Bringing in the professionals

FuzhouI wrote this on my flight from Fuzhou to Shanghai after a wonderful set of meetings with the founders and president of Yonghui Superstores. This is an amazing Chinese success story, although the founders are the first to warn that it is far too early to claim victory. It is also a perfect case study of how founders can professionalize their fast-growing company and prevent it from aging prematurely without straying from their Founder’s MentalitySM.

The two Zhang brothers—Xuansong (the current chairman) and Xuanning (the CEO)—launched their first stores in Fuzhou in 1998. They experimented with nine smaller-format stores before opening their 10th store in 2000 using the Yonghui brand and format. Their mission was to provide the mass consumer with safe, fresh produce at reasonable prices. Their one major business-model innovation was to buy fresh food directly and sell it themselves (vs. working through distributors and having others sell fresh food via concession).

The brothers couldn’t believe their initial success—but they also recall how much work it was. When we visited store No. 10—the first Yonghui store— Xuanning Zhang pointed out where he and his brother slept for several nights before the store opened and for way too many nights after. “We just did whatever it took,” he said. “That meant a lot of nights sleeping at the store and a lot of 2 AM wake-ups to buy the best produce from wholesalers.”

The store was unlike anything else in Fuzhou and returned the Zhangs’ initial cash investment in the first year. That allowed them to continue opening new stores using cash generated from the previous stores. As the company grew within the city and then throughout the Fujian province, the brothers expanded the founding team to a core group of six, all of whom had equity in the company and helped build it into what it is today. In 2007, they realized they needed more capital to grow and brought in Headland Capital Partners (formerly HSBC Private Equity (Asia) Ltd.). Valued at approximately 2 billion RMB that year, Yonghui is now valued on the Shanghai exchange at around 20 billion RMB, representing nearly a tenfold return for the PE investors.

Given this extraordinary success, it is all the more remarkable that the founders recognized their own limits. As Xuansong Zhang said: “Of course we are proud of what we’ve done, but there is still a huge amount to do.  We know our limits and are working hard to bring in the professionals.” In February 2011, they hired as president Jianbo Li, who now runs day-to-day store operations. The original founders still run the buying group, but they are working to professionalize it, too, with new management systems and training.

Xuansong Zhang is very clear that the founding team needs to learn to let go over time by supporting the new professional recruits. “Of course we need to pass on our values and make sure the new team shares the original mission,” he said, “but we also need to trust them to run the operations and do the right thing. Founders do a lot of things right, but we also do a lot of things wrong, and professionals can help us bring the company to the next level. They are doing some great things that we should support rather than say, ‘Things were different back in the old days.’”

In March, the Zhangs held an offsite for their top 300 leaders with the objective of training leaders to embrace the best practices of both the founders and the new professional team. Li, the company’s president, described how it unfolded: “Our goal was to articulate and pass on the values and experience of the founding team while also outlining the capabilities we need to move to the next level. Our HR VP, Mingang Chai, developed an excellent program,” he said. “The founders attended full time, talking about the early days. We had some of the key executives who had opened the early stores telling their stories—all the good things and all the bad things. We wanted to make everyone understand the history of the company, the values of the founders and what it meant to be responsible for a store. But we also talked through some of the new initiatives we were pursuing and the new capabilities we were building.” He added: “The founders are very clear on this: We must understand and respect the founding period, but we also have to build new capabilities to take the company to the next level. The founders are proud of what they’ve done, but also recognize that others are needed now as well. This is what we tried to teach with our 300 leaders.”

I find that extraordinary. The founders built a great company, but also recognize their limits in building it to the next stage. They view their job as finding, recruiting and nurturing a new set of professionals that will achieve the mission for the next 10 years.

This entry was posted in Revenue grows faster than talent, The unscalable founder by James Allen. Bookmark the permalink.

About James Allen

James Allen is a senior partner in Bain & Company's London office and recognized as a leading expert in developing global corporate and business unit strategy. He is co-head of Bain’s Global Strategy practice and a member of Bain & Company's European Consumer Products practice. He is co-author, with Chris Zook, of Repeatability (HBR Press, March 2012) and Profit from the Core (HBR Press, 2001 and 2010).

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