Analysis: Concerns over Great Wall's employment policy

Gasgoo.com (Shanghai) - Great Wall's management and marketing decisions have been attracting a great deal of attention as of late. The Hebei-based manufacturer, which is now listed on both the Hong Kong and mainland stock exchanges, has become somewhat of a black horse in the Chinese automobile industry. Its sales and financial performance in the SUV market have been especially strong. Great Wall sold a total of 462,700 vehicles in 2011, 27.3 percent more than the previous year. In addition, its net profits increased 26.86 percent to 3.42 billion yuan ($541.32m) last year. Its growth rate far exceeded the industry average, which was just under three percent.

Great Wall's strategy of stable development has been applauded by many in the industry, with some media outlets going as far as saying the manufacturer has yet to make a wrong move. However, this conservative attitude also contains some dangers, as the manufacturer rarely goes out of its way to seek outside talent. The vast majority of Great Wall's management staff consists of employees who started their careers at the manufacturer, with talent from other companies very scarce. Recent reports revealed that former Deputy General Manager Cui Zhiyu, who left the manufacturer last month, was one of those few outside hires.

Possessing talented staff is one of the keys to success in the automobile industry. As Great Wall enters a period of rapid expansion and globalization, will its current employment strategy help or hinder it? In order to answer this and related questions, Gasgoo.com (Chinese) conducted a survey on the topic. A total of 2,320 individuals from within the industry participated.

When asked whether or not they believed Great Wall's employment strategy was excessively conservative, participants' responses were mixed. Nearly half, 47 percent, agreed with the statement, whereas 35 percent answered that there was no problem with the strategy, commenting that outside hires are not necessarily that useful to a company's development. The remaining 18 percent were undecided.

According to the reports supplied by Great Wall to the Shanghai Stock Exchange, the vast majority of its deputy general managers joined the manufacturer not long after its establishment. They have retained their positions all the way to today. The manufacturer boasts that its core staff is the product of long-term internal training. Due to the manufacturer's strong sales and financial results, this approach has also gained a lot of praise from within the industry, with many commenting that it is one the attributes that makes Great Wall unique.

However, are Great Wall's sales results really linked to its employment strategy? Looking at previous figures, the manufacturer's sales growth only began speeding up three years ago. From 2007 to 2008, its vehicles sales grew less than 20,000 units. However, beginning in 2009, the manufacturer experienced tremendous growth, with its sales last year exceeding 460,000 units. The ratio of sales from overseas markets also increased to 17 percent.

There has been a lot of concern voiced that Great Wall's employment strategy may not be able to keep up with its rapid development. The recent retirements of Deputy General Managers Jia Yaquan and Cui Zhiyu, which caught many by surprise, may signify that the manufacturer is considering revising this policy.

Aside from its employment strategy, several of Great Wall's other internal policies have come under scrutiny. Specifically, Board Chairman Wei Jianjun has been criticized as acting rash and arrogant in several of the decisions he made. Due to timely market adjustments, Great Wall has been able to avoid any mistakes made from escalating too severely. However, it remains to be seen whether or not the manufacturer will be able to quickly react to such slip-ups in the future as it continues to rapidly expand.

Another issue of concern is whether or not Great Wall's employment strategy will lead to the manufacturer's development bottlenecking in the future. The majority of participants, 72 percent, believe that the policy may stunt development within the next five years, with over half of those predicting such a bottleneck may occur in the next three years. The remaining 28 percent maintain that the employment policy is not severely detrimental to the manufacturer's growth, and predict that development will remain smooth over the next five years.

Over its twenty year history, Great Wall has made significant strides in both quality and technology. These advancements may very well be linked to its employment strategy. However, the manufacturer has also benefited from lack of strong competition. When it first entered the Chinese pickup truck market over a decade ago and the SUV market in 2003, Great Wall faced almost no opposition. This allowed the manufacturer a great deal of margin to freely develop. It was not until 2008, when Great Wall first started selling sedans, that it began to feel considerable market pressure. Its first few sedans, such as the Florid Cross, Coolbear and Voleex C10, didn't bring any noteworthy features and eventually failed to succeed. It was not until 2010's Voleex C30 that Great Wall finally made a breakthrough in the market. However, Great Wall and other own brands face new challenges as competition in the Chinese automobile market continues to become fiercer.

The manufacturer has already been forced to make great changes. The recent management shake-up which saw Mr. Jia and Mr. Cui leaving was only one of these. Great Wall has also made repeated attempts to reorganize its sales network and brand structure. While it may be too early to judge if the manufacturer's rapid development will bottleneck in a few years, it goes without saying that both its management team and staff in general face ever more challenging obstacles in the Chinese automobile market.