Headcount Freezing is Largely Misinterpreted – Incoming Alibaba (BABA) CEO

Daniel Zhang, incoming chief executive officer at Alibaba (BABA), spoke with Bloomberg Television’s Emily Chang about global growth plans for the e-commerce company, leadership changes and their relationship with the Chinese government.

On the hiring freeze and whether layoffs are a potential next step, Zhang said: “The headcount freezing news actually I think is largely misinterpreted by the market. And we will adopt a zero net asset policy this year for our headcount policy. But we will definitely continue to hire talented people to join us and replace those guys, under-performing employees.”

On how many more management changes are likely to happen, Zhang said: “We change a couple of leadership in our BUs, and we believe that today is the right time for us to bring young generation to the leadership. And, as you know, Alibaba wish to live for 102 years. This is a long journey. So we need young generation to participate in the leadership and lead the company to the next path of journey.”

EMILY CHANG: Daniel Zhang, Alibaba’s incoming CEO, joining us from Hong Kong. First of all, Daniel, congratulations. Thank you for joining us.

First question, Alibaba has lost $90 billion in market cap since the IPO. What will you do differently from Jonathan Liu?

DANIEL ZHANG: Well, as we always said during our IPO, and Alibaba manage our business by creating value for the long-term customers, by creating value for the participants in the entire ecosystem. So we believe that we will – investors will like us as long as we continue our belief and continue our creating value for the customers.

CHANG: Now, Alibaba has changed out the heads of TMall, Alimama, and now the CEO. How many more management changes are we likely to see? Or is management going to stabilize now?

ZHANG: We change a couple of leadership in our BUs, and we believe that today is the right time for us to bring young generation to the leadership. And, as you know, Alibaba wish to live for 102 years. This is a long journey. So we need young generation to participate in the leadership and lead the company to the next path of journey.

CHANG: How will you bring more young talent into the leadership and management roles?

ZHANG: Well, today, if you look at our key business units, and all the leaders are after ’70, 1970s. And we also are trying to bring more and more 1980s, 1985, 1990s young generations to the middle class level, finally to the leadership level. We believe this will – the foundation will be the foundation for our future growth.

CHANG: Now, Jack Ma says he wants 50 percent of revenue to come from outside of China. Currently that number is more like 9 percent. What’s your target for that number this year?

ZHANG: Well, globalization is one of our cost strategies in the future. And we start with our cross-border strategies and we help the overseas supplies to sell through our platform to Chinese consumers. On the other hand, through our Alibaba – Ali Express retail platform, we help Chinese suppliers to sell through to the overseas customers all over the world.

But at the end of the day, we want to build a global buy and global sales global network, a global platform, to serve all the merchants and consumers around the world.

CHANG: So if it’s 9 percent now coming from international, what do you want that number to be?

ZHANG: We are confident that business from international, from our globalization will continue to grow. And now is just a starting point.

CHANG: So what kind of countries can we expect to see Alibaba popping up in? Where are we going to see a greater presence from Alibaba abroad, more specifically?

ZHANG: Today, through our retail platform, Ali Express, we sell a lot of products to the developing countries like Brazil, like Russia. And in those countries, the consumer product is very expensive, so we help Chinese suppliers to sell through our platform to those countries. But we will cover a lot more countries in the future. And on the other hand, we will participate in the growth of certain countries, large investments and M&A. We will try to help the young generations and the young entrepreneurs in the local countries to do their own business.

CHANG: How do you plan to do that?

ZHANG: Well, actually, we have a very clear strategy of globalization. And today we start with the cross-border, as I said. And in the future -next step, we will go further to build up a global network. As I said, today is just beginning. It’s a long journey for globalization.

CHANG: Now, we’ve heard about the hiring freeze, capping employees at, what, 30,000 employees today? How likely would layoffs be if layoffs are a potential next step?

ZHANG: Well, the headcount freezing news actually I think is largely misinterpreted by the market. And we will adopt a zero net asset (ph) policy this year for our headcount policy. But we will definitely continue to hire talented people to join us and replace those guys, underperforming employees.

And the purpose of this zero net-asset (ph) in headcount is to improve our operating efficiency. And we did the same thing three years ago, which gave us very productive results. In five years, we have a dream that we will have $1 trillion USD GME (ph). And checks (ph) at a target for us that, at that day, the headcount in our group should be within 50,000 people. So today, in a good time, we adopt policy, zero net-asset (ph) policy, to improve operating efficiency, we are prepared for future roles.

CHANG: So the Chinese government has made some pretty harsh accusations against Alibaba about bribes, about knockoffs. What is the state of your relationship with the Chinese government right now?

ZHANG: Like all global companies, Alibaba has a very smooth and transparent conversation with Chinese government. We share our views and our plans of business development and we also address their concerns. We do everything we can to make sure all our — all the business on our platform are in line, in compliance with the laws and regulations.

CHANG: So should we consider the latest accusations a warning of some sort?

ZHANG: No, that’s not a warning. As I said, we have a very good conversation with Chinese government.

CHANG: Now, I mentioned that since its peak, Alibaba has lost about $90 million in market value. I wonder, from your perspective, how has life changed since the IPO?

ZHANG: Well, to us, we do what we always do in the past 15 years. And, as we said, over the IPO process, we manage our business by creating value for long-term customers. We don’t want to manage our business by revenue growth and by margins. We believe, if we can create value to the customers, to the ecosystems, we can enjoy record growth and we’ll be recognized by the market.

CHANG: Now, with all of the M&A that you’ve done in so many different industries — pharmaceuticals, movies — what kind of businesses is Alibaba not interested in buying?

ZHANG: Well, we have very clear investment strategy. And we focus on three areas to make our strategic investment. The first is that we try to acquire new customers. Second is that we try to invest to acquire — to expand our existing business to new categories and new areas. The last one is we try to invest and capture the opportunity in disruptive and innovative technologies. So we follow our strategists to make investments and we will continue to do so.

CHANG: Now, there have been a lot of concerns about growth in the Chinese economy slowing down. How concerned are you about the economy in China slowing down?

ZHANG: From our platform, we can see that the Chinese — the consumer demand from China is huge. And today, the Chinese consumer, they not only like products in China, but also they like the high quality products from all over the world. So that’s why we start our cross-border initiatives to help overseas suppliers to sell to China through our platform.

So we are confident that, if we can meet the demand of Chinese consumers, they will continue shopping, to consume on our platform. And this is benefit for the Chinese economy.

CHANG: All right, incoming Alibaba CEO Daniel Zhang. Daniel, thanks so much for joining us. Great to speak with you for the first time here today.

ZHANG: Thank you.

Video for viewing here.

Bloomberg Television

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