THE BASIC QUALITIES SOCIALIST ENTREPRENEURS MUST HAVE1
JULY 5, 1989
What is a socialist entrepreneur? There are many views on this subject. Last year, I laid out three expectations for city government cadres.2 Today I am laying out three expectations for factory directors and entrepreneurs. These are the basic qualities required of socialist entrepreneurs.
1. Represent Interests of the Working Class
Socialist entrepreneurs must steadfastly uphold the four cardinal principles,3 display a spirit of arduous work, be adept at ideological work, and be able to go through thick and thin and get their hands dirty alongside their employees. This is the first condition they must meet. Capitalist management always employs a set of interpersonal relations and uses various techniques and methods to win people over. Our factory directors and managers represent the fundamental interests of the working class, so it is all the more important for them to be one with the workers. Ideological work should be at the forefront of their activities. Political work is the lifeblood of economic work—I haven’t said this nearly enough during the past few years. I feel that many difficulties can be overcome provided we can do this.
The basic problem now is detachment from the people—that is why many problems involving staff or the people that could have been solved are not so easily solved now. If we can’t give people a sense of cohesion, how can we work together to tackle difficulties? These past few years, our entrepreneurs have been paying a lot of attention to being stylish. They wear Western suits and leather shoes and spend all their time going abroad, or only networking “horizontally” with other managers. Of course this may be required for their work, but their energies should mainly be devoted to the internal management of their factories. They should get a bit oil-stained and learn to be one of the workers. If they explain difficulties clearly to everyone and win their understanding, the workers will join their efforts with ours and unite to do real and substantive work. If you don’t display a spirit of working arduously yourself, if you’re enjoying special privileges and spending all your time thinking about how to decorate your apartment or how to get a newer model car, you can’t even think of becoming one with the workers, so how can you learn from them and find ways to solve problems?
2. Be Well-Versed in the Science of Management
Socialist entrepreneurs must be familiar with scientific management methods, be adept at exploiting the internal potential of enterprises, and be able to obtain maximum benefits from minimal amounts of both materialized and living labor. That is to say, they must obtain benefits through management. They should be familiar with how management science emerged and developed globally, which includes an understanding of ancient Chinese management methods such as those outlined in Sun Zi’s Art of War. Of course we mainly want to master modern management methods, from Taylor’s4 scientific management all the way to behavioral science. We should have an appropriate familiarity with many different management methods and integrate these with actual circumstances to form our own socialist methods of scientific management with Chinese characteristics, and use them to run our enterprises well and mobilize all their positive internal factors. That’s the only way to obtain the greatest output from the smallest input.
Unfortunately, our factory directors usually have very little time and don’t study the subject nearly enough. There are many things they don’t know—some don’t even know the ABCs of management science—and we can’t go on like this. If factory directors and managers are to become socialist entrepreneurs, they must work hard to study management and strengthen enterprise management, particularly quality management. The quality of Shanghai products at the moment is uneven—it might be a bit better today, then it might be a little worse tomorrow. Unless we can stabilize quality, it won’t be possible to fight our way into international markets. We must pay attention to our reputation and to quality consistency.
Besides lacking scientific methods, we don’t run our factories strictly. This is related to the first issue. Unless you can walk straight and sit firm, don’t seek special privileges, and become one with the people, you can’t hope to run a strict operation and be utterly impartial; only then will you be able to keep all the managerial systems at your factory in place. Otherwise, it will all be for naught.
3. Know Your Economic Environment, Domestic and Foreign
Socialist entrepreneurs must understand domestic and foreign trends in the economy, in sci-tech developments, and in market shifts. They must be good at adapting to the environment and making operational decisions that are suited to realities. Shanghai must develop an externally oriented economy—we can’t help but do so. Factory directors and managers must know in a timely way where our products fall short of other people’s products, what the leading brands are in the world, and what the advanced technologies are; they also must have a grasp of international market shifts and trends and know what sells well this year and what will sell well next year; they must be familiar with an enterprise’s ability to repay, the source of its loans, and the caliber of its workers—they must know all this in order to make decisions correctly. Operational decisions are extremely important, sometimes even more important than internal management. If its operational decisions are constantly wrong, an enterprise is sure to go under.
Some Additional Thoughts on Management
I hope we can all explore how to manage our enterprises well. Our Enterprise Management Association and Entrepreneurs Association should organize more discussions and publish more papers; we also need to study how to invigorate large and medium state-owned enterprises (SOEs). It’s very important for all enterprises to accumulate more capital on their own and to enhance their capacity for developing and upgrading technology. Of course the main source of capital will still be bank loans—there isn’t a country whose enterprises can refashion themselves by relying entirely on their own capital, nor is there a capitalist who has prospered by relying only on his own capital. Modern enterprises all rely on their own reputations and that of their products, and on their operational and managerial abilities to win the trust of banks, and they rely on bank loans to develop.
However, enterprises must also have economic strength and the ability to repay, as those that cannot repay will have to shut down. To be able to repay, enterprises must also rely on themselves. Currently, our SOEs have established many jointly operated enterprises and given these all their raw materials, capital, and technology, with the result that their own enterprises have become stagnant. The same things have been in place for decades—the same old machines, the same old equipment, the same old products, and the same old faces. How can this be any good for an enterprise’s development? The “good” is that the enterprise can siphon profits [from its jointly operated enterprises] into its own slush fund and then pay bonuses, and the factory director can wine and dine there without paying anything—this phenomenon is quite common.
I’m also aware of the woes of factory directors. Shanghai’s SOEs have the very heavy burden of turning money over to the central fiscal authorities, so you want to use this policy to make things a little easier for you. But everyone must take the big picture into consideration, and going on like this can only result in the collapse of Shanghai’s enterprises. I’m not saying you shouldn’t have jointly operated enterprises; it’s just that the bulk of the profits returned to you by the jointly operated enterprises should be used for your own technical upgrading so that SOEs can improve. Right now more bonuses are being paid out and funds for consumption have increased—this is living off your own capital, and it isn’t how entrepreneurs act for the long term.
Our factory directors and managers should first improve their own enterprises, then establish jointly operated enterprises. Form only as many as your abilities allow. If you can’t even improve yourself, why operate jointly? I believe that provided everyone works hard, we will surely be able to invigorate our large and medium SOEs. Provided our factory directors and managers earnestly try to meet these three expectations of socialist entrepreneurs, wholeheartedly rely on the working class, and strive together, we will undoubtedly overcome Shanghai’s difficulties this year, and there will definitely be hope for Shanghai’s revitalization.
1. These are some of the remarks by Zhu Rongji at the annual meeting of the Shanghai Management Association and the Shanghai Entrepreneurs Association.
2. See chapter 19, “Three Expectations of All City Officials at the Bureau Level and Above.”
3. Continuing to uphold the socialist road, the dictatorship of the proletariat, the leadership of the Chinese Communist Party, and Marxism-Leninism and Mao Zedong Thought.
4. American management specialist Frederick Winslow Taylor.