businesstransition is far more than Re-configuration of production

It should be that lots of enterprises that in their well-developed position are mainly benefited from the demands in the huge markets. However, since the circumstance of demands is in change, and the external conditions of production capacity become surplus and the ability of customer’s game playing is enhanced, the enterprise is required not only to act in mechanical-logic thought, but also to act in biologic-logic thought. In the age of production capacity surplus, in order to deal with the complicated challenge the enterprise should strive and turn in the mind-set, institutional mechanism and production technology for sound development.

Logos and utensils – the need of existence and long-term development for the enterprise

I have worked in the entity enterprise for 20 years and I feel that the economic environment is getting less and less optimistic. The enterprise is facing up to the depression that large scale demand from both internal and external is declining, and to the depression of the gravely surplus production capacity. And what is more, the currency is under inflation, and the labor cost is getting higher and higher while the life pressure on labors heavier and heavier and their life becomes relatively difficult. Enterprises are inevitably the victim of all those pressures. Under such difficult situation, an enterprise could not survive healthily, happily and long without ideals, and belief, while only with going after money. 

Nowadays, the world we live in is overwhelmed in materialistic desires, and dominated by vested interest rather than ideal and thought. Once a man has no thought, he would be controlled by materialism, which makes him forget his primary target and get lost of his bearings. A man should pursue of happiness with physical fitness. If he has the ability to help others he should do it so, which should be a man’s life goal. A man’s life value in true is that how many people he has well-treated and helped, and made them happy, rather than how much he could attain his own happiness. 

An enterprise, just like a man, shall be healthily alive before a quality living. A healthy enterprise shall have its due business philosophy. The management team and its staffs of an enterprise shall have right life idea and vigorous thoughts before anything else. An enterprise without ideals and believes would not go long, should it be controlled by material desires. This kind of enterprise would confuse tools and goals and, to contrary, take tools as goals.  

Tianjin Heavy steel Mechanical Equipment Co., LTD (Hereafter called “TZME”) guides its working team and staffs in spiritual growth under the simple value and thought to be grateful and obey by rules and be helpful. The leaders will actively take the lead in transformation of the working style, putting its staff’s interest in concentration. Anywhere and anytime TZME takes care for, cherishes and understands its staffs for their working conditions, living conditions, and body fitness, happy growth. In this way the staffs will have the lofty ideals and believes, and work hard for their own enterprise and the society. “Working opportunities for who are willing to work. --Health and happy life for TZME working staffs.--The non-standardized product made by Chinese in China for the high-end customers in the world”---that is the spirit of TZME. And it is the lofty ideal and thought that condensates the 700 people in sharing the happiness and sufferings, in striving for its common cause.   

It is unreasonable for many people to think that someone is able to do things well and manage an enterprise well just because he has competence and ability and he has manpower, capital and material and certain human social relations. Nevertheless, all these marketing, capital, manpower, management, products and technology, which would be regarded as logos by some enterprise managers, belong to ‘utensils’ ,i.e. methods, of enterprise development rather than ‘logos’.  Since some people are regardless of the difference between logos and utensils, misunderstand utensils as logos, it results in short enterprise life and could hardly go in the drastically competitive market.    

Then, what is the logo for an enterprise? It’s not only the property management, or to say, the business management, but the natural law in universe, the natural law on earth and humanity etc. should also be included.

1.    The natural law in universe lies in trustworthiness. It is customers and staffs that are God/King of an enterprise. ‘The natural law in universe does not pay for diligence.’ There is no mercy for your hard work. God/King won’t select you, and so go after you. Nevertheless, the enterprise is surely successful so long as you are trustable and creditable to your reverent customers, and cherishes your staffs, and you can create value for your customers and staffs. In this way, you make your customers ever for yours; make your staffs faithful to you. Without more and more customers and without staffs faithful to your enterprise you can never manage an enterprise well. Integrity wins the World. An enterprise’s overall bankruptcy is its loss of trust. So long as its trust exists, it can get the capital and opportunity in possession to turn over. Keep trustable and cherish every trust from customers and staffs! Never overdraw your trustworthiness.     

2.    The natural law on earth pays for diligence. It’s saying that the natural law in universe pays for diligence. In fact, the natural law in universe lies in trustworthiness, the natural law on earth pays for diligence. Normally, the earth would pay back. The saying is ‘as we sow so shall we reap’, and ‘no pain, no gain’. 

3.    Humanity means honesty. People cannot associate heart to heart without honesty. It is unnecessary to say more about the root of bearing oneself with honesty.

4.    Business means morality. The words of moral integrity mean the root of bearing oneself and the root of business. As for an enterprise, morality is how to manage it well, while behavior is how to make it long-life. An enterprise cannot be successful without morality, even cannot go forward. An enterprise cannot be without morality, without morality it would be temporal, even though it could come into being. Being short of moral integrity means spiritual empty. Presently, being driven by material interest, not only people are fickle, but an enterprise is also. Fickleness and impulse is bad for enterprise development, and also undermines the morale of people. Moral shortage in the industrial society and industrialization without moral spirit would ruin not only the industry itself, but also all the achievement the industrialization brought to us, and ultimately would make harm to mankind itself. Now, it is necessary to have business moral guidance and moral integrity come back. Don’t just follow path, it is more important to look up at the way. When you are on a wrong way, morality would be lost and all your efforts would come to naught. Do get it in mind that ‘Business means morality’.  

Enterprise morality is that of natural law both in universe and on earth and humanity and business, of which the true essence is moral and integrity and diligence and credit. And these are the root for an enterprise to stay in the market. Many Chinese enterprises are used to inter-personal connections and monopoly energy, and even to over-relying on government orientation. What I mean is that Hill will be backing down, water will be flowing away by the water, and person will be running away by person. That will make us lose our independent character and moral. We should get rid of the non-market oriented management methods such as making personal relations, smuggling of taxes, bribery, playing touch ball etc.. And we should believe in the market force, bearing in mind the true customers’ choice. Eventually, we should believe in the force of value creation and the correct morality of enterprise management.

When such enterprise management morality is carried out, you must have such guidance as to have your business big is inferior to strong, and strong is inferior to perfect, and perfect to long life. The Long carries more significant value, which is the goal we are ever pursuing. Enterprise management moral is the base for long life, while market, capital, production and technology, etc. are the tools of business development. To do business for long time, logos and utensils must be integrated. Only in this way can an enterprise existence for long and develop healthily under bad economic environment.

THE KEY FOR ENTERPRISE HEALTHY AND SCIENTIFIC DEVELOPMENT—ADAPTION OF INSTITUTION AND HUMANITY

It is known among the enterprise managers that there are always three issues that call for the enterprise to study and solve whatsoever the property and category of the enterprise is in. The three issues are: how to mobilize the initiatives of the enterprise operator (the professional manager), the administrator, and the laborer; how to organize the enterprise to carry out production in order and effectively and efficiently; and how to configure and make use of its resources (manpower, capital, material, information etc.). However, although science and technology is the first production force, it’s man who maneuvers creation and application of the science and technology. So the core of the three issues above-mentioned still is how to mobilize the initiatives of the man. Among the three factors determining man’s actions, the corporate culture, administrative order and institution, each has its own function, while supplemental to each other. The decisive one is the institution.

The first factor in enterprise production and management is human. A poor management of the human would result in cost increasing, and so it would become dynamic and successive consumption, a negative resource. But, under a good management of human, it could become a positive one and continuous impetus of wealth creation. In its existence and development of an enterprise, there would endlessly appear variety of management issues, which are originated from three factors: 1. selfishness, 2. Information asymmetry, 3. Separation of management right and ownership. Selfishness is not terrible, which can be resolved by supervision and punishment method. However, a lot of poor information circulation and asymmetry exist there in the enterprise, which brings a lot of difficult problems to dispose. It is not yet so bad if there are only the first two factors, because you do for yourself, the problems from selfishness and information asymmetry can be easily resolved. However, in the huge modern society of cooperative production, we could not go without separation of management right and ownership. In this respect, endless management problems would be derived from selfishness and information asymmetry, calling the operator to weary deal with.

Often, would the three factors be coefficient, which make endless troubles of our management. How to treat these problems in management? Not only make the staffs know that enterprise development is their own affairs, but also make them unite in the enterprise system so as to struggle for their own interest. This would call for coordination between humanity and institution in an enterprise. Selfish is the nature of human beings. Ordinary people are self-supported, while being not a selfless dedicated moral model, nor an utterly worthless person. Often, they would consider for the interest of themselves. It is basically the human nature that mind is determined by interest, while mind determines action. From the ancient time, this humanity has never changed. In the past, our state-owned enterprises tried to have their institution adapted to an idealized selfless humanity. So, they managed to make use of ideological education to bring up people of Lei Feng style so as to settle the problems in management. And by means of advocating dedication spirit, and participation of cost reduction and efficiency promotion, and conscientious work, they hoped to resolve the problems of adaption of institution to humanity. However, at last things go contrary to their wishes due to non-adaption of institution to humanity. At the end of 2007, I resigned from public service. In practice, I wanted to make it clear how the institution can combine with mechanism and what effect the adaption of institution to humanity has on enterprise development. And I took the lead to initiate our own business, a private-operated limited liability company--- Tianjin Heavy steel Mechanical Equipment Co., LTD, of which its main managers and key staffs are both share holders and employees. Their positions are basically altered with the double roles of commander and fighter. At all times they take it their job to pay more attention to the enterprise and its development. Thanks that their interest from both roles is combined and rationally matched, part of the problems caused by the separation of the operation right and ownership is resolved. In this way, their vigor and enthusiasm pop up, and the relationship between share holders and staffs gets more and more harmonious.

A design of reasonable salary distribution and post promotion system within the enterprise can sufficiently resolve the problem of interest game playing between enterprise and staffs. The staffs will work as earnestly as do for themselves, and spend enterprise’s money just like spend money of their own. It is not merely an interest community established, but a fate community relationship is also established. For example, we offer a win-win platform in TZME, on which the labors save for themselves, work for themselves. The salary distribution is based on the hourly wages previously and on the efficiency wages presently. This makes the labors direct manager of the labor efficiency. Previous requirement—labors should work hard and pay out, is turned into the present status that labors initiatively make money and promote themselves. The labors work happily and enjoy themselves in working. A self-management system is formed that labors self-restrain and self- motivate so as to pay for themselves. Cost control and its effect become affairs of the labors themselves, and the efficiency is remarkably increased. Production cost is decreased and the competitiveness is enhanced, but also the labors become real master of the enterprise. It facilitates the enterprise to go forward harmoniously and healthily. 

In the past seven years, the non-standard equipment we made has been sent to more than 20 countries and regions. TZME has provided employment opportunities for 750 persons and there is grand total tax payment more than RMB10 millions. The available employment is 4 times than in the state-owned joint venture in 13 years, and tax is 7 times. Now, here in TZME labor-capital relationship is harmonious, staffs are in full spirit and energy, which is the social effect of institutional mechanism transformation. Our practice proves that not only private enterprise has social value of existence, but also proves that it is necessary to build the enterprise system for the scientific development of an enterprise in line with the natural principle of ‘selfish-oriented mankind’. In this system, the labor can subjectively strive for private interest. The labor can get the condition to dedicate to the society with high value created, and can objectively get to the ultimate goal for the public.

HOW TZME TO POSITION ITSELF?    

Enterprise positioning and enterprise culture comes out in one continuous line. What kind of enterprise could be brought up is inevitably connected and affected by a national culture in the country. The Chinese culture is ‘a leading culture’. Each one has his own idea and thought ahead, which is not suitable for team work. The persons of the kind under the stirring culture influence are suitable to work with standardized jobs on flow production line or for a product with both combined jobs, e.g. for container, appliances, automobile and standardized daily articles. Since the productions are easy to duplicate and imitate, it is enough to invest equipment and briefly train the labor for production, for the product on flow production line in particular. The stirring idea of the labor is fixed onto the procedures up and down along the flow line. So the difficulty of management is reduced. In practice It is proved that whenever the like production is introduced into Chinese enterprise, the enterprise would become No. one in the world.

Compared with Japanese and German, because of different culture background, Chinese has different working attitude and working perceptiveness, while often work in passivity. As for a quality machinery manufacturer, the labor must have very strong sense of being master and sense of responsibility, a spirit of ‘a screw’ in the production, i.e. alignment to the right position, then screw-in and permanently stay there at the position. Only in this way, can the product quality be stable and reliable, and satisfied by the customer. Impulsion and fickleness is the taboo in production. It is believed that in an industrial entity, in a quality machinery manufacturer in particular, the most difficult thing is how to foster quality labors, how to transform a fickleness man in society to a man with ‘screw’ spirit. In this respect, TZME has endeavored for years. We start from recruitment, determine employment by a man’s responsibility, considering it as decisive element to be able to hard work. Under TZME culture and its surrounding atmosphere, we tried to ease labors’ fickleness by philosophy education and thought guidance, and improve labors’ techniques and skills in training course, and resolve passive working attitude through adaption between institution and humanity. And we got great achievement. Many people think that TZME brought out top-quality products because it has first class equipment and technique. That’s wrong. In the same time when we improve labors’ technique and operating ability, we depend on the labors’ ‘screw’ spirit—at any time to treat work seriously, surely, cautiously and conscientiously, depend on the meticulosity of labors and making perfection more perfect to the ultimate. Depending on the spirit, enterprise system adaption of humanity and institution, and management, by perfectly combining man and material and forming an integrate system ability, TZME can have a foothold in the industry.

In the age of absolute production capacity surplus, competition between enterprises becomes more and more violent. Customers are more hypercritical, and there are no more allowed tolerant rooms for us to correct any mistakes that might take place. The key factor to get development is to create value for customers and gain approval from customers. So we must soberly make it clear that strategy is more important than tactics, and management is more important than administration. Mere thinking of administration and endeavor is far away from plenty. As Mr. Lu Xun said, the most painful thing in a life is there is no way to go after waking up from a dream. These years, the domestic enterprises pay more and more attention to the strategy. However, recognition of strategic importance is one thing, while taking in mind strategy consciousness is another one. It is a transfer process from quantitative changes to qualitative changes, a process to cure a wound by Scrapping poison off the bone. More than 90% Chinese enterprises consider they have their strategy, while the strategy they understand is just an idea, or a direction, or a target, or a pursuit rather than the strategy in its true significance. What is strategy? Dr. Potter’s definition is as following, Create a unique advantageous position, involving a variety of different operating activities. We can see that positioning is the core of the strategy for an enterprise, which is to form a set of systematic and characteristic operating activities, and to take a position with unique value.

Yet China is not a complete industrialized country while its industries supported by the agricultural idea. There are two misunderstandings on development in Chinese enterprise short of industrial sprit support.

The first one is to attribute the core competitive ability to a coordinated process service in order for the enterprise to exist in the market economy. Only can an enterprise have promising development, as misunderstood, when it has monopoly control over all and each steps and links. Take machinery manufacture industry as an example, the only way to go, as said, for an enterprise to exist and development, is to command in monopoly all steps from tech-development to manufacture, to installation, to post sale service as being No.1 in the industry. Monopoly force does not definitely mean vitality. Should you cover 70% of an industrial market, you would be killed by surplus production capacity when market demand reduces to half. In fact, market economy is an efficient one rather than monopoly one. Market economy requires enterprises to precisely cooperate with one another. These enterprises have a variety of different advantage and ability, and even come from other countries and regions, serving the customer with a conglomeration manner. It just likes a chain. When each part of the chain is manufactured by a company with advanced, refined and top ability, each company could make the part to its best. Then when all parts are perfectly assembled together, the chain would become of an art master piece instead of just a chain.   

TZME’s choice is to be a number of the chain. Our greatest advantage is the ability to make simple and perfect joint with various customers, i.e. when our product comes to German, it can be installed and commissioned by German, and put in use, and when to Japan— by Japanese. These countries are well-known for their strictness with product quality.

The second one is that often a crowd of enterprises would pile into an industry and vie, like a swarm of bees. Eventually, nobody could live a happy life, nor could save his life. Market economy is a specialized one. In the west developed countries competition is rational. Therefore, usually only few enterprises could take part in an industry, while the rest would step aside. That’s why numerous small and nice champions exist in Germany. Contrarily, in China, the numerous psychologies always make people rush for a promising industry, while encountering crisis, then hurrying up to retreat. It is widespread mentality to follow the trend of impetuous. In the past years, the market circumstance both at home and abroad was favorable. So a lot of opportunities emerged, and many companies came into being. They went in for certain productions, of which the management is simple. The productions merely call for single technology and standardized specifications on a simple production flow line. Since these productions could be easily realized by simply simulation and copying, a crowd of companies took part in the industry one after another, launching an out-of-order competition and disastrous production capacity surplus. Many companies have to sacrifice their cost and interest to survive. Therefore, it is the trouble maker to follow the trend of impetuosity.
 

In the market, the Chinese culture encounters the two misunderstanding regions of business management. Many enterprises are sustained through relationship and reputation. Because they don’t follow the market, while follow the national industrial policy, some of enterprises lose independent moral, but accelerate the production capacity surplus. In the age of absolute production capacity surplus, it is worried whether the private enterprise can exist and develop under the surrounding that demand reduced both at home and abroad in large scale, and yet the state-owned enterprises carry out industrial monopoly, or take part in competition irrespective of cost. Maybe, in the near future, private business failure upsurge would come true.    

Since we’ve fully found out the two misunderstandings on Chinese culture and how to control an enterprise, TZME has not positioned its production on only one industry, but positioned it on non-standardized machinery and equipment and high-level steel works for multi-industries on the world. For it can avoid competition from the outside. The characteristic in multi-industries makes our management less affected than in single industry, in the same time, non-standardized and high-level production is not only an easy production in control and technology, nor a production that can be easily copies, nor a simple production on a flow line. A non-standardized product is tailored to its specification. Its manufacture process is diverse and difficult. And many production work and skills are applied, and good systematic control is required. So it is hard to be copied and substituted.

In these years, what TZME relies on is its advanced ever-progressing systematic ability in manufacture. TZME has supplied variety of quality non-standardized machinery and equipment tailored by well-known heavy machinery companies in the world and internationally famous engineering contractors. It realizes TZME’s value and sharp management edge. Just because TZME can render its customers, international high end customers in particular, more value than that domestic competitors unable to copy and offer, and that foreign competitors unable to make in terms of cost performance. It always keeps its customers at ease, and satisfied. After years’ cooperation, TZME’s products gained good public praise, and TZME has established long-term stable cooperation relationship with more than 30 well-known customers in the world. Up till now, specialized sales force has not yet been appointed in TZME, while the supervisor from customers becomes of our ‘salesperson’. Many customers and end-users become of our marketing window. Our products are exported to more than 20 countries and regions.  

CONCLUSION:
 

Under the guidance of correct business morality, an enterprise can definitely walk up on the healthy development way so long as it establishes institutional mechanisms adapted to humanity, and lays out the way for enterprises to transform, making perfect and market-oriented products with delicate craft effort, and constantly surpass beyond itself and constantly transform and adjust itself, constantly take crisis awareness.   
 

LIKUN

Tianjin Heavy steel Mechanical Equipment Co., LTD