Fosun expands ranks of partners to improve management amid global expansion

Almost half the Chinese conglomerate’s managing directors are based overseas, with most of those local hires

PUBLISHED : Friday, 29 April, 2016, 11:11am
UPDATED : Friday, 29 April, 2016, 11:11am

How to manage a conglomerate with business across the globe that’s scattered across different industry sectors? The answer from Fosun International is to implement a global programme to fill its partner ranks and find more senior managers from local markets.

Chief executive Liang Xinjun said that to optimise the age structure of Fosun’s management team, integrate overseas teams, and enhance localisation, the company had increased the number of partners to 21 from the original four.

It had also flattened its organisational structure by creating bigger teams and simplifying reporting procedures, he said.

Fosun started from scratch in the early 1990s in the pharmaceutical market and later developed into a conglomerate. It has been one of China’s most aggressive outbound dealmakers in recent years and has snapped up everything from insurance companies to circus performers.

We have made communication much more efficient and accurate
Liang Xinjun, Fosun

Fosun International now oversees six insurance companies based in Europe, the United States, Hong Kong and mainland China. It also controls global resort operator Club Mediterranee, from France, and Canada’s Cirque du Soleil circus troupe.

The company also owns major stakes in many other foreign companies including US media company Studio 8, and British travel agency Thomas Cook.

Liang said Fosun now had 196 managing directors. Amost half – 89 – were based offshore, with 80 recruited as local talent. All the managing directors report directly to the board and chief executive, with endorsement from the partners.

The company’s reporting procedures previously involved more layers and took longer.

“In this way we have made communication much more efficient and accurate,” Liang said. “The expanded partner team shares the responsibilities and risks.”

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By shifting more responsibilities to senior overseas managers, Fosun’s management had become more project-oriented, and quicker in responding to market changes. Also, the intermediate and backstage teams had been merged into business operations to provide strong, systemic support, Liang added.

In a letter to staff in January, Fosun chairman Guo Guangchang said the global partner scheme had been introduced because Fosun had gradually evolved into a multinational enterprise, rooted in China but with global competencies.

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“The founding partners of Fosun made it clear from the beginning of our entrepreneurial journey that our shareholding ratio would be more dynamic than static,” he wrote. “We have always been expecting more enthusiastic people to join, making Fosun continuously bigger and stronger.

“Fosun’s partners do not have lifetime tenures and are not arranged according to years of service. We hope to attract younger, stronger people who meet our standards to join this organisation, and decommission those who cannot meet these standards.”

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Seeking to emulate legendary US investor Warren Buffett in using insurance capital for value investing, Fosun has been sticking to an “Insurance + Investment” twin-driver business model. However, some investors have raised questions about Fosun’s long-term profitability, fearing it has fingers in too many widely dispersed pies.

Fosun International’s revenue rose 27.6 per cent to 78.80 billion yuan (HK$94.28 billion) last year, generating a net profit of 8.04 billion yuan, up 17.3 per cent year on year. In 2014 its profit had grown by 24.2 per cent.

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Meanwhile, the spate of investments pushed the company’s outstanding debt from 54 billion yuan in 2011 to 115 billion yuan last year.

Liang said in addition to introducing the global partner scheme, Fosun had a new “unicorn” strategy for future development, and planed to focus in future on discovering and investing in profitable unicorns.

He said a unicorn was a project that could generate a US$1 billion profit for Fosun in two years, or one where the valuation of its investment could increase by US$1 billion in two years.

“Typically, a unicorn is created by utilising idle and cheap resources through mature products and business models, or promoting traditional industries with mobile internet and artificial intelligence,” he said.

He said Fosun had already invested in a few unicorns in the health, wealth and happiness sectors, three core themes of the company’s business.