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    Ning Gaoning: Only balanced development ensures sustainability; benchmark against the best to build world-class excellence.

    Release Date:

    2019-04-20

    The 2019 High-Level Strategic Symposium recently concluded successfully. Over the course of three days, nearly 80 managers and professionals from Sinochem Group and ChemChina gathered in Beijing to engage in extensive and in-depth discussions centered on the theme “Benchmarking Against Best Practices to Build World-Class Excellence.” The following is Ning Gaoning’s closing summary from the 2019 Sinochem High-Level Strategic Symposium (excerpted from an audio recording and not reviewed by him): Benchmarking is an entry point; in fact, it can also be approached from strategic, human resources, financial, and other perspectives. Through benchmarking, we conducted a comprehensive reassessment of our corporate management. At first, it felt somewhat like blind men feeling an elephant.

    The 2019 High-Level Strategic Symposium recently concluded successfully. Over the course of the three-day event, nearly 80 managers and professionals from Sinochem Group and ChemChina gathered in Beijing to engage in extensive and in-depth discussions under the theme “Benchmarking Against Best Practices to Build World-Class Excellence.”

     
    The following is the closing summary delivered by Ning Gaoning at the Sinochem Senior Management Strategic Symposium in 2019.
    (Excerpt compiled from the recording,未经本人审阅)
     
    Benchmarking is an entry point; in fact, it can also be approached from strategic, human‑resource, financial, and other perspectives. Through benchmarking, we undertook a comprehensive reassessment of our corporate management. At first, it felt somewhat like blind men feeling an elephant—our benchmarking targets were quite complex. As we delved deeper, the issues only grew more intricate and multifaceted. Later, as our discussions progressed, each team began to grasp the art of “dismembering the ox with skillful precision,” and the conclusions they reached often converged remarkably. This is rather reminiscent of the three stages of insight that Wang Guowei described in his “Human Words on Poetry.”
     
    I have developed a model in an attempt to distill all the key elements and illuminate the underlying logical relationships. Of course, this model still requires further refinement. At the very heart of the model lies the foundation of our core team, encompassing our values, mission, and Party leadership. These are not the focus of today’s discussion, but they are undoubtedly the starting point for all issues. A company’s mission and an individual’s aspirations are neither contradictory nor entirely aligned. If moral imperatives are too far removed from human nature, they will be difficult to put into practice; if they were perfectly aligned, the darker aspects of human nature would remain unchecked.
     
    The model is surrounded by four components: Society, customers, shareholders, employees Since the emergence of enterprises as an organizational form in human society, their purpose has always been to enhance production efficiency and improve people’s lives. Even if we set aside discussions of mission and values today, the very raison d’être of our organization remains to benefit society, our customers, our shareholders, and our employees. As a state-owned enterprise, “benefiting the shareholders” ultimately means benefiting the nation. In practice, these elements operate in a dynamic, cyclical, and interwoven manner, making it difficult to separate them. Therefore, each dimension must thrive—just as a person’s eyes, ears, and nose must all function properly.
     
    Everyone seeks to understand benchmarking through these four perspectives—yet these very same perspectives encapsulate the very purpose of a company’s existence, as textbooks also explain. However, today we are neither simply copying from a textbook nor being compelled to adopt this view; rather, after careful study and discussion, we have concluded that this is precisely how we should approach the issue.
     
    If we simply jot them down on a separate sheet of paper, we might say that we have a social responsibility to provide better working conditions for our employees. These statements sound good in theory, but without an underlying logical structure, people tend to forget them and struggle to integrate them into a broader framework. However, once we bring them together and establish clear logical connections, we begin to see them as part of a coherent model: if any one element is missing, the entire system will be compromised.
     
    We have discussed equity and sustainability, noting that internationally leading companies have maintained steady progress over decades. Meanwhile, in China, it’s already quite remarkable for a company to survive five or ten years; over the past year or two, major corporations have been running into trouble almost every day. That’s the gap: their peers manage to achieve consistent, balanced performance, enabling steady growth. Of course, such consistency can also pose challenges—namely, sluggishness, excessive conservatism, and insufficient innovation. Still, these are merely potential risks, not inevitable outcomes.
     
    First, society.
     
    Becoming a socially responsible corporate citizen has now become the pinnacle of business management. This philosophy and goal are, in many companies—especially large, multinational ones—virtually paramount, taking precedence over shareholder interests, employee concerns, and even conventional profit motives.
     
    This encompasses a wide range of areas, including corporate citizenship, social responsibility, HSE management, integrity and accountability, as well as tax contributions and employment. Moreover, as a national enterprise, we believe that when it comes to social responsibility, such companies should embody a distinct sense of national identity. We must also be a group of individuals of the highest moral character—upholding lofty ethical standards, setting ambitious goals, demonstrating a strong sense of social responsibility, showing deep concern for society, and possessing a powerful sense of mission. At the same time, we must excel in HSE management and maintain robust tax compliance.
     
    Second, the customer.
     
    The customer is the market—this is the ultimate test and the benchmark by which we are measured. If this hurdle cannot be overcome, the company is bound to fail. First comes the mindset; only then do actions follow. The same holds true for customers: we must first embrace a customer‑centric philosophy. From this principle, a host of related areas can be derived—market validation, product innovation, research and development, a science‑first approach, strategy‑driven leadership, industry insight, an integrated business model, operational excellence, cost efficiency, strategic industrial positioning, and supply‑chain management, among others.
     
    Among them, Strategic Leadership It encompasses two dimensions. The first is the corporate asset‑portfolio strategy—ensuring orderly entry and exit, coupled with deep industry insights—by continuously adjusting the portfolio to align with evolving market demands across sectors. The second is the firm’s competitive strategy: for instance, integration; once a target industry is identified, firms can pursue vertical integration, reduce costs, invest in R&D, and enhance product quality—all of which constitute core elements of competitive strategy.
     
    About Integration There has been much discussion over the past couple of days, and BASF’s integration strategy is a prime example of success. In China, they plan to build an upgraded version of Ludwigshafen. Integration encompasses product lines, R&D, marketing, information systems, and the consolidation of asset portfolios—specifically, how upstream and downstream operations are coordinated, how sales are managed, how R&D is conducted, how production, supply chains, and sales channels are aligned, and how information systems are integrated. It is precisely within this framework that value creation and synergies emerge. Corporate integration is by no means a mere arithmetic sum; it must be a “chemical” integration—not a physical one—where meaningful interactions and organic linkages arise, rather than simple additive effects.
     
    About Industrial layout Previously, our discussions about industrial parks often began with safety concerns, as we viewed them as capital-intensive and difficult to manage. However, through ongoing dialogue, it has become increasingly clear that industrial parks are underpinned by an integrated technological logic, driving efficiency gains and strategic innovation. Looking ahead, as small chemical enterprises are gradually phased out, chemical parks characterized by robust safety management, high output value, and advanced technological capabilities will emerge as the prevailing trend.
     
    In the past, much of our investment was relatively passive: we would buy only when others wanted to sell—what we call investment driven by investment banks, with the banks serving as intermediaries. Whether the asset aligned with our strategy, met market needs, or reflected favorable trends was often left uncertain. This was essentially opportunistic investing, which we are now striving to transform into strategic investing. And… Going forward, we will proactively make strategic investments. With our overarching direction and target industries firmly in place, we will take the initiative to identify and acquire opportunities, or pursue them ourselves. 。
     
    Third, shareholders.
     
    Shareholders are seldom discussed in management courses, and they are often not regarded as part of the managerial framework. Yet, from our perspective, shareholders are of paramount importance, because the demands imposed by the state and the system of ownership virtually shape all our actions.
     
    As a state-owned enterprise, the state is the majority shareholder; of course, there are also minority shareholders and joint‑venture partners. Shareholder interests encompass a wide range of factors, including scale, returns, ROCE (return on capital employed), business integration, governance structure, and strategic investment and mixed‑ownership reform.
     
    I would like to reiterate the concept of ROCE, which reflects the social resources tied up in a company. In particular, for state-owned enterprises, virtually all the funds you deploy can be regarded as equity capital.
     
    We must first establish the principle of national interest. Think of ourselves as herdsmen: the cow belongs to the nation, not to us. If you tend the herd well, you may enjoy a cup of milk, but you must not eat its meat—doing so would mean slaughtering the cow. We need to recognize that a company is not an individual’s property. As we work over the long term and the enterprise grows increasingly successful, it’s all too easy to fall into the mindset that “this company is my domain,” but that is simply not the case. And this applies not only to Chinese firms, but to foreign companies as well.
     
    It is essential first to firmly establish the status of wage‑earners; one may seek to reform the system and introduce greater incentives for them, thereby enabling the company to perform more effectively. However, such reforms must not contravene, overstep, or undermine this established framework.
     
    For Sinochem, the first priority is to strengthen our business and enhance our return on capital employed (ROCE), while clearly identifying the gap between us and industry leaders and pinpointing areas for improvement. Second, we also aim to adopt a more market‑oriented shareholder structure through strategic investment and mixed‑ownership reform; however, our ultimate goal remains to achieve our targets for scale, returns, and ROCE.
     
    It must be understood that if no new capital enters our industry and our rate of return continues to decline, we will inevitably face collapse one day, because a high rate of return reflects both robust investment in innovation and strong shareholder support.
     
    Fourth, employees.
     
    Although this model places employees last, they are, as a fundamentally essential component of business operations, virtually at the forefront of enterprise efficiency management. When a company can genuinely win its employees’ heartfelt endorsement of its philosophy, mission, strategy, and operating model—while evaluating them with impartiality—and when, in the process, employees fully align their personal interests with those of the organization, that represents the highest ideal in the employer–employee relationship.
     
    Of course, some companies manage their employees through strict discipline and mandatory clock‑in procedures; this may be necessary at a certain stage of development. However, such an approach stifles employee creativity. Employees are the most valuable asset, and businesses must embrace this principle. In the past, employees were often viewed as liabilities on the company’s balance sheet—unpaid wages, for instance, were recorded under liabilities. In reality, though, employees are assets—indeed, the most flexible and high‑potential assets, and also the most difficult to assess. A company’s success ultimately hinges on the success of its people.
     
    However, even with a talented workforce, an enterprise cannot succeed if its organizational structure or strategy is flawed. In this model, no single factor can independently determine whether a company thrives; all these elements must perform at a high level. Consequently, any shortcomings in these areas must be addressed by dedicated individuals and teams tasked with reform and improvement—otherwise, they will undermine the company’s overall growth.
     
    As employees, the first and foremost factor is corporate culture. We talk a lot about corporate culture and often emphasize its importance, yet it remains elusive—people struggle to grasp what it really is and find it hard to cultivate. Corporate culture must stem from the heart of every employee. I once wrote a short piece suggesting that corporate culture is what employees say in the hallway after a meeting ends. For example, after today’s meeting, as people head out together, you might see four typical reactions: first, no one mentions the meeting at all and they happily go home; second, some vent their frustrations, complaining that the meeting was pointless; third, others keep debating the meeting—this would be the ideal response; and fourth, a few praise the meeting as excellent—a perfect outcome, though rather unlikely. The best scenario is when participants recognize that the meeting had both valid points and areas for improvement, and they’re eager to continue the discussion. That, indeed, is a sign of a strong corporate culture.
     
    From this perspective, we must all approach issues with genuine conviction, grounding our thinking in the company’s mission, values, and strategy; prioritize the interests of every employee; leverage the unique contributions of each team member; and work together to build an organization that is fair, inclusive, open, and transparent. Justice has become a quasi‑religious conviction in contemporary society, and the modern philosopher and Harvard professor John Rawls authored such influential works as A Theory of Justice. It has become evident that fairness and justice now shape people’s thinking more profoundly than religion or any form of education. In a company, individuals hold different roles; not everyone can be chairman—this is perfectly acceptable. Differences in outcomes are no cause for concern, but unfairness in the process is what matters. If fairness is fundamentally undermined within an organization and decisions are made without impartiality, the company will falter, and its culture will deteriorate. At the heart of this lies the top leader and the leadership team. Some argue that corporate culture is simply the “top‑leader culture,” which is not entirely accurate; however, the top leader invariably wields the greatest external influence and exerts the strongest radiating effect. From this perspective, the collective behaviors of employees give rise to the organization’s shared culture. Corporate culture, in essence, is a set of predictable employee behaviors.
     
    At this meeting, much was discussed about the qualities of leadership teams and the attributes of a high‑caliber workforce. If our generation stays committed to the established strategy—making clear choices and moving forward with conviction—and secures broad alignment around our core values and guiding principles, we will find that this approach is not only best for our employees but also optimal for the company. Elevating people’s capabilities begins with how we select, promote, evaluate, and assess talent at the earliest stages, applying fair, impartial, and scientifically grounded criteria to support our strategic objectives. Over time, this systematic approach will steadily raise the overall quality of our workforce.
     
    Much has been said about organizational structure. Whether the management approach is strategy‑driven, capital‑focused, or operations‑oriented is certainly worth exploring. Once you’ve mapped out the organizational structure—along with team composition and compensation and benefits—it’s advisable for each individual to conduct a more granular comparison and refinement, recognizing that different business units may require distinct management approaches at different stages of their lifecycle.
     
    Another crucial factor is employees’ sense of accomplishment and career development. Employees have careers, and I hope that when they work at our company, it’s not just about making a living or earning a paycheck. Rather, after a period of time, they should not only enhance their skills but also refine their mindset, broaden their perspectives, deepen their insights into corporate management, and gain a more comprehensive understanding—ultimately becoming better versions of themselves.
     
    We must do this to ensure the entire company runs smoothly. Every factor is part of the broader atmospheric context; it’s not a matter of grabbing a random piece—like blind men feeling an elephant—and then trying to fix it. Even if such an approach yields some minor results, it will likely be overshadowed by other factors and have little overall impact.
     
    If the strategy is wrong, no amount of motivation will help. And if HSE performance is lacking, efforts to cut costs will be futile as well. The challenge faced by enterprises—and the high expectations placed on their managers—lies precisely in their multifaceted nature and the need to excel across multiple dimensions. This is precisely why it proves so difficult for companies.
     
    As enterprises, we now face an increasingly complex competitive landscape. Some companies employ tens of thousands or even hundreds of thousands of employees—more than the population of an entire city. Yet today, we strive to systematically categorize these complexities, identify root causes and gaps, take concrete actions, and engage in thoughtful reflection—only then can we make meaningful progress.
     
    We It can be benchmarked at every level. After the review is completed, every team member takes concrete action. If we could digitize this model—assigning scores and quantifying gaps—we could conduct year‑over‑year comparisons to see whether the scores converge over time. For example, how do we demonstrate our commitment to professionalization, particularly in managing non‑performing assets and low‑yielding holdings, through orderly entry and exit? If we merely talk, write, discuss, or deliver speeches—no matter how well we articulate our intentions—but then fail to follow through when the next year arrives, achieving nothing at all, then we will have no hope for the future.
     
    Having listened to everyone’s three-day discussion, I’ve endeavored to synthesize the relevant factors raised into a model that reflects an internal logical structure. Moving forward, we aim to refine and iteratively improve this framework—this is the management model we intend to advance.
     
    As the three-day conference draws to a close, one crucial insight it has left us with is… Benchmarking mindset is extremely important. Going forward, whenever we undertake any initiative, we must establish a clear frame of reference—whether it’s good or bad—rather than relying on subjective judgments. In the future, whether dealing with major or minor issues, we can always assess them through this systematic framework. Whenever we launch a new product, we must assess its market share, return on investment, and profit margin relative to our competitors. Starting with benchmarking, we identify root causes, pinpoint gaps, and define actionable steps to drive continuous improvement. Even achieving modest progress each year would be a significant achievement. Guided by this benchmarking mindset, we need to critically examine our strategy, corporate culture, incentive systems, and more—every element deserves scrutiny, as each constitutes a smaller subsystem. In the future, our review process will become simpler and less cumbersome, thanks to data‑driven insights and greater familiarity with the metrics. At that point, evaluating performance—whether for bonuses or for assigning A‑ or B‑grade ratings—will be both straightforward and credible.
     
    Next, we will proceed with implementation on a case-by-case basis. The outcomes of this meeting must be formalized into a resolution, and I urge everyone to put it into practice and ensure its effective execution—so that we truly achieve our overarching goal through earnest implementation, rigorous execution, and dedicated learning, embodying both the spirit and the essence of our vision. By benchmarking against our partners and competitors and observing their growth trajectories, we can draw valuable insights.
     
    Once we have the documents, we also need mechanisms to drive implementation. I don’t want this to become merely a function‑specific task; actual execution must take place within each of our specialized companies and business units. Whether assigned to a business unit or a specialized company, there should be a comprehensive benchmarking framework in place. After today’s meeting, I encourage everyone to draft five to eight concrete action plans and get to work—this is the most significant outcome of our session. I hope you will further refine these plans and proactively follow through, so that this approach truly becomes an integral part of our working methodology.
     
    Benchmarking is an excellent tool for driving performance. Going forward, we will follow this approach to advance it in a sustained, robust, and continuous manner, ultimately enabling us to swiftly align with the management philosophies, standards, and systems of world-class enterprises and put ourselves on a truly competitive trajectory. The Chinese market has provided us with greater room for growth and development, and we possess our own distinct advantages and untapped potential. We have streamlined our management systems while remaining humble and eager to learn from others—benchmarking to improve. We hope that, one day, thanks to our deep understanding of the Chinese market and by fully harnessing the ingenuity and creativity of the Chinese people, we will ultimately surpass even our benchmark companies.
     
     

     

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