Not singing praises

Yu: welcomes staff criticism

It is not uncommon for Chinese companies to feature theatrical performances in their annual gatherings (see WiC438 for more background on the nianhui culture). Last year Tencent’s Pony Ma dressed in hip-hop attire to sing a popular Sandy Lam ballad on stage; rival boss Jack Ma had previously performed a Michael Jackson dance tribute in front of 40,000 Alibaba employees. Beijing-based New Oriental Education and Technology spiced up its nianhui with some live entertainment too. But the performance was so unusual that a five-minute video of it has been viewed 240 million times on Sina Weibo.

The skit saw six staff sing a song entitled Release Myself (adapted from the popular internet pop tune Desert Camel). But rather than praise their bosses, their lyrics mocked New Oriental’s ossified corporate culture, lampooning senior managers for being risk averse and middle management as servile.

The song included scathing lines like “Just want to pass the assessment, not want to do real work; when there’s a problem everybody shirks” and “What moral ethics? What professional ethics? Cheers only to the renminbi.”

The satirical song, while savagely critical, unexpectedly won the favour of New Oriental’s founder and boss Yu Minhong.

“Staff that dare to diss their bosses, to expose New Oriental’s problems, deserve encouragement. I’m going to award the team who created and performed the song Rmb120,000 ($17,792),” Yu announced on his own weibo, adding that he would like to foster a culture of frankness at his firm, which is the largest provider of private educational services in China.

In fact, Yu himself wrote five open letters to his employees last year to discuss New Oriental’s ills, according to Shenwang, a news outlet operated by Tencent. He felt that the company had failed to provide products (tutorial classes in this case) of consistent quality. Moreover, Yu pointed out the firm’s failure to retain talent and complained it was overly tolerant of managers that were not acting in its best interests.

The root cause, Yu believed, was the lack of a well-functioning human resources department.

“In 2019 we’ll begin to assess the capability and achievement of each and every one in the company; meanwhile, we’ll strengthen [our] system for training and hiring talents,” Yu proclaimed. “We will also weed out the undesirable personnel – those who are mediocre, unruly, ingratiating and slack – starting from officers in the sixth rank or above,” he added. His plan will see New Oriental’s 50,000-staff, organised into a hierarchy of 14 layers, with the worst 5-10% to be dismissed every year.

The shake-up comes at a time when the New York-listed firm is struggling. Last month it reported its first quarterly loss in seven years, as a spike in operating costs sent it $25.8 million into the red for the September-November period. Its revenue for that quarter also saw its slowest sales growth since August 2017, up 27.8% on the year to $597.1 million.

Expansion costs and rising compensation for teachers are part of the problem, but New Oriental is also feeling the heat from a government initiative to clamp down on “excessive profits” in the private education sector since August. Flush with private equity investment, the sector saw seven players go public in 2017. Yet subsequent allegations of financial shenanigans, kindergarten abuses (see WiC390) and widespread non-compliance with teaching and licencing requirements have battered the private education sector’s reputation.

A new rule in November curbed profit-oriented activities in the pre-school segment, and online education is expected to be the next target of the regulators. This policy risk is casting a shadow over New Oriental’s plan to spin off its online unit in a Hong Kong IPO. Backed also by Tencent, Koolearn Technology reported its first loss during the six months ended in November, and is expecting a deepening deficit for the full year. That’s the bleak forecast in its updated prospectus (released on February 1). Because of delays the prospectus needed to be updated after Koolearn’s earlier IPO application in July expired.

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