Focus Media Holding Limited held an urgent meeting on March 5th, declaring an important appointment: Tan Zhi would replace Jason Nanchun Jiang as chief executive officer of Focus Media while Jiang only maintained the position of President.
The meeting was therefore also interpreted as the beginning of the 2.0 Era for Focus Media. This is also a meeting in which “Passion, Efficiency, Professionalism and Cooperation” were voted as the principle of the corporate culture of Focus Media. With Tan Zhi at the helm, reforms focused on the company’s corporate culture quickly got underway.
Marketing Reform
Tan Zhi’s appointment was initially viewed with skepticism. Yet the executive, a man of high determination, delivered his response since March with a reformation of system and administration, all aimed to solve existing problems in marketing.
Tan Zhi brought with him an impressive bag of acronyms, such as FWO (Focus Media Wealth Operating System), FSO (Focus Media Sales Contract Operation) and put them to work. In the past, information was typed in by hand and managed with Excel tables. As the company expanded, it became increasingly hard. Without a proper information system, efficiency stayed low and rate of errors would only grow. For example, monthly sales data from second tier cities would come out until the 20th of next month under the old system. But now contracts, sales, marketing progress and other figures can be updated immediately. Text messages are sent to remind staff whenever a contract is signed.
“In the past it was difficult to say exactly how much sales one has done. Now, data and information system speak for them,” Tan Zhi noted. Real-time systems make the progress of marketing more transparent and also help predict future sales more accurately. Rash last-minute decisions ruled the day under the old system, and targets were often made by sudden shifts at the end of a month or quarter. “Inexact date didn’t matter that much when the market was good in the past. But now we need to master precise data in advance,” said Tan Zhi. He believes the information system will help make better projections and avoid rushing before a deadline.
If the information system is only a tool for Focus Media to boost marketing efficiency, the reconstruction of the sales teams and the reform of salary system of sales persons indeed touched the nerves of each member. After Tan Zhi took his job, the office building was refurnished and the scattered marketing teams were gathered on the same floor. More importantly, former flat marketing administration was altered to a large degree.
In the past the sales teams in first-tier cities, such as Beijing, Shanghai, Guangzhou and Shenzhen, were led directly by Jason Jiang. And the sales teams in 17 other second-tier cities reported directly to Diana Chen, the former chief operating officer. It became quite a demanding job for Jiang and Chen to cover such a large market. Some second-tier cities could only be visited a few times all year long. “It is difficult for many branch companies to gain timely help and feedback, when the leader is too busy to take care of them,” says Tan Zhi.
Soon after Tan took his job, it was declared Focus Media would divide its market into seven large regions: three sales teams in northern China were integrated as the great region of northern China, while the three other sales teams in southern China were integrated. The other seven teams from eastern China were integrated as four regions, while shopping mall sales was treated as an independent region. Second-tier marketing teams were assigned to the teams of the larger regions. Leaders of the seven large regions are all veterans of Focus Media, who report directly to Tan.
The reform caused an immediate stir and many found their powers suddenly impaired. Team leaders who reported to Jiang in the past had to report to new regional heads instead. More importantly, dividing customers became problematic. “I worked as a judge at the very beginning,” Tan Zhi says. Many marketers were competing with each other for customers and contracts, sending emails to Tan even at mid-night. But Tan seldom made a decision in these cases, throwing the problems back to the marketers. “You settle the problem yourself,” Tan would say, “I can tell you the worst result is we lose the contracts. And the company can afford to lose contracts worth millions of RMB. It doesn’t make a difference to have such a contract or not. I’ll take the loss.”
In the past sales performance was judged by the number of contracts, therefore sales teams often compete with each other to win the contracts. Cutthroat competition always led to big discounts, reducing the margins and brand value of Focus Media. Now the problem is in the process of being solved.
Since July 1st, Tan Zhi has implemented on-target earnings (OTE), shaking the salary system of sales teams. Marketers used to deduct a stable percentage of contracted money, which usually led to several kinds of problems. First is a lack of balance between veterans and green hands. For example, a veteran marketer can easily pocket RMB4 million (US$581,000) from contracts with old customers worth around RMB50 million (US$7.3 million). However, newcomers can only deduct RMB80,000 (US$12,000) from a RMB1 million (US$145,000) contract, even if it is from a very important new customer brought in by the newcomer. Secondly, it caused losses because deductions are based on contracted sales, resulting in some 99.5% discount on some contracts. The company cannot make money form from these contracts while the marketers still receive their share.
According to the new OTE, the deduction marketers make is equal to management profits multiplied by a percentage quota. Management profits are not the margins of the company, but the net-income after all the costs of sales, taxes and management are removed from the contracted sales. Management profits can be settled with flexibility according to different categories of customers, different marketers and regions, etc. More importantly, the team leader cannot deduct from the contracted sales made by himself, but from the overall sales of the whole team, which effectively stamped out the problem of competition between team leader and team members. Team leaders are willing to give their contracts to marketers, turning individualism to teamwork spirit.
“With OTE, different marketing practices end in a different deduction percentage, which is based on one’s capacity and expectancy,” said Tan. Deduction percentage is now derived from OTE formula, based on the expected salary of a marketer and his actual sales.
OTE effectively activates the marketers, though some quit too, not happy with the policy. For those stayed, to guarantee higher income, they have to maintain the motivation to develop new customers no matter veterans or newcomers.