Developer China Vanke promotes fun runs in belief healthy staff boosts sales

China Vanke, the country's largest homebuilder by sales, is trying something no peers have done before - a "run for fun" - to sustain its leadership in the competitive industry.

Its sales exceeded the psychologically important level of 100 billion yuan (HK$127 billion) in 2010 and have since gone on to reach 160 billion yuan in the first 11 months of this year.

However, its peers are running close behind, and six are expected to break the 100 billion sales barrier this year - the Greenland Group, China Overseas Land & Investment, Poly Real Estate, Evergrande, Country Garden and Dalian Wanda Group.

"After sales hit 100 billion yuan, growth tends to ease down," said Vanke's chief executive, Yu Liang. "So we needed to challenge ourselves."

The challenge was successfully met and the group has added another 60 billion yuan to its annual sales in three years, which Yu attributed in part to corporate sports activities designed to integrate work and play as part of its corporate culture.

The activities help to improve efficiency as staff become healthier and happier, he said.

More conventionally, Vanke has also been cutting costs, downsizing its headquarters by 40 per cent since 2010 to about 200 people and giving local teams more power to make the quick decisions needed to stay on top of the fierce competition.

It has also been pioneering the industrialisation of its construction process, which it expects will eventually shorten the development cycle and cut costs.

But the focus on cutting costs has resulted in slow deliveries in the past two years, analysts at JPMorgan said in a November 27 report that maintained a neutral rating on China Vanke.

"Vanke is a good company, in our view. But in order to sustain growth, it has spent a lot of resources on improving its corporate structure and the way it builds and develops," analysts Ryan Li, Leo Ng and Cusson Leung wrote.

"As a result, its margin has been persistently below the market average, and return on equity has been difficult to grow, which we believe caps the multiple it could trade at."

But Yu shrugged off such concerns. "You have to do something others haven't done before. Otherwise, you won't be so successful," he told the South China Morning Post after completing a 5 kilometre run in just 19 minutes last Friday.

That day, about 5,000 people joined the "run for fun" programme in Guangzhou that Vanke organised.

The company initiated the running programme in March in its headquarters in Shenzhen, and then took it to Beijing in June and Shanghai in September.

Next year, Vanke plans to stage the run in all the 60 mainland cities it has set its footprint on to celebrate its 30th anniversary. That is part of top executives' efforts to operate the company more efficiently as it grows bigger and extends to more cities.

Apart from running, the company has also tried biking, sailing, and mountain climbing.

To make a change, Yu himself started running three years ago and climbed to the top of Mount Everest in May. He also linked the bonuses of senior managers to the health of their teams.

"Any company that doesn't care about the health of its workers is not a good company," Yu said before the run began in Guangzhou.

Addressing concerns that the company spends too much time and resources on running, Yu said: "They haven't realised the joy, the creativity and high work efficiency it brings."

These sports activities helped raise staff satisfaction in Vanke to 59 per cent last year from 47 per cent in 2011, according to the company's annual surveys.

"I'm proud of being a member of Vanke. Nothing surprises. I'd like to stay with this company," said a woman in her 20s after crossing the finish line.

If everyone shares her view, that will differentiate Vanke from its rivals in the labour market, given talent has been in short supply in what is a fast-growing and -evolving industry.

"The most difficult part (of running the mainland's biggest developer) is to steer it on the right path," Yu once told domestic media.

"If you take the wrong way, it's hard to turn around. The bigger, the harder."

Vanke has tentatively decided to become a city service provider as the profit margin for developers is falling amid surging land prices and government measures to curb home price rises.

That explains why it bought an 8 per cent stake in the Anhui-based Huishang Bank during its US$1.3 billion initial public offering in October.