Does ‘996’ Provide Competitive Advantage? And How Should Foreign Firms Respond?
By Tim Lindeman
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Background
One of the most striking differences between the IT industry in China and the West is the amount of time that professionals put into their work. I learned this first-hand many years ago when I took a job at Yonyou, a large Chinese ERP vendor. Not only did we frequently work in the evenings, but we also participated in work-related events on the weekends. Being a Westerner, I couldn’t put up with the long work week, so I quickly jumped at the opportunity to work at a foreign firm that provided a better work-life balance.
Recently the topic of “996” (the 72-hour work week common at Chinese tech companies) has gained a lot of attention in the news. Some vocal Chinese developers have started a low-key protest against these long working hours. And prominent industry leaders, such as Alibaba’s Jack Ma (see endnote 1) and JD’s Richard Liu, (see endnote 2) have publicly expressed why Chinese firms need “996” to survive and grow in China’s brutally competitive tech market.
To get a better understanding of the advantages and disadvantages of “996,” and whether it makes sense for foreign firms to become more like their Chinese competitors, I conducted inquiry calls with six of my favorite China-based IT analysts working at two leading analyst firms. Each of these analysts shared their experiences and opinions on the subject.
DISCLAIMER
The following content includes personal observations and impressions of industry analysts covering the China tech industry. This content does not necessarily reflect the views of China BizConnect or any analyst organization. Although these views are not based on quantitative research, each analyst is an expert in the Chinese tech industry, and collectively their views provide a noteworthy perspective on “996” in China.
View 1: “996” Is Not a New Phenomenon
While the “996” working-hour system is something that has developed gradually over the last ten to fifteen years, the culture of working overtime has been around since China’s economic reform in the late 1970s. Since China’s opening up, ambitious entrepreneurs have worked tirelessly to raise the country out of poverty. This is an important reason China’s economy has grown twice as fast as the US economy over the same period of time. (see endnote 3)
In the early 2000s, Chinese tech companies started to grow rapidly, but they couldn’t hire new employees fast enough to keep up with the growth. Therefore, they started to add overtime hours gradually, first one day a week, then increasing to every day. In this way, they were able to support the growth using their existing staff while hiring new staff as fast as they could.
Another reason for adopting the “996” work week was to keep labor costs down. Historically, China has had the competitive advantage of low labor costs. But with the rapid growth of China’s economy, wages have also increased significantly. Therefore, to combat the declining cost advantage, companies started asking employees to work longer hours.
View 2: There Are Many Different Flavors of “996”
Strictly speaking, “996” means working from 9 am to 9 pm Monday through Saturday. However, there are many variants of the broader “996” working culture, including 995 (9 am to 9 pm five days a week), “8106” (8 am to 10 pm six days a week), and even “997” (9 am to 9 pm seven days a week). (see endnote 4)
The leaders in the “996” movement are large internet companies and tech startups. These companies have the longest hours and most regular schedules. Other companies that work closely with these firms, such as server vendors, also have adopted similar work schedules so they can respond rapidly to the needs of “996” customers.
Service companies, such as system integrators and IT consulting companies, tend to have more variability in their working schedules because their work is project-based. If there is a backlog of active projects or a deadline that is approaching fast, consultants will work very long hours. Otherwise, there is no reason to keep them at the office late.
Outside of the tech industry, it is common for managers in more traditional Chinese organizations, such as government, state-owned companies, and hospitals to also work long hours and weekends. The purpose of working overtime is different from the “996” internet companies, however. Managers at these organizations will dedicate their evenings and weekends to activities that build relationships, such as working dinners, seminars, and conferences. In the past, these after-hour activities took place at lavish venues. But in recent years, following Xi Jinping’s crackdown on corruption, these events have generally become less extravagant. Employees who are not managers have fewer opportunities to participate in after-hours events. But if they are ambitious and good at networking, they will gradually get opportunities, and advance their careers more rapidly.
View 3: Internet Companies Pay High Salaries to Attract Top Talent
Leading Chinese internet tech companies like Alibaba and Tencent offer their employees a very competitive wage, sometimes as much as five times the market wage. These high salaries have been an effective means to persuade younger employees to join the company and accept the “996” working hours. A bigger paycheck is very important to many younger workers because it has become very expensive to live in China, especially in large cities. “When young Chinese face the challenges of life and the rising living costs, they realize how important money is, and many are willing to sacrifice their personal time to do more work.”
View 4: Smart Companies Enforce “996” Without Formal Policies
When you work at a “996” company, it is very clear what the working hours are, but these rules are typically not published in an organizational handbook. One analyst explains, “it would be really stupid for a company to publish a policy about working 996. It is against the law. And it is not decent or elegant.”
Because “996” is an important part of the company culture, even if the policy is optional, staff really have no choice but to stay. “If you don’t stay, it means you don’t work hard enough, and other employees and managers will not respect you.” Also, you will miss out on important collaboration and will not be able to keep up with the rest of the team.
Instead of using formal policies, companies use other ways to encourage employees to spend long hours at work. For example, companies frequently provide free evening meals and pay for late night taxi rides home from work.
View 5: China Is Not the Only Country That Practices “996”
One of the analysts I spoke with had experience working with both Japanese and Chinese companies. This analyst explained that Japan, South Korea, and China all have similar behaviors when it comes to “996.” “Japanese culture encourages men to come how late at night. If you go to a subway station in Tokyo at around 10 to 11 pm, you will see a crowd of Japanese professionals waiting to get on the next subway going home from work. Although Japan has strict labor laws to protect workers, they are useless, because people will voluntarily spend more time at work anyway.”
View 6: Chinese Organizational Structures Encourage “996”
Chinese organizations generally have a different organizational structure than Western firms. Companies in the West are typically more structured and have clear hierarchies. It is not easy for employees to jump from low ranks in an organization to positions of senior leadership. Instead, career progression is incremental with gradual salary increases. In China, on the other hand, there are more opportunities for rapid career growth, and there is intense competition for leadership positions. Both the opportunity for advancement and threat of being left behind motivates Chinese employees to work longer hours.
View 7: China Has a Company-First Mentality
Chinese companies often demand intense loyalty, especially from their managers. When family priorities get in the way of spending time at work, the company’s needs generally win out. For example, if a manager were to ask the boss for time off on the weekend to spend time with a sick spouse, it would not be uncommon for the boss to deny the request. “The company should be your number one priority. And the term company doesn’t mean some abstract entity. Rather, your loyalty is with the team of colleagues who are also dedicating their lives to see the company succeed.”
View 8: Young Workers Have Varying Opinions of “996”
Mature Chinese workers accept the heavy imbalance of work in their lives so they can financially support their aging parents and provide a better education for their children. These workers have been in the workforce long enough to become accustomed to the overtime hours.
Younger Chinese workers, on the other hand, have different priorities than the older generations. These youth are attracted to a better work-life balance. They want to spend more time with their family and friends. And they also want to have fun playing video games or spending time on Toutiao. (see endnote 5)
One important group of young workers, known as the “fuerdai” (see endnote 6) or children of wealthy Chinese parents, is not as attracted to the high salaries at “996” jobs. Money is not the most important goal for these individuals. Instead, they want a job that is interesting to them. They choose to work for pleasure rather than laboring for a paycheck. While this group is significant, the large majority of young Chinese workers do not come from rich families and do not have the luxury of choosing a career based on personal interest alone.
Many Chinese youth still share the values of the older generations. They believe they should spend more time working to develop themselves and improve their professional capabilities. They are still motivated by money and they believe that if they fight hard during their youth life will get better when they are older.
Another factor driving the acceptance of “996” within the younger generation is the steady flow of young workers from rural areas competing for tech jobs. College graduates from China’s interior have technical skills and are eager to improve their social status. They are willing to work hard and compete with their classmates to see who can earn the most and gain financial success the fastest. “This period of intense competition usually lasts for the first four years after graduating from college. After this period, successful young workers realize that they have a competitive advantage in the job market and begin to negotiate with their employers for higher pay.”
View 9: “996” Provides a Competitive Advantage
Chinese tech companies clearly believe that implementing “996” gives them a competitive advantage. Most of the China-based analysts I spoke with agreed. “While there are a lot of opinions out there about whether 996 is a good thing or a bad thing, I am not aware of there being any clear benchmarks to compare the performance of Chinese companies running 996 vs. those who do not. That being said, if you look at Huawei and other high-productive companies like Baidu and Tencent, you will find that they are really high class.”
China’s amazing growth in the last 50 years comes with a cost, which is the overtime the Chinese workers had to put in to achieve that growth. China is still a developing market, and the competition is much harder than in mature markets. The priority is to move quickly. If you can’t innovate fast and lead the market, you will lose. “This is why Chinese tech companies really don’t have a choice. If they don’t use 996, they will fail and disappear.”
When you compare Chinese companies running “996” vs. foreign companies who do not, you will find that although the foreign products and services may be more advanced than Chinese offerings, the Chinese firms are much better at responding quickly to customer needs. Working long hours enables Chinese companies to bring important local features to market much faster than foreign competitors. And this helps Chinese companies gain a lock on the local market.
View 10: Chinese Firms With “996” Cultures Are Not Productive
However, others question whether forcing employees to work long hours achieves the desired outcome. John Artman at Technode writes: “As wages rise, Chinese productivity is lagging behind global averages. 996 schedules are an ad hoc solution for companies that don’t know how to manage workers effectively.” (see endnote 7)
One analyst shared an opinion that was quite different from the other analysts, arguing that workers will only produce what they are willing to produce, regardless of how many hours they stay at the office. Chinese employees will go along with the company culture and stay late at the office, but that doesn’t mean they are always working. A lot of their overtime is spent sitting in meetings and chatting with co-workers. “When I visit a company in China, the employees will usually look like they are working hard. But if I stick around and come back in fifteen minutes, it’s easy to see when they are putting on a show and just trying to look good.”
View 11: True Competitive Advantage Comes from Passion Not KPIs
It is important to think about cause and effect when considering “996” and productivity. Are employees more productive because their managers make them spend more time at the office? Or do employees spend more time at the office, because they are inspired to accomplish more in a productive organization?
One analyst shared a story to illustrate the power of leadership to inspire both “996” and high productivity. “I used to work as a project manager at a large Chinese company, and we were challenged to consolidate 86 different data sources with a very aggressive deadline. Everyone on the team threw themselves into the project and worked very long hours. But no one quit during the project. We had a lot of fun working together on a challenge that we thought was meaningful.”
Ultimately, you are not going to succeed by making “996” a policy and implementing KPIs to measure how much time people are spending at work. The better approach is to inspire your staff with sound leadership and motivate them by giving them challenging problems that ignite personal passions.
View 12: “996” is Likely to Stay in the Near Future
Even if Chinese companies are able to achieve benefits from working “996” in the short run, is such an intense working culture sustainable? Most of the analysts I spoke with said yes.
Although China has clear labor laws mandating an eight-hour workday, the government is unlikely to pressure companies to change their “996” culture. One analyst explained that “unless employees start jumping off buildings as they did at Foxconn, the government will not interfere.”
While there is a growing preference among young workers to pursue a balanced lifestyle, for the next five to ten years, there will continue to be enough workers from the rural areas of China who are willing to sacrifice their time for an opportunity to build up their skills and earn a decent paycheck. Furthermore, in the short-term, “996” doesn’t appear to be causing higher employee turnover, because workers have already become accustomed to working long hours and they know that other companies offer a similar working schedule.
View 13: Foreign Vendors Should Use “996” as an Opportunity to Differentiate and Attract Talent
Given that “996” is pervasive throughout China, particularly in the tech industry, what does this mean for foreign vendors who have to compete with Chinese companies?
Generally speaking, foreign vendors should make every effort to localize their management practices to fit Chinese market conditions. However, the practice of “996” is not in the best interest of employees and it violates local labor laws. Therefore, it is better for foreign companies to use “996” as an opportunity to differentiate against local competitors to attract and retain Chinese talent.
Providing a better work-life balance, however, is not enough. One analyst explains: “when I worked at the China office for a large multinational IT firm, they never encouraged employees to do extra work. And after I quit, I felt guilty about the time I lost that I could have used to advance my career.”
Instead of worrying about squeezing more productivity out of Chinese staff by making them work longer hours, focus on providing career development programs that will make staff feel important and want to stay with your company. Provide opportunities for motivated workers to go beyond what is required and give them opportunities to rapidly advance their careers. Finally, publicize what you do so others in the market will be attracted to work for you.
Endnotes
- Source: “Alibaba’s Jack Ma calls the ‘996’ — China’s 72-hour workweek — a ‘huge blessing’,” MarketWatch, April 15, 2019 (https://www.marketwatch.com/story/alibabas-jack-ma-calls-the-996-chinas-72-hour-work-week-a-huge-blessing-2019-04-15)
Back to Text - Source: “China’s JD.com boss criticizes ‘slackers’ as company makes cuts,” Reuters, April 13, 2019 (https://www.reuters.com/article/us-jd-com-labour/chinas-jdcom-boss-criticizes-slackers-as-company-makes-cuts-idUSKCN1RP06D)
Back to Text - Source: “Comparing United States and China by Economy,” Statistics Time, Viewed on June 5, 2019 (http://statisticstimes.com/economy/united-states-vs-china-economy.php)
Back to Text - Source: “996.ICU Blacklist,” GitHub User 996icu, Viewed on June 5, 2019 (https://github.com/996icu/996.ICU/tree/master/blacklist)
Back to Text - Toutiao is a popular Chinese news aggregation mobile application. See: “Toutiao: The Rise of the News Aggregation Giant,” Sekkei Studio, December 21, 2018 (https://www.sekkeistudio.com/blog/2018/12/toutiao-rise-news-aggregation-giant/)
Back to Text - Source: “Fuerdai,” Wikipedia, Viewed on June 5, 2019 (https://en.wikipedia.org/wiki/Fuerdai)
Back to Text - Source: “INSIGHTS: 996 and China speed—Slowing growth in the face of a changing workforce,” technode, April 24, 2019 (https://technode.com/2019/04/24/insights-996-and-china-speed-slowing-growth-in-the-face-of-a-changing-workforce/)
Back to Text
- Source: “Alibaba’s Jack Ma calls the ‘996’ — China’s 72-hour workweek — a ‘huge blessing’,” MarketWatch, April 15, 2019 (https://www.marketwatch.com/story/alibabas-jack-ma-calls-the-996-chinas-72-hour-work-week-a-huge-blessing-2019-04-15)