Alibaba's World (6 page)

We drove past a few remaining dot-com billboards, turned into a small office park, and pulled up to a glossy one-story office building surrounded by a parking lot. “We’re
here,” Tony said.

We walked into the office, and Tony took me around to meet the staff. There was a mix of Westerners, Chinese Americans, and Chinese nationals, most of whom had studied and lived in the United
States for several years. Ordinarily meeting new staff members would be a happy affair, but I felt somewhat like the grim reaper. I wore a strained smile, knowing that in a few minutes I’d be
laying off many of them.

I was taken to an office where Jack was reading his email. He was visibly concerned about the meeting ahead.

“I don’t know what to say today,” he said. “This whole time we’ve been growing, I’ve only been hiring people. This is the first time we’ve ever had to
fire people. How do we do this?”

I felt bad for Jack. Although many of the foreign staff members didn’t view him as a credible manager, I knew that only his good intentions and optimism had brought us this far. For a
Chinese company, opening a Silicon Valley office was a huge source of pride. For the last several months we’d been traveling around China boasting about our growing US staff, holding it up as
a sign of Alibaba’s global importance.

After discussing the best way to handle it, we called the employees into a large meeting room. There was a tangible pall, as people sensed bad news was coming. Some
were meeting Jack for the first time, and I hoped that the session would not become hostile.

After the seats around the table filled up, another row of colleagues formed behind them, filling the room to the walls. Once everyone was settled, we closed the door and Jack began to
speak.

“I want everyone to know how much we appreciate how hard everyone is working. But I’m afraid that I’m here with some bad news. We are going to have to cut some of our
staff.”

Around the room eyes dropped. Jack continued:

“A few months ago we thought it would be best to move our operations to Silicon Valley. Everyone thought that if you are going to run an English-language website, this is where you have to
be. The engineers are here, the English speakers are here, and the Internet people are all here. So it really seemed like the right decision at the time.

“But since we did that, it seems we created more problems in the company than ever before. Everyone here has been working so hard on different projects, but the communication is very
difficult between here and our Hangzhou office. When you guys come into the office, it is the end of the day in Hangzhou. When we come into the office, you are all leaving. It seems it’s been
impossible to communicate, and I know you’ve all been frustrated when projects were started and then canceled.

“For all of us Alibaba is a dream. Everyone here has worked so hard and really believes in this dream. We want to make this a company that lasts 80 years. But if we want to make
this dream happen, we have to be realistic. Right now it doesn’t make sense for us to have a big center in Silicon Valley. If we want to make the company grow again
someday, we are going to have to cut back today.

“I feel really bad and sorry, for you and your families. At the end of the day the mistakes we made are my responsibility. So I’m very sorry for this. I hope that someday, when the
company is healthy, we can grow again and give you another chance to join Alibaba.”

It was an emotional speech and, as was usual for Jack, straight from his heart. I looked around the room, and the hostility I feared had not materialized. People seemed to respect Jack’s
candor and were resigned to the decision he had made. The only remaining question was who would be cut, and my job was to tell them.

We were laying off about half the staff, and that sent a chill through the office. Although I didn’t know the staff personally, my stomach churned each time I sat down with one of the
unlucky. The company offered laid-off staff members three months of salary and allowed them to keep some of their stock options. To my surprise many were not as concerned about losing their jobs as
they were sad to be leaving Alibaba. Even some of the Western staff in the office, many of whom had no personal connection to China, seemed attached to the company and its mission.

Back at the Alibaba House, I collapsed on the couch, glad to have a difficult day behind me. The company’s future was still uncertain, but at least we were taking the painful steps
necessary to survive. It was also clear that if any company could subsist on a tiny budget, we could do it. After all, Alibaba’s founders had paid themselves a salary of only RMB 500
($60)
per month in the company’s early days. Compared to the employees of our global competitors, we could more easily go back to living on a shoestring budget. Our
“Back to China” strategy had begun, and if we had to, the team could contract all the way back to the Alibaba apartment, cutting costs along the way. Now, if only we had a revenue
model, I thought to myself, we just might have a chance.

A few days later, after Jack and I returned to China, he called me. I was surprised to hear a shaky voice on the other end of the line.

“Porter, can I ask you a question?” His voice was breaking; it sounded like he might even be crying.

“Sure, Jack. What’s wrong?”

“Am I a bad person?”

In the eight months I’d known him, I’d never seen his optimism or confidence waver.

“What do you mean?”

“I’m getting a lot of calls from staff, and they are angry with me about the layoffs. I know it was my fault that I made those decisions. And now everyone is mad at me. But do you
think I’m a bad person for what I did?”

In the background I could hear Jack sniffling. I felt sad for him. Given all of the chaos and disorganization in the company, I had seen this day coming. But rather than being angry at our CEO
for letting the company fall into such disarray, I was sympathetic. In my mind Jack was still just an English teacher who had reached for the stars. It was hard to blame him for overreaching.

“Jack, you did what you had to do. The company wouldn’t survive if you didn’t make those decisions.”

“Yeah, I guess you’re right. But I just feel like I let everyone down.”

We spoke for a few more minutes and then hung up. I felt even more unsettled than I had on the morning of the layoffs. If Jack lost his confidence, who would be left to encourage us?

N
OT LONG AFTER
Jack and I returned from the United States, Joe pulled me into his office. “Porter, I need you to prepare an Alibaba organizational chart,” he
explained. “We’re bringing in another candidate for chief operating officer, Savio Kwan, and I’d like you to bring the org chart along when you interview him so that he can have a
better understanding of Alibaba’s company structure.”

In any other company this would have been a simple and straightforward task, but in the case of Alibaba it was daunting. Alibaba was almost two years old and had never had an organizational
chart. I didn’t particularly relish the task of trying to make sense out of the amorphous blob that was our structure.

Internal chaos was the price we were paying even as Jack boasted publicly, “Alibaba doesn’t plan.” New departments formed and disbanded so quickly that nobody had a good sense
of who was doing what and who was in charge. Day-to-day decisions were difficult to make without having Jack weigh in. Important personnel decisions, such as the hiring and firing of new staff,
were made without any clear procedures, resulting in
anger and resentment among staff members who felt they were being treated unfairly. The organizational chart would be
a pain in the ass to put together, but the prospect of having an adult in the room, in the form of a COO, was enough to motivate me.

As I set out to draft the organizational chart, I contacted the managers I thought were in charge of the various departments that had popped up in the previous six months, as the company swelled
from 40 to several hundred employees. Not surprisingly my guesses were not always correct. Like a pinball I was bounced around to various colleagues who clearly didn’t know what departments
existed or who, in fact, was in charge. After hammering out the best chart I could, I realized that not everyone in the company had been accounted for. Partly to cover my bases, and partly as an
ironic joke to myself, I placed an asterisk next to the chart and, at the bottom of the page, wrote:

By the time I sat down with Savio, he seemed just as confused as I was—in fact, he was frazzled by the whole Alibaba interview process. “So who have you met so far?” I
asked.

“I’ve had about eight meetings so far with the company founders, and it really seems like there’s a lot of confusion.”

A 25-year management veteran, with 15 of those years spent at General Electric, he was no doubt used to a more structured organization. While interviewing at Alibaba, he’d been tossed from
manager to manager with no proper introductions.

“I can’t understand why all these people are interviewing me. It’s pretty unorthodox for a COO to be interviewed by his
potential subordinates. And no
one seems to have clear agreement on what the company’s strategy or priorities are.”

I was afraid that we’d already scared Savio away. Seeking to bring some calm to the situation, I pulled out a folder with the Alibaba organizational chart I’d created, along with a
few articles and background material about Alibaba that gave as close to a comprehensive introduction to the company as was possible at the time. He took a deep breath and seemed to feel a bit more
at ease.

“Eight meetings in, this is the first time anyone has given me any kind of overview of Alibaba,” he said. I could only imagine what had been discussed in his earlier meetings.

Savio settled in and told me a little bit about himself. He had been born and raised in Hong Kong, then had studied in London, and ultimately found his way back to China, helping lead GE’s
medical equipment business there in the 1980s and ’90s. He had been working in China at a time when few people from Hong Kong were willing to do so, and that had given him a front-row seat
for China’s transition from a planned economy to a market economy. It gave me some comfort to know that he had worked in China before doing so became a trend and would probably be accustomed
to a rough-and-tumble environment.

Savio was not the first person whom I’d interviewed for the position, and my first impression of him was that he wasn’t the best candidate. He had a warm and jovial spirit that told
me he might fit in, and the graying hair that signaled experience, but I worried that he lacked the industry expertise and decisiveness necessary to bring order to Alibaba’s chaos. I
preferred the first candidate I’d met, a strong, bold—even brash—China country manager from a large multinational tech company who seemed
like he’d
bring real backbone to the company. Savio seemed almost too nice. I shared my thoughts with Joe Tsai.

“So you liked the other guy?” Joe responded. “Well, I don’t think we’re going to be able to get him. He’s in a pretty high-level position at his current
company, and in this market it would be hard to convince him to join a little start-up like Alibaba.”

In January 2001 we announced that Savio was our new COO. And a few weeks after that Savio surprised me with his decisiveness by cutting the majority of the remaining international staff at the
company. First he cut Hong Kong, keeping only a few financial and administrative staffers. And then he cut what was left of the US office, save for a couple technical experts. The suddenness was a
shock, which left me with a strange loneliness that even the staff members with whom I’d had disagreements were now gone. With the exception of Abir Oreibi in Europe and a few other
international staffers, I now found myself the lone survivor in the group hired about the same time I was.

As painful as it was, the layoffs were crucial to stop Alibaba’s financial bleeding. Jack should have recognized this earlier, but doing it took an outsider who did not have personal
relationships with the staff. In the wake of the layoffs I arrived at work to see rows upon rows of empty desks where my colleagues used to sit.

In severing the international staff, the company had made an attempt to be fair. Employees were offered a choice of three months’ salary or one month of salary plus two years’ worth
of their unearned stock options. Disgruntled and with little faith in the company’s prospects, many of the laid-off managers chose
the full three-month salary offer,
not wanting to be left holding worthless stock certificates for a company that appeared to be headed toward bankruptcy.

Savio’s next step was a more symbolic one—clearing out the bunk beds from Alibaba’s main Hangzhou office. “This is unsustainable,” he contended. “If people
are working around the clock like this, they will burn out. We have to allow people to spend time with their families and have a life outside of Alibaba, or they won’t last long in the
company.” On the one hand I got his point. But on the other hand, I worried that not only was he cutting staff, he was cutting back the hours that existing staff were working. Might he be
bringing a big-company working culture to Alibaba without any of the actual business to justify it?

With his quick, bold cuts in staff, Savio had defied my initial impression of him as lacking conviction. But cutting costs was one thing. Building a business was another. And Savio’s next
moves failed to impress me. Rather than taking the company by the reins, defining its strategy, and moving forward with a bold execution plan, Savio decided to focus senior management on a lengthy
process of defining the company’s mission, vision, and values.

Hadn’t we been talking about these things for more than a year already?
I thought to myself. If there was one thing that Alibaba had been big on, it was talking about dreams and
values. Our problem, it seemed to me, was that we had a lot of lofty talk and not enough tangible results. With Alibaba’s money running out, shouldn’t we be doing more than writing down
typical corporate-speak on PowerPoint presentations?