Xiaomi chief executive Lei Jun restructures company to ensure sustainability and develop younger talent

PUBLISHED : Friday, 14 September, 2018, 10:52am
UPDATED : Friday, 14 September, 2018, 10:58pm

Xiaomi founder and chief executive Lei Jun on Thursday told staff that the firm would be undergoing an internal restructuring to strengthen the different functions and help develop younger talent.

The Xiaomi restructuring includes the creation of two new departments – an organisation department that oversees hiring, promotion and training, as well as a strategic advisory department that will focus on the company’s development strategy and monitor the progress of each business unit.

“This restructuring will strengthen the capabilities of the headquarters as well as ensure that company values are passed on,” Lei said in an internal letter to Xiaomi staff seen by the Post. “It also increases the efficiency of each department and builds strong career progression, allowing us to develop younger talent and provide them with opportunities to shine.”

The Chinese smartphone maker’s internal restructuring also includes the establishment of 10 new business units: four hardware units, four internet services units, one technology platform and an e-commerce platform.

“Without experienced soldiers, there is no succession. Without new troops, there is no future,” Lei continued on in the letter. “We need to groom and develop a large group of young managerial talent … to manage the troops. Let every capable and ambitious young person learn to battle and grow quickly on the battlefield.”

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The company’s organisational shake-up comes at a time when the governance of Chinese companies is under the spotlight.

Alibaba executive chairman Jack Ma earlier this week announced his plans to resign after a 12-month transition period, handing over the reins to Daniel Zhang, current chief executive of Alibaba Group Holding. Ma’s resignation brought the establishment of Alibaba Partnership to the forefront, a succession plan that had been in place for 10 years with the aim of grooming the next generation of Alibaba leaders.

The timing of Xiaomi's internal restructuring couldn't have come at a better time, and other Chinese technology companies are likely to follow suit, according to associate professor Lawrence Loh, director of the Centre for Governance, Institutions & Organisations at the National University of Singapore.

“After what happened to [Richard Liu of] and the announcement of Alibaba's succession plan, Xiaomi is probably under some pressure to publicly cement and share their structure plans for continuity,” said Loh. “This has probably been on the books for a while, but the timing of the announcement is quite critical.”

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The control exerted by founder Richard Liu Qiangdong over China’s second largest e-commerce player has come under fresh scrutiny after his recent US arrest on a rape allegation. Analysts say the incident has exposed corporate governance risks at the Beijing-based company, because according to its corporate by-laws, the board may not be able to form a quorum without Mr. Liu if he is unable to attend meetings.

“There has been concern that companies like are too leader-centric and it is almost the same for Xiaomi as Lei Jun is the face of the company,” said Loh. “Investors and stakeholders are concerned about these one-man internet companies where the company rises and falls with one iconic figure. That's not healthy and poses a certain risk.”

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Xiaomi, known for its value-for-money smartphones, went public in Hong Kong in July, raising US$5.4 billion from its initial public offering. However, the Beijing-based company’s stock has been volatile. It peaked at HK$21.55 on July 18, but on Thursday closed at HK$16.40, below its initial offering price of HK$17.

The company, which is the world’s fourth largest smartphone supplier, reported a surprise profit of 14.6 billion yuan (US$2.1 billion) in its maiden results announcement for the quarter ended June, compared to a 11.9 billion yuan loss during the same period last year.

Alibaba is the parent company of the South China Morning Post.