How to transform an organization into an "efficiency machine"? And the dual challenges of the "efficiency machine".

Written by Hao Ran

This article is an original article by Shangyin Society. Please contact the back office for reprinting.

01

Efficiency Machine

When reading history, it is interesting to compare historical events with the current business world.

Recently, I read about the history of the Warring States period, which was a chaotic era of fierce rivalry between various forces, and it was Qin that ended this history.

Qin "strived for the remaining strength of six generations," and after accumulating strength for multiple generations, it took less than 10 years to annihilate the six kingdoms. Its combat effectiveness and execution power are astonishing, making it a powerful "efficiency machine."

If you delve into the origins of Qin's ultra-high efficiency using modern organizational management knowledge, you will find many factors, such as:

A simple and clear strategic goal, with six generations focusing on one grand strategy;

Creating a centralized and flat management structure, with the prefecture system enabling Qin's decrees to reach the bottom of society directly. A single order from the Qin Emperor could reach the grassroots, with strong social mobilization capabilities;

In addition, the top-level formulates strategies and acts as the "super brain" of the organization, while the individualized organizational members obediently follow and execute, ensuring the organization's strong execution power;

Also, providing individuals in the organization with incentives that exceed expectations, abolishing hereditary titles and salaries, rewarding military achievements, and promotions are entirely based on the number of enemies killed. At the same time, there are strict laws and punishments, often leading to collective punishment;

There is also the enticement of human resources outside the organization, such as "abolishing the well-field system and opening up the roads," promoting private land ownership, and encouraging refugees from the other six kingdoms to cultivate wasteland. Once cultivated, the land becomes theirs, leading to a flood of refugees from the six kingdoms into Qin, which gained extremely valuable "traffic" resources at the time.

This easily reminds one of the contemporary business world's "efficiency machine" Pinduoduo.

Qin and Pinduoduo seem unrelated, but discussing them under the proposition of "how to transform an organization into an 'efficiency machine'" makes sense.

Both achieved extremely high efficiency and execution power at a certain stage in different eras. The former swept away the six kingdoms, while the latter forcefully squeezed onto the "already established" e-commerce giant's table and became a giant pole, renowned for its "extreme efficiency." In the past year, it has received even more attention due to significant performance growth and market capitalization surpassing Alibaba.

Generally, when discussing an organization, we analyze its three essential elements: organizational goals, organizational structure, and organizational personnel. Below, I will also roughly expand on this framework.

02

Organizational Goals

Pinduoduo's strategic goals are consumer-first, high efficiency, and low prices, while Qin's strategic goals are monarchic centralization, national prosperity, and military strength.

Organizational goals do not come out of thin air; they are based on the macro external environment and the micro internal environment, which together form the "momentum" we often talk about. Organizational goals are built upon this "momentum".

There have been numerous articles interpreting Pinduoduo's choice of high efficiency and low prices as strategic goals. In summary, in an era of uncertainty, it was judged that consumption would enter a downgrading cycle, while existing e-commerce giants Alibaba and JD.com were engaged in consumption upgrades, leading to strategic misjudgments. Pinduoduo disrupted the low end by focusing on efficiency and low prices.

Similarly, the Warring States period was a history of fierce slaughter, filled with even greater uncertainty. Qin's strategic goal choice was also deeply rooted in the needs of that era.

In fact, there is nothing fresh or astonishing about Qin's strategic goals. Other six kingdoms also knew that the monarch must not lose power, and territorial competition relies on sufficient provisions and strong fighting power. Even for this reason, they also carried out reforms, such as Li Kui's reforms in Wei, Zhao Wulingwang's Hufu Qishe reforms in Zhao, Shen Buhai's reforms in Han, and Wu Qi's reforms in Chu.

These reforms have more or less traces of Shang Yang's reforms. For example, Li Kui's reforms abolished the hereditary title and salary system early on, rewarded farming, and used the "Law Code" he compiled to regulate people's social activities.

When Shang Yang entered Qin, he brought a copy of Li Kui's "Law Code," and some of the theoretical foundations of Shang Yang's reforms came from here.

Moreover, the "feudalism" under the military merit system actually existed in the Jin state during the late Spring and Autumn period, with "junior officials receiving prefectures and senior officials receiving counties" (at that time, prefectures were smaller than counties), and the Chu state also rewarded military achievements with "Chu titles".

It can be said that Shang Yang's reforms selected some of the most organized and efficient measures from the reforms of various countries during the Spring and Autumn and Warring States periods, combined them around their own organizational strategic goals, and implemented them resolutely.

Other six kingdoms also perceived this organizational goal and even reformed in this direction, but why couldn't they persist?

One crucial reason is that Qin was extremely backward and remote at the time.

Yes, for the reforms at that time, extreme backwardness actually made Qin the country with the least burden and the most suitable for implementing the reforms to the end.

From an external perspective, Qin was too backward. Since the Spring and Autumn period, the Jin to the east and the Chu to the south had squeezed Qin into the Rongdi region, leaving no room for development. Moreover, the Huaxia countries even regarded the Qin people outside the "five rings" as barbarians, not inviting or even allowing them to participate in the alliances at that time.

Moreover, Qin, located in the hinterland of Guanzhong, could not truly connect with the central logistics channel of the Central Plains - the Yellow River, forming a relatively independent economic zone. For the eastern six kingdoms, expanding westward lacked material support. In other words, attacking Qin was too cost-ineffective.

Therefore, even if Qin implemented reforms, it could not attract much attention from the eastern six kingdoms. In contrast, countries that had once established hegemony, such as Wei, Chu, Qi, and Zhao, often faced international joint suppression after becoming powerful or obtaining hegemony.

In short, Wei, Chu, Qi, and Zhao were closely watched by their competitors, who did not allow them to dominate. They would also be deformed by the movements of their rivals. They should have rested and recuperated, but instead, they spent their national strength fighting.

Internally, Qin's nobility class was the weakest. During the Spring and Autumn and Warring States periods, nobility had hereditary titles, private fiefs, and received salaries without merit. Even the monarch had no way to deal with them, and they could even cause internal turmoil, such as Tian Shi replacing Qi, the division of Jin into three kingdoms, and the fragmentation of Chu.

However, the remote and backward Qin nobility was not strong to begin with. Before Shang Yang's reforms, they had almost killed each other off in various changes, leaving a large amount of land that became public land controlled by the monarch.

For Wei, Chu, Qi, and Zhao, the nobility formed under the feudal system was the basis of their rule. For example, during the reign of Duke Huan of Qi, Qi achieved the status of the supreme ruler of the world, "uniting the princes and rectifying the world," by uniting the nobility. They would not rashly target the nobility.

In terms of modern organizational management, large countries like Wei, Chu, Qi, and Zhao are trapped in their respective value networks.

The "value network" refers to an organization's thinking mode being jointly determined by the organization's accumulated experience and external customers, competitors, suppliers, etc. This is the source of the organization's strength, but it is also like a big net that tightly binds the organization's thinking.

Large countries not only constantly monitor their rivals' movements and engage in battles, consuming their national strength to balance their rivals, but they also try to rely on old ideologies and organizational forms to solve new problems, which constantly leads to problems.

For example, Qi initially fought against Wei and then took advantage of the internal turmoil in Yan to attack it. Later, it allied with Han and Wei to strike Chu and Qin, attacking on all fronts. However, in the end, it ended with five countries attacking Qi. Even after Tian Dan successfully restored the country, it was already greatly weakened.

Qi actually did not have the intention to occupy or rule more territories many times. Constrained by the hegemony thinking of the Spring and Autumn period, it only wanted to subdue others and let other countries recognize its status as the "supreme ruler of the world." This instead led to its military and diplomatic strategies never following a clear line, with vague strategic goals.

Compared to Qi, Chu had the intention to expand its territory and continued to expand during the Spring and Autumn and Warring States periods. However, there were serious governance issues after scale expansion.

Because Chu did not timely transform its organizational form but continued to practice feudalism, which weakened the direct jurisdiction of the Chu king.

After Wu Qi implemented reforms in Chu, he imposed some restrictions on the Chu nobility, and Chu's national strength recovered somewhat. However, after the death of King Daowang of Chu, the powerful nobility immediately rebelled and assassinated Wu Qi. Since then, Chu hardly expanded anymore and has been digesting its overly vast territory.

Therefore, Qin, unbound by value networks and lightly armed, initially possessed a certain "favorable timing" factor.

Similarly, when Pinduoduo started from the sinking market, Alibaba and JD.com had already occupied most of the e-commerce industry. Many industry insiders tended to believe that the competition in the e-commerce sector had already been settled.

Alibaba and JD.com closely monitored each other's movements, advanced rapidly, and bet on consumption upgrades. Compared to white-label and unbranded products, brands can bring more GMV and higher profit margins to e-commerce platforms. Low- and mid-end products were not strategically cost-effective for them.

Even though they also recognized the value of the sinking market and agreed with e-commerce principles such as high efficiency and low prices, they did not pay much attention to the newly emerging Pinduoduo, even considering it a "tricky trick on the traffic side." It was only when Pinduoduo grew stronger that the two giants separately launched competitive products Taote and Jingxi to counter it, giving Pinduoduo an opportunity to rise.

However, when they discovered that the trend of consumption downgrading was becoming increasingly apparent and Pinduoduo posed a real threat, the giants truly wanted to reform but found it difficult to effectively manage their huge organizations with tens of thousands of people. Human efficiency decreased, and interest groups proliferated within the organizations. The original ideologies and organizational forms could no longer solve new problems.

Moreover, similar to Shang Yang's reforms, Pinduoduo's low-price measures were not entirely original. Many of them were also taken from other companies' measures, combined around the target for innovative combinations, and then subjected to more extreme testing and selection.

History is always strikingly similar.

It can be seen that when an era is full of uncertainty or facing major changes, it enters a certain stage of "reverse elimination": not who does more, bigger, or more advanced, but who is more resolute, precisely reaches the target, makes the fewest mistakes, and ultimately prevails.

03

Organizational Structure and Personnel

From an organizational structure perspective, both Qin and Pinduoduo adopted a centralized and flat management structure, which has strong mobilization and execution capabilities.

One of the crucial measures of Shang Yang's reforms was "abolishing feudalism and implementing the prefecture system." The feudal system of the Zhou Dynasty involved the emperor awarding fiefs to nobles, who in turn awarded fiefs to ministers. Ministers had governance rights over their territories (fiefs), and nobles could not interfere. The subjects of the fiefs were loyal only to the ministers and not necessarily to the nobles (monarch). Such a structure lacks efficiency and execution power.

After Shang Yang's reforms, regardless of bloodline, military merits determined status, rank, and salary. Even if someone was awarded a title, they only had financial rights over their fief and no governance rights, meaning they could only collect taxes.

The subjects originally belonging to the nobility were reorganized and managed by locally appointed officials appointed by the emperor, becoming registered households directly under the monarch.

Therefore, a single order from the Qin Emperor could reach the grassroots.

However, a centralized and flat structure heavily relies on "rule by man." Matching this is the top-level decision-maker serving as the "super brain" to formulate strategies and indicate directions, while the bottom-level people are separated from all organizations and function as atomized individuals with minimal insights. They exclude all external interference and highly obey upper-level leaders.

When Shang Yang first met Duke Xiao of Qin, he said:

"Moreover, those who have noble deeds are often misunderstood by the world; those who have unique insights are often despised by the people. The foolish are ignorant of accomplished matters, while the wise foresee events before they occur. The people cannot be consulted on the beginning but can share in the joy of success. Those who discuss the highest virtues are not in harmony with customs, and those who achieve great deeds do not consult the masses."

In essence, ordinary people are accustomed to their accustomed way of life, while experts and scholars' insights are often limited to their narrow field of expertise. These two types of people are excellent choices for performing stereotyped tasks in their positions but cannot be consulted on grand strategies and policies. The wise point the way, and the ordinary execute.

Therefore, Shang Yang believed that illiterate,淳朴务农, and law-abiding "foolish people" were the best management targets.

Pinduoduo's company hierarchy only includes first-level supervisors, second-level supervisors, group leaders, and employees. According to a report by LatePost, the working state of its grassroots employees is like atoms, with minimal information access. Work indicators are broken down into extremely fine details, and execution revolves around one or two indicators. Pinduoduo uses pseudonyms for all employee communication, and they may not even know each other's real names or genders.

Pinduoduo screens practical, high-efficiency, and high-execution personnel who are suitable for the organization from the interview stage. Only those willing to sacrifice some personal freedom for profit and able to accept high pressure and absolute obedience can stay.

Even if a leader makes a decision to transfer someone from the Shanghai headquarters to a foreign province to develop business, that person will quickly obey the arrangement, move to the foreign province to do unfamiliar work. There are not a few such people in Pinduoduo.

In fact, the "efficiency machine" does not just "atomize" human resources; almost all resources are dismantled into the finest details for atomized invocation and combination to maximize efficiency.

For example, Qin already had very fine "numerical management." There were 12 evaluation indicators for raising livestock, and even prisoners were divided into 26 levels, with slight differences in rations for each level. Everyone was quantified as part of the state machine to be invoked as a human resource.

Even the operations of the Qin army were simplified to the extreme. Any individual could become a loader in the Qin heavy crossbowmen after only half an hour of training, using the strength of their waist and legs to pull back the bow, load an arrow, and then hand it over to the shooter to fire. The shooter was solely responsible for aiming and firing.

In contrast, to become a member of Zhao Wulingwang's Hufu Qishe team, one must first learn to ride a horse for at least three months, then learn to draw a bow for another three months. Taking into account the fodder and grain consumed during the six-month training period, the cost and efficiency are much higher than Qin's, making it difficult to replicate on a large scale.

Pinduoduo also atomized the platform merchants. Previously, Taobao's crown stores and big-brand flagship stores have become SKUs on Pinduoduo, blurring the distinction between stores and brands. The amount of traffic received by merchant products is purely determined by price, essentially "abolishing the hereditary title and salary system and the military merit system."

But this also means that the dismantled stores and brands not only lose their pricing power, but also their ability to compete with the platform. In addition, merchants are also strongly controlled by the platform, and the platform has even launched an "automatic price tracking" function, constantly lowering the prices of merchants' products to maintain the lowest price.

Merchants, as competitive resources on the platform, are atomized and finely tuned for efficient deployment and fierce attacks.

In addition, in terms of rewards and punishments for individuals, "efficiency machines" provide incentives and punishments far beyond individual expectations.

The state of Qin holds a military merit medal in one hand and a wolf tooth stick in the other, with generous rewards and strict laws that need not be repeated. Qin Fa encouraged neighbors to report each other, but did not mention the need for evidence, nor did he even have a law to sanction false accusations. As a result, Shang Yang was ultimately accused of rebellion and did not have the right to defend himself, making it difficult to explain.

This is a bit like the "refund only" feature, which does not require any evidence and the merchant has no opportunity to explain.

This type of reward and punishment method actually has rules to follow in management studies. In 1957, American psychologist McGregor proposed in his article "The Human Aspect of Business" that human nature is lazy, job averse, and the vast majority of people lack ambition and initiative. The only way is to prioritize economic benefits as the main incentive and adopt a strict punishment system.

It assumes that human nature is inherently evil, and therefore believes that the most efficient way is to "carrot and stick".

In fact, the third way, besides coercion and inducement, is faith. It assumes that people have a part of goodwill that can be constantly stimulated, but using values and cultural output to stimulate goodwill is very inefficient, so it is generally abandoned by "efficiency machine organizations".

04

Dual Challenge

Why did the Second Emperor of the Great Qin Empire perish?

I have seen many explanations, for example, some people believe that the Qin state's model is actually a "planned economy" model that is only applicable to wartime situations. Moreover, with the end of the war and the expansion of the scope of rule, the quantity and complexity of information exploded, which was beyond the processing capabilities of the technological conditions at that time. Even the most advanced supercomputer would be paralyzed.

And what can handle the diversity and complexity of economy and society is precisely various free games and loose organizations. Inter organizational competition is the organizational foundation for efficient economic operation. Qin State precisely eliminated various organizations, eliminated the vitality and potential of social development, and thus led to collapse.

Some people believe that even if the Qin state wins, it still overlooks the "inefficient" social and cultural construction.

There are various explanations, but I won't describe them one by one. But this indicates that what we usually consider to be ultra-high efficiency or even extreme efficiency is not entirely a good thing. Everything has its two sides, and organizations are the result of various factors playing games and balancing each other. Using or neglecting any one factor will bring certain consequences.

For example, there is a game relationship between efficiency and fairness.

Economics believes that efficiency is only relative to those who participate in the decision-making process. For example, when two people consider maximizing the profits of our company, as long as these two people can reach an agreement and achieve Pareto optimality between their interests, it is an efficient solution. If other people do not participate in the decision-making process, the efficiency of this decision may not reflect their interests.

The ultimate efficiency of Pinduoduo is not the efficiency of merchants. If the quality of goods deteriorates due to fierce bidding, it will not be the efficiency of consumers, but only the efficiency of Pinduoduo; Manner Coffee wants to maximize profits with the least number of people. If the staff is under too much pressure and conflicts fiercely with customers, it is not the efficiency of employees and customers, but Manner's efficiency.

Moreover, there is a game relationship between efficiency and sustainable development.

A company must improve efficiency in order to adapt to the current and local environment, and to survive and develop; But the higher its efficiency and better its adaptability to the current and local environment, the poorer its ability to adapt to future environmental changes, and its long-term adaptability is also worse.

For example, in the past, when Alibaba and JD.com upgraded their consumption, they prioritized big brands for the sake of increasing GMV and improving revenue efficiency. However, sinking markets and consumer downgrading were seen as inefficient sectors, which led to a loss of opportunities to explore more possibilities.

These two are the challenges that efficiency oriented organizations must face after reaching a certain stage of development.