How does the internal management of Pinduoduo operate?
A deep dive into Pinduoduo's management strategies and corporate culture fueling its success
In 2023, Pinduoduo distinguished itself as a notable exception in the Chinese equity market, successfully navigating against the tide of widespread pessimism and surpassing its industry counterparts. Achieving a remarkable year-to-date stock return of over 70%, despite the sluggish pace of China’s domestic economic recovery, Pinduoduo not only thrived but also surpassed Alibaba, securing its position as the most valuable e-commerce titan in China.
This impressive trajectory raises pivotal questions: What are the unique strategies that propel Pinduoduo ahead of the competition? How does its internal management contribute to its enduring success in the fiercely competitive e-commerce landscape of China? In today's post, we translate an insightful article published by 左林右狸(Zuo Lin You Li), an independent media platform known for its coverage of China's internet industry. This article offers a deeper understanding of Pinduoduo's internal dynamics, shedding light on the key factors that enable the company to maintain its competitive edge in China's bustling e-commerce sector.
Highlights of the key takeaways
The management philosophy at Pinduoduo focuses on simplicity, results-oriented culture, and efficiency. They emphasize individual responsibility, minimize meetings, and prioritize execution. Pinduoduo focuses on innovation and quick decision-making in its internal management, adopting a relatively flat organizational structure to facilitate information flow and rapid response to market changes.
Pinduoduo values individuals who are driven by profit, accept high pressure and exhibit absolute obedience. Pinduoduo is known for long working hours, following an 11-11-6 work schedule (11 am to 11 pm, six days a week). Employees often work over 70 hours a week.
Pinduoduo prioritizes incentives and competitive compensation. They offer high starting salaries, and performance-based salary increases, and selectively hire individuals who have financial needs and a drive to succeed.
*Disclaimer: This post is not sponsored by Pinduoduo
Below is Baiguan’s translation of the original article:
How does the internal management of Pinduoduo operate?
"Pinduoduo has always been screening, only those who are willing to make money, accept high pressure, and obey absolutely can stay, those who do not accept will leave quickly.”
A well-known joke:
In the early days of Ouku [Baiguan: Ouku is an e-commerce service founded by Zheng Huang, the founder of Pinduoduo], when one of the early-state employee in the customer service left Zheng Huang, Zheng Huang was very sad and cried alone in a corner of the office.
A similar plot also occurred in Xiaohongshu [Baiguan: Xiaohongshu is China's largest lifestyle social media platform, founded by Wenchao Mao. It was founded in Shanghai, just like Pinduoduo.] Wenchao Mao also shed tears for the departure of an early-stage employee. However, this employee was a high-level executive at the COO level, a graduate of an Ivy League university, and extremely outstanding. Compared to the customer service of an e-commerce company, the COO had greater importance and influence. Clearly, in Boss Huang's heart, everyone is born equal. If I trust you sincerely, you should stay with me forever.
Almost all entrepreneurs who return from overseas have such a common problem when starting a business in China, which is hoping to replicate the Western culture of respecting individual freedom, mutual trust, and fighting side by side. In the early days of Ouku, the office had a large number of whiteboards, with almost one for each person. Zheng Huang encouraged colleagues to write and discuss everything on the whiteboards. Every week, Ouku would also organize “democratic” discussions involving almost all employees. These were very Google-like [Baiguan: Zheng Huang joined Google in 2004 in the U.S. and played a role in establishing Google's China office in 2007. ] However, soon this approach became less mainstream in Ouku and was replaced by a down-to-earth management philosophy, which then formed Pinduoduo's unique management style.
Pinduoduo's management style starts from the basics and strongly advocates a results-oriented culture. It combines accountability mechanisms and competition, along with positive and strong incentives, to ultimately form a self-sustaining “flywheel” of continuous growth.
If we can avoid having meetings, we should avoid them
As we have mentioned several times in the Zuo Lin You Li channel video, Zheng Huang, influenced by Yongping Duan, is a representative figure of the Buffett school.
In Zheng Huang's management philosophy, "benfen" [Baiguan: the Chinese phrase that means doing one's own duty] is also mentioned multiple times. Unlike OV [Baiguan: OV refers to Oppo and Vivo, two major cellphone manufacturers in China], which uses "benfen" to guide its basic principles in dealing with upstream and downstream, Pinduoduo evaluates employees' work based on "benfen". That is:
Whether or not they have done their own duties, adhered to their own responsibilities, and emphasized the absolute clarity of each organization and individual's work responsibilities and measurable task outputs.
Zheng Huang has a core belief that excessive collaboration can make work complicated and emphasizes the importance of each individual focusing on their own job. Each developer, each operator usually only knows what their own tasks are, and everyone can quietly work in a peaceful environment.
In many Chinese internet companies, employees are required to write weekly reports. Not only do they need to talk about what they have done, but they also need to discuss their thoughts, the kind of ecosystem they want to build, the strategies they want to pursue, and the boundaries they want to explore. In other internet companies, PPT presentations are the norm. Even if the business is doing well, employees still need to report annually. They not only need to think about how to do their job well but also need to think about how to present their work effectively. [Baiguan: paragraph redacted]
But at Pinduoduo, these discussions and reports are all used for specific execution. Multiple Pinduoduo employees have expressed in the Zuo Lin You Li channel that there are very few internal meetings because not having meetings means not having to write meeting materials or spend time on meetings. Second-level supervisors may have a meeting once a month, and even if they have a meeting once a month, the communication is brief and consists of a few sentences:
What actions have been taken and what contributions have been made to GMV.
On the first day of a new employee's onboarding, the manager assigns tasks directly, without the usual phase of getting familiar with the work and the company. The manager expects deliveries and results from these tasks on the second day. After working at Pinduoduo for three or four years, the R&D employees haven't made a single PPT and usually don't write documents unless necessary, preferring oral communication at their desks. Even when writing product requirements, they are forced not to draw "prototypes" as it is considered a waste of time. Instead, they simply take screenshots of competitor's pages and annotate them. Even the biannual salary raises, and performance review meetings have been condensed to less than 10 minutes, basically just informing the results.
The Zuo Lin You Li Group's members have discussed with us before that since 2020, there has been information isolation between departments, and employees only have permission to view documents within their own departments. To facilitate communication, employees sometimes share information through screenshots, but if caught, they will be interviewed and warned. Later, even screenshots were prohibited.
Intimate interactions between employees were also forbidden, as the company opposes employee socializing and constantly disbands WeChat groups among colleagues. Employees can only communicate through the company's internal messaging app called "Konck," and everyone uses pseudonyms, so even if they have collaborated for a long time, they may not know each other's real names.
To shorten the time for information dissemination, Pinduoduo has always had an extremely flat organizational structure. Below Abu [Baiguan: pseudonyms of Pingping Gu, Pinduoduo’s core senior executives], there are first-level supervisors, second-level supervisors, team leaders, and then individual employees, with no more than 5 levels of hierarchy. Fewer levels mean more efficient execution and accuracy. Pinduoduo believes that the biggest time cost in work is the communication cost within the team. Employees must absolutely obey any reasonable or unreasonable arrangements from their superiors.
"Don't ask why, just go and do it."
Zheng Huang has said more than once that there can only be one person in a team who has the final say. Subordinates can have different opinions, but if the superior doesn't listen, you cannot argue. If there are different opinions among peers, you should immediately seek the judgment of the superior instead of arguing internally. In the system of Pinduoduo, there is no distinction between right and wrong, only who has the final say. In order to ensure communication efficiency, Pinduoduo does not arrange employee workstations according to departments, but flexibly arranges them based on projects and tasks, which are called "walking workstations". This means that product, operation, development, and testing teams must sit together, and everyone must move workstations whenever there is a change in tasks. Low-value aspects of work are also gradually eliminated by Pinduoduo.
Use results to speak
Pinduoduo can form a simple and efficient way of doing things, which is closely related to its external environment of growth. After 2015, the domestic e-commerce market began to be oversupplied. At that time, the e-commerce industry had already matured and standardized, with only a change in the positions of the supply side and the demand side. In the eyes of Pinduoduo's management team, as a latecomer in the market, there is no need for much discussion and innovation on how to do this business. Just copy the homework. Converting the incremental innovation discussed by middle and lower-level employees into direct execution yields a higher ROI.
Therefore, within Pinduoduo, there is no such thing as a president, manager, or director. There are only responsible individuals who are accountable for specific matters. All centralized decisions come from Zheng Huang, Abu, and the core team. As for the second-level level, team leaders, and grassroots employees, their role is to tighten screws and perform assembly line work.
There are basically three strategies in execution:
2. Efficiency is paramount. If we can quickly launch by removing features, then we will do so;
3. Low prices. In most cases, we do not increase costs for consumers.
For example, if there is a demand for the warehouse distribution system from multiple provinces, then this demand takes priority. If the demand is only proposed by a single province, then the priority naturally decreases. The more provinces are covered by the demand, the higher the priority. And when there are inconsistencies in the warehouse distribution demands among provinces, other decision-makers are often introduced, such as the product manager. When there is consensus on major demands but differentiation in minor demands, the warehouse distribution system will try to be compatible when dealing with the demands.
Pinduoduo possibly has one of the strongest accountability mechanisms in the Chinese internet industry. This includes technology as well. If it causes losses to the business, proportional penalties are required.
In January 2019, a serious bug appeared in the Pinduoduo app: all users could receive a ￥100 (14 USD) coupon with no minimum spending requirement, and there was no limit to the total number of coupons. Countless people rushed to exploit this "freebie" opportunity on Pinduoduo, resulting in tens of millions of yuan in losses within a few hours. Pinduoduo's top management was furious and ordered a serious rectification.
According to common knowledge, when a system has a problem, it is usually resolved within the system by fixing bugs and refactoring code. However, Pinduoduo took an unconventional approach. They used a monitoring platform with warning software to monitor data. Once an anomaly occurred, an alert would be sent out. If the person on duty did not respond to the alert in a timely manner, the alert would escalate, and the supervisor would be called. If the supervisor still did not respond, the boss would be directly contacted. At the boss level, the consequences speak for themselves.
The ability to promote and demote is one of Pinduoduo's core management strategies, which also means there are no limits. Media outlets like Leifeng.com have reported that Grape (a nickname of an employee) was a first-level supervisor before managing the grocery business, and later was demoted by one level due to a mistake. Afterwards, Grape was promoted again due to outstanding performance.
In Kaifei's podcast, it was summarized that Pinduoduo's management style is simple, direct, and results-oriented. There is only either done or not done, with no middle ground. Pinduoduo only asks when the sales volume can be completed, when it can reach a certain percentage, and how to do it is not important.
In one sentence, let the results speak.
PK (Play Kill) is the norm
Under the influence of the simple rule and the emphasis on results, Pinduoduo's internal environment is always in a state of intense competition. It starts from the moment of joining Pinduoduo, which marks the beginning of the competition. For frontline employees, the results of the competition directly affect salary increases and year-end bonuses. For managers, once a module performs poorly, competition can lead to them directly losing their territory.
In 2017, during the outbreak of growth campaign activities, Pinduoduo's internal competition was carried out through the "Chop One Project." [Baiguan: this is a promotion campaign that went viral in China] Different product managers often simultaneously tested numerous marketing plans and gameplay, tried a large number of different product features and strategies, and ultimately selected the campaigns with the highest ROI and best results through elimination.
By 2018, the main search recommendation ads on the Pinduoduo website had organized a team competition. Over 500 people were divided into three groups and competed based on GMV. The competition logic was to allocate a certain share of the total traffic to each group, and assessments were conducted monthly. The specific methods and optimization of metrics were decided by each secondary manager and their respective team leaders. Ultimately, only the incremental GMV was assessed.
When transferring teams, it is also necessary to achieve extreme segmentation in terms of technology. If a person from Team A is transferred to Team C, all the code that was previously done in Team A must be deleted. Only the knowledge can be brought to Team C, and a new interface should be provided. The system should be completely self-made, and the code should be rewritten.
In early 2020, when Pinduoduo established the brand investment team, 30 people were divided into two groups for an internal competition. The task was to attract brand entry, led by Boss Mao and Mango, reporting directly to Abu. The same competition mechanism occurred in other businesses of Pinduoduo. In March 2020, Pinduoduo live streaming was mentioned as an important position, at that time there was a competition between the commercialization team and another team.
The technical team participating in PK with the business team is natural. These are often related to product functions and gameplay, where technology plays a side role. On the other hand, the iteration of strategy-related tasks is often driven by the technical team, for example, in algorithm iterations such as recommendation, search, and advertising categories, PK often directly divides the traffic. For example, three teams each get 1/3, and ultimately see whose GMV and income are higher in the week, month, and quarter.
“Horse racing” mechanics [Baiguan: this is how Pinduoduo refers to the competitive mechanisms] are also used on the international market Temu. Because business is developing too fast, warehouse management is facing huge problems. Several Pinduoduo executives each took several warehouses and solved the problem by horse racing mechanism, so the “winter jujube warehouse”, “grape warehouse”, and “watermelon warehouse” appeared. Yes, you read that right [Baiguan: these are pseudonyms of the team leaders]. Today, Winter Jujube has been promoted to co-CEO of Pinduoduo, but he is still on the front line, still competing with Grape and others.
This year, Pinduoduo Live even allows customer service employees to participate in the horse racing mechanism. There is no longer any distinction between regions or categories. Whoever recruits service providers will be the ones who claim the merits.
Matching the high-intensity horse racing mechanism is the high-intensity and long-hour work of employees. Pinduoduo is famous for its long working hours. The company implements an 11-11-6 work system (starting at 11 a.m., leaving getting off work at 11 p.m., working 6 days a week). Sometimes they have to work overtime until the early morning, and employees work more than 70 hours a week.
Internet giants typically release a new version every two weeks, including some minor features. However, Pinduoduo operates at a much faster pace, releasing three versions per week. These releases start at 12 AM and are completed by 2 AM. Abu personally reviews all the online changes for an extended period of time. [Baiguan: paragraph abbreviated]
In 2016, it was common for Pinduoduo to release bargain products two or three times a day when launching a campaign: they would go live with a campaign in the morning, analyze the data at noon, make revisions in the afternoon, and experiment with conclusions in the evening before launching another version late at night.
Internal employees at Pinduoduo revealed that during the 2019 annual meeting, Abu spent 20 minutes emphasizing the importance of clocking in, stating that some executives would arrive late and use tricks to avoid clocking in, which is considered deceiving the company.
According to rumors, this is because after Pinduoduo went public, the management team had a new reflection and believed that many people had started to take credit for themselves. Since then, rules that go against human nature, such as squatting toilets, clocking in and out, and deducting 3 hours of salary for being a second late, have gradually been introduced. Since then, not only do employees not have toilet freedom, but there are also strict time limits for three meals a day. Breakfast at 9:30, lunch at 12:00, and dinner at 18:00. The meals are placed in the dining room and can only be taken at the designated time, not a second earlier. Not only do the employees picking up the meals have time restrictions, but the delivery staff as well. They must prepare the meals around 11:30 and distribute them within half an hour.
There was a summary meeting on Double 11 shopping festival [Baiguan: China’s largest annual online shopping carnival.] that year, and the company ordered box lunches for everyone to eat together. A certain executive wanted to go out for some fresh air and also took the opportunity to throw away the trash. When Zheng Huang found out about this, he angrily confronted the HR director and almost fired both the HR director and the executive. He believed that employees should not be allowed to go downstairs to throw away the trash because it takes 15 minutes for a round trip, and the benefits generated by these 15 minutes of work could hire many cleaners.
In 2020, Zheng Huang gave a speech at Pinduoduo's 5th anniversary internal event, stating that they would start the "all-staff hardcore mode" - taking 1 day off every 13 days, with a monthly working time of no less than 300 hours, and some employees could work more than 30 hours consecutively. Most departments have implemented a system where employees get two days off per month.
Pinduoduo employees said that some technical departments had a shift system - the morning shift was from 7 am to 11 pm, and the evening shift was from 7 pm to 7 am the next day. Each person would rotate shifts approximately every half a month.
Speak with the money; horse racing competition
In terms of mission, vision, and values, companies like ByteDance, Pinduoduo, Kuaishou, and even Meituan are completely different from Alibaba, Tencent, and Baidu. The older generation of entrepreneurs not only talks about mission, vision, and values but also constantly leads their teams to practice them. However, the new generation of entrepreneurs advocates efficiency and worship speed. There is no superiority or inferiority between the two. The former emphasizes momentum, the overall trend, and a vast and mighty force. The latter advocates kinetic energy, AB testing, horse racing mechanisms, and "you can you up" [Baiguan is a Chinese slang term that means "if you think you can do it, you should step up and do it.”].
This is also why Yiming Zhang [Baiguan: founder of Byte Dance, Douyin’s parent company] would say such a shocking statement that technology has no value, and Pinduoduo has always shown itself as a company that prioritizes efficiency. [Baiguan: paragraph redacted]
Employees not only have to unquestionably obey the instructions of their managers, but also work long hours and complete their tasks quickly, efficiently, and in large quantities. How does Pinduoduo achieve this? The answer is simple:
They pay well.
Pinduoduo adheres to a fundamental principle:
We all come to work to earn money, not to listen to the boss talk about mission, vision, and values. If you want employees to obey and work hard, then speak with money.
The starting salary at Pinduoduo is high, with a basic salary for fresh graduates being 1.5 times the market price, and for experienced hires, it starts at 2 times the market price. When it comes to poaching talents, it goes without saying that the salary multiples range from 3 to 5. Regular salary adjustments are also high. Pinduoduo does not have explicit job levels and promotions, but there are two salary increases per year, in March and September respectively, and everyone participates in the general salary adjustment.
Pinduoduo has an internal performance evaluation system called 271, which means 20% are rated as excellent, 70% as qualified, and 10% as unqualified. Some employees at Pinduoduo have revealed that in the business team, those who receive a qualified performance evaluation receive a monthly salary increase of over 10,000 yuan, and even those who receive the lowest performance evaluation receive a 10% salary increase, which amounts to around 7,000 yuan according to some employees. If they belong to the top 20%, the increase is even higher.
The Zuo Lin You Li channel has learned that approximately 20% of people can receive a year-end bonus equivalent to around 10 months' salary. The reason for this is that the basic salary at Pinduoduo is relatively low. In the early stages, the salaries of these bosses did not exceed 20,000 yuan per month, but when the company rapidly expanded and recruited a large number of people from outside, this rule was broken. This means that as long as ordinary employees work at Pinduoduo for five or six years and achieve normal performance, their annual salary will basically reach millions.
For middle managers, if a new project is successful, all participants will receive significant rewards in the following year. Not only will they receive a substantial salary increase, but also a large number of stock options and year-end bonus packages.
Looking for hungry partners
There is a saying that the turnover rate is highest in the first month of joining Pinduoduo. However, after the first month, it often becomes stable, and at least several years are spent at Pinduoduo, as they have accepted and adapted to the requirements of Pinduoduo.
This saying is not without reason. In fact, Pinduoduo has its own unique formula for recruiting. Firstly, they recruit people who come from rural areas and those who have strong financial needs such as housing and car loans. This is because these individuals are often more motivated, and efficient, and produce results more easily. From this perspective, Pinduoduo may be the most suitable company for ambitious individuals from small towns.
According to the information obtained from the Zuo Lin You Li Channel, when Zheng Huang first started his business, he did not spend much time pondering the business itself, but rather devoted a lot of time to studying financial statements and human resources. At that time, the company only had about ten or twenty people, and the company would hold human resources meetings every month or even every week. They would discuss the background of each team member's family, their aspirations for fame and fortune, and how to best utilize each person's strengths. This system conducted a thorough study of human nature.
Of course, there is also a saying that Pinduoduo's HR has a special strict rule that they do not recruit employees who have a hobby in social media (social networks). The reasons behind this are needless to say.
Up until now, during Pinduoduo's HR interviews, they would ask very detailed and private questions, such as "How many people are there in your family? What do your parents do? Do you have a mortgage or car loan? Are you a local resident?"
Pinduoduo has been screening candidates, keeping only those who are willing to make money, accept high pressure, and be absolutely obedient. Those who do not meet these criteria will quickly leave. Additionally, in order to deeply bind some key employees, Pinduoduo will set up an additional obstacle for them:
The original stock options can only be fully obtained after 7+4 years.
According to insiders who revealed this to the Zuo Lin You Li channel, for senior-level employees like Grapes and winter Jujubes, the fixed monthly salary may not be high, but the year-end bonus can be substantial. The company then guides employees to convert cash into stock options, binding them to the company in the long term. These individuals may now have a net worth of billions, but what they can actually receive in hand is likely less than one-tenth, with the rest being delayed gratification.
For those entrepreneurial veterans, the original shares can only be cashed in after 7 years, and it is not a one-time cash-out, but rather a gradual cash-out over four years, requiring a total of 7+4 years to obtain all the benefits. During this period, the company will also provide you with new equity, which must be cashed out annually according to the specified period. To this day, there are still many people born around 1985 within Pinduoduo who are still working hard on the frontlines of the business.
Written at the end
After a year of hard work, Temu has become the "second growth" curve of Pinduoduo. Like Duoduo MaiCai [Baiguan: Pinduoduo’s O2O grocery shopping service], Temu follows the same strategic thinking as the main site:
Lower the threshold for entry, attract a large number of merchants, and continue to let merchants compete for low prices.
The difference lies in the fact that Pinduoduo, specifically through Duoduo MaiCai, underwent a significant adjustment and leap in its organizational structure, completing an evolution. Moreover, Temu's success abroad is also connected to Pinduoduo's organizational evolution and the incorporation of most of the accomplishments from the Duoduo MaiCai era. One could even argue that Temu represents the 1.0 version of MaiCai. [Baiguan: paragraph redacted]
Whenever entering a new field, the core management and execution teams are dispatched to various regions for in-depth research. For the grocery business, the core management team will go to cities like Changsha and Nanchang to communicate and interview a large number of internal employees of Xingshengyouxuan [Baiguan: one of the main players in the O2O grocery shopping service]. They will stay in local cities and investigate the frequency of user purchases, consumption habits, population density, and consumer purchasing power. When doing Temu, Abu personally conducts research in Europe, and Zheng Huang stays in the United States to study overseas warehouses and local traffic.
After research, Pinduoduo's core team realized that since they didn't know the most effective execution method, they decided to give full authorization to their employees. If the employees want to try something, the company will provide traffic and support. If the test results are good, more resources will be allocated, and more traffic will be directed towards it. They give the frontline teams ample testing and decision-making opportunities to stimulate activity.
In 2020, the grocery business adopted the Amoeba model more in terms of competitive strategy. This means adopting a small unit partnership mode, where the rules remain the same, and company resources and systems can be reused. However, the frontline teams have decision-making power, and they have the final say on how to conduct the business, how many warehouses to use, and what resources to allocate.
Unlike traditional e-commerce platforms that rely on centralized decision-making, strong execution, and a "benfen" culture (doing one's own duty), Pinduoduo's Amoeba model has made it more agile, flexible, and has maximized its formidable execution power.