Will Chinese smartphone maker Meizu’s 5% staff layoff affect other tech companies?

From Baidu Images.

Alibaba-backed Chinese smartphone maker Meizu recently announced that it will cut up to 5% of its 4000 staff in 2016 and will also lay off employees every year, Guangzhou-based Time Weekly reported on Tuesday.

Founded in 2003, Meizu is among the largest smartphone makers in China. Chinese e-commerce giant Alibaba bought shares in Meizu for USD 590 million last February to promote its “YunOS” operating system. Meizu sold more than 20 million phones in 2015. Its year-on-year sales grew by 350%, and it aims to sell 20 million phones in 2016.

Meizu CEO Bai Yongxiang explained in an internal letter that he’s following the “20-70-10” vitality model created by the former CEO of General Electric, Jack Welch. The model concludes that the top 20% of the workforce is most productive, and 70% work adequately. The bottom 10% are nonproducers and should be downsized.

Bai said the layoffs would help build an outstanding team and an efficient company. By September 2014, Meizu had as many as 1500 staff. Over a year, it expanded to 4000 staff. That’s why most of the staff being laid off have worked in the company for less than a year.

It is reported that many Chinese tech companies have adopted a vitality model. Chinese internet giants Alibaba and Tencent, China’s leading smartphone maker Huawei and ride-hailing giant Didi Kuaidi have all followed the model.

It was reported that Huawei CEO Ren Zhengfei said that firing the bottom 10% will create a dynamic team, and he would be willing to be fired as well, for the sake of the company.

Didi Kuaidi founder and CEO Cheng Wei said in an interview with Fortune last September that he would follow the same vitality model as a company strategy to improve the team’s executive power.

Last December China’s leading delivery service provider S.F. Express eliminated its bottom performers.

Although Meizu argues that it intends to improve its productivity by laying off staff, it may be following a trend started by Chinese tech giants BAT, which all initiated hiring freezes late last year. Alibaba significantly reduced its campus recruitment last September. Baidu announced a freeze on large-scale non-campus hiring last October. Following Alibaba and Baidu, Tencent froze its outsource hiring while continuing campus and social recruitment last October.

The hiring freeze of BAT may have been signs that “winter has arrived for the capital market” after the Chinese stock market crashed. Meizu’s layoffs only reinforce this theory.

(Top photo from Baidu Images.)

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