The Strategy of Human Resource Management

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The Strategy of Human Resource Management









There are two basic preconditions for an army to win a war: correct strategic guidelines and competent generals and soldiers. If the army were loose in structure and spirit, even if the correct strategic guidelines were adopted, the army would still lose the war. Here the strategy of human resource management plays a part. Corporate management also relies on such human resource management.

Shortly after I begun my career in Air China, I was told, “There are a lot of things you don’t know!” I answered, “It doesn’t matter. I can always find and depend on those who do know. Instead of holding on to specific issues, I’d rather hold on to key people. As long as key people are under my control, the specific issues will be readily taken care of.” This is what the Song dynasty poet Su Shi meant when he said, “Instead of managing issues, one should manage people. Better than managing people, one should tighten the rule of law. Better than tightening the rule of law, one should make the best of the contemporary world.”

I summarize corporate management into four sentences: Know your employees very well, especially the managerial team. Take great care of the key personnel. Improve on the regulations in all respects. Increase overall employee quality. Management involves many things, but at its core are people management and team leading. The essence of management is human resource management.

To be concise, the strategy of human resource management is a process of selecting people, hiring people, caring about people, and cultivating people. You need to have an insight into talent in the process of selecting people. You need to have the tolerance to work with talent, and the guts to put talent in the right position when hiring people. You should be strict in the management of talent, for this is a gesture of caring at a higher level. You have to be responsible for people and create favorable conditions for their further development. Nowadays, many managers and leaders are always talking about realizing a unified workforce. However, this term means nothing if the manager is not familiar with the human resource management strategy.

A leader should be ming zhi (reasonable and intelligent) himself, if he wants to master the strategy of human resource management. What is ming? Ming is self-understanding, which requires you never to do things completely out of your reach. Otherwise, you will end up like somebody pulling his head upward so as to get off the ground, as was mocked by Lu Xun1. What is zhi? Zhi refers to your understanding of human resources, which requires you never to mismatch your work assignments with your employees’ expertise. Otherwise, you may lose some very good employees, as they fail in the tasks that they are not cut out for.

After the founding of the Former Han dynasty, Emperor Liu Bang summed up his experience of success as follows, “I am not as good as

1 Lu Xun, a famous Chinese essayist famous for his satires.

Zi Fang in military strategizing. I am not as good as Xiao He in stabilizing the nation, appeasing the civilians, and maintaining food supplies to the army. I am not as good as Han Xin in leading a large army and winning every fight. These three leaders were the very best of the Han leaders. I won over the nation because I have these three people working for me.” These words reveal Liu’s ming zhi, and aptly describe the relation between talent and success. As a manager and a leader, one must master the strategy of talent management. The management of human resources is an art, and no manager or leader can grasp the essence of human resource management without long-term practice and planning.


The competitiveness of a company is reflected in its leaders, its backbone employees, and its ordinary employees.

Banzi, the backbone employees, and ordinary employees are all indispensable to successful human resource management. But they differ from one another in terms of status, function, requirements, and the way they are managed.

How should we treat and manage the banzi? The key to the success of a company is its leaders, and the capabilities of the leaders are mainly dependent on the top two executives. Napoleon once said, “An army of sheep led by a lion would defeat an army of lions led by a sheep”

The Banzi are the center and core of all corporate operations and management. To manage corporate development, one must spend due time building a collaborative and competent banzi. This is crucial to corporate development, especially the cultivation of core competitiveness.

The competence of a banzi includes four aspects. Firstly, a banzi should have ideas. Without ideas, the company will have no way forward. Secondly, a banzi should have insights. Without insights, the leaders cannot make correct judgments on employees or on business affairs. Thirdly, a banzi should be able to win popular support. Without popular support, their power will be undermined, and will carry no authority. Fourthly, a banzi should have a strong sense of collaboration. A slack banzi will never lead the company to success.

Ideas and foresight are always the top qualities expected of the main leaders of a company. People vary from one another in terms of their manner of and ability in thinking. Operations and management talents also belong to different areas. The major difference can be summarized in two words—leadership and management. In terms of objectives, leadership emphasizes more perspective and vision, while management stresses short-term or specific objectives. In terms of measures, leadership is more about soft techniques or art, while management is more about hard techniques and measures. In terms of content, leadership focuses more on strategy, the overall situation, culture, and talent policy in pursuit of innovation and change, while management pays close attention to regional issues, concrete details, and regulations in pursuit of precision and standardization. Of course, leadership and management are correlated. As such, operation managers should learn from the leaders in terms of quality, while the leaders should learn from the managers in terms of techniques.

Building a banzi is a key factor. A xi banzi (performance troupe) is composed of different actors. Similarly, different characters should be considered in building a company’s banzi, in order to achieve a balancing effect. Firstly, a chief and a deputy need to be appointed in such a way that the chief has the ability to act as the commander-in-chief while the deputy is able to play the role of a general. Secondly, banzi members should be mixed in a way that they can complement one another well in terms of expertise. Thirdly, an appropriate mix of personalities should also be considered. A mild-tempered member can always serve as a mediator in times of conflict. Fourthly, attention must also be paid to a varied age range. Different age groups in a banzi can ensure the continuous emergence of talent, and avoid the gradual decay of a banzi, as the members turn old. Fifthly, there should be a gender mixture. A reasonable gender mixture will contribute to a lively and harmonious banzi.

In a word, banzi building is like building construction, and is a kind of art. Mao Zedong is not only a great politician and strategist, but also a great artist in banzi building. A case in point is his management of the commander banzi of four major field armies during the Chinese Civil War (1945–1949). Peng Dehuai was appointed the commander-in-chief and political commissar of the First Field Army. He was an exceptional general, known for his loyalty, decisiveness, and even stubbornness. Solely responsible for both military and political affairs, Peng led the First Field Army that swept through northwestern China with the help of vice political commissar Xi Zhongxun, who served as the mediator. The commander-in-chief and political commissar of the Second Field Army were Liu Bocheng and Deng Xiaoping, respectively. These two were excellent in both military command and political awareness, and they cooperated for a considerable time. With Chen Yi as the second political commissar, the Second Field Army became the vanguard in the strategic counterattack and march on Dabie Mountain. After the War to Cross the Yangtze River, the Second Field Army occupied the vast expanse of southeastern China. The basis of the Third Field Army came from the former Fourth New Army, of which Chen Yi was appointed acting commander and in which role he enjoyed a high prestige. Su Yu, on the other hand, was good at commanding wars of maneuver. Mao took advantage of Chen Yi’s prestige and made him commander-in-chief of the Third Field Army, as well as the second political commissar of the Second Field Army, while Su Yu was appointed the acting commander-in-chief of the Third Field Army. Chen Yi was of a generous character, which helped Su Yu make full use of his talent. After fighting bravely in Nanjing, Shandong, and Anhui, as well as in the War to Cross the Yangtze River, the Third Field Army marched directly into the southeastern area. Lin Biao, the commander-in-chief of the Fourth Field Army, was a military talent but was an eccentric personality. Therefore Mao Zedong appointed Luo Ronghuan, a flexible person who was good at handling interpersonal relations, as the political commissar. The Fourth Field Army destroyed enemies in northeast China, and participated in the Battle of Pingjin (Beijing and Tianjin) before marching to Hainan Island. Mao Zedong’s excellent ability in building banzi is well worth studying.

How then, should we treat and best utilize backbone employees? Operational problems in a company are mainly due to a dysfunctional group of backbone employees. As a leader, you should appoint excellent personnel to key positions, to areas where performance has been hard to improve, and to take charge of promising projects. Besides these tactics, you should also help the backbone employees get the work started. The fundamental approach to the successful management of a state-owned company is to build a good management team.

I read many letters written by Mao Zedong and Chiang Kaishek during wartime while I was studying at the PLA University of National Defense. Mao typically ended his telegrams to his subordinates with the sentence, “Asking for instructions would be unnecessary in the case of an emergency,” whereas Chiang often bypassed his designated leader and gave direct commands. This is actually an issue of whether you trust your backbone employees, and whether you can utilize them. A gap between Mao and Chiang can thus be inferred from this minor detail.

Who are the best people to become the operational backbone of a company? There are three criteria. First, that person must be good at understanding the policies made by a superior and formulating questions. Second, the person must have the ability, passion, and determination to fully implement the ideas and decisions made by a superior in connection with the practical situation of their department. Third, the person must have a pioneering spirit, and be ready to break, when appropriate, the established rules and practices. He should be able to proceed with the work creatively and innovatively.

Leaders must adopt the right attitude toward the backbone employees’ executive power. Any unexamined or biased perceptions should be avoided. Do not assess backbone employees by whether they fully accept your opinion, but rather by whether they have complied with your intention in general, and whether what they have done is good for corporate development. Operational backbones should not blindly follow their superiors, or worse, pander to their superiors for the sake of personal interest. Backbone employees should have their own ideas: while they are responsible to both their superiors and the company, ultimately they are responsible to the company. In fact, the more submissive a subordinate is, the more likely he is to ruin the whole business. Lu Zhi had an incisive comment on this, “Those who speak little are not necessarily stupid. Those that talk a lot are not necessarily clever. Those that rise up against you are not necessarily disloyal. Those who are submissive are not necessarily loyal.”2

2 Lu Zhi (754-805), a Tang dynasty statesman, who served as prime minister during the reign of Emperor Li Shi.

Speaking of the importance of backbone employees, I will never forget the time when I had just taken office in Air China. I received 39 letters, 36 of which were suggestions on the future of Air China. An anonymous letter listed eight major advantages and eight major potential concerns of Air China and advanced some counter-measures. The letter ran over 20 pages. On the Air China intranet forum, a post entitled, “Our Young Pilots Should Pull Themselves Together,” caught my attention. The post highlighted some factors within Air China that were detrimental to the career development of junior pilots. It went on to warn young employees of Air China against seeking quick success. “Air China faces a shortage of pilots today. Some very experienced captains are around 50 years old and are approaching retirement. There is an obvious shortage of pilots aged 30–40, if we take a long-term view. The future trends of Air China require a younger generation to grow up quickly.” All these suggestions were raised by Air China’s backbone employees.

Backbones are yeast and seeds, and they can influence a group of people. There is a saying that goes, if a leader does not have the backbone group working for him, it will be as if he has a gun but no bullets. In this way, even if the banzi is a good gun, its destructive potential will be seriously discounted.

How should we treat and best utilize ordinary employees in the company?

If a company is compared to a human being, then the banzi is the brain, the spine, and the skeleton, and the employees are the cells. Small as they are, if something goes wrong with the cells, making them unhealthy and sluggish, the whole body will be adversely affected. If the employee quality is not high, no matter how good the operation strategy and ideas are, they may never be effectively implemented, and the company’s core competitiveness would be greatly undermined. Therefore, human resource management of a company must also seek to increase the quality of all its employees. This can be done in three ways: understanding the overall situation of the employee team, consolidating employee training, and improving their professional ethics and work style. Only then can we fully energize every cell in the company.

On April 15, 2002, Air China flight CA129 crashed in Busan, South Korea. Air China came under unprecedented pressure. On the morning of April 16, one air crew member published the following post on the intranet forum of Air China:

This afternoon I will fly with CA1365 from Beijing to Sanya. I won’t return until three o’clock tomorrow morning. I will tell my colleagues that we should remain calm and face all passengers with our very best smile and service. We should also show the same smile to Air China!

I was deeply moved by this post. This is the quality of Air China’s employees! They did not run away in times of crisis. They did not back off in times of difficulty. It was only a matter of time before Air China would be flying high again. I decided that we would promote employees like this post-writer and hoped that all Air China employees shared such virtues.

Human resource management is generally perceived as being about the appointment or promotion of a particular person. In fact, in Russian, the word “human” can be both singular and plural. In a broad sense, “human” should include banzi, the backbone, and all employees. Banzi is the key, the backbone is the bridge, and the employees are the foundation. Banzi must be determined, the backbone competent, and employees qualified. Only when all these three tiers are ready can corporate development be ensured.


Zhuge Liang3 once said, “The strategy of ruling a nation lies in the promotion of talent… The leaders of a nation are like the pillars of a house. The pillars should not be too thin, just as the leaders should not be weak. If the pillars are too thin, the house will be in danger. If the leaders are weak, the dynasty is set to collapse.” There is much in common between ruling a nation, commanding an army, and managing a company. A leader or manager must be fair on the issue of personnel appointment and removal. One must never be nepotistic or form a small, exclusive self-interested group. Such a group would definitely discourage the majority. Once the majority has drifted away, a leader is bound to fail.

At an Air China work meeting in 2002, regarding how to guard against malpractices existing in personnel appointment and removal, I said, “We must not join any ‘small groups,’ or play little games such as promising appointments, boot-licking, or spreading baseless news. Personal grace in this regard may turn into personal enmity.” When Di Renjie was appointed prime minister of the Tang dynasty, Wu Zetian, the empress, asked him if he wanted to know who recommended him to the position. Di said no. The empress asked why. Di answered that if he knew who the person was, he would feel grateful, and his gratitude would prevent him from handling affairs impartially in future. We should have an even better understanding of this issue than our ancestors.

Experience has proved that on the issue of appointment and removal, one should operate on the basis of transparency and equity

3 Zhuge Liang (181–234): famous politician, militarist, and thinker in the Kingdom of Shu. He used to serve as the chengxiang (a position in feudal Chinese government which equates to today’s prime minister) of the Kingdom of Shu.

through standardized procedures. Reasonable ideas are not enough. The appointment must be governed by related rules and regulations so as to turn from the rule of the people to the rule of law. Air China has adopted the following procedures on appointment and removal. The chief and deputy chief review the performance assessment and the transfer plan prepared by the organizational and personnel departments. After a proposal is reached, we turn to the banzi for comments. The amended plan will then be further discussed at meetings before being made public to all employees. Moreover, a system of probation will be applied to the newly appointed, and the final outcome will be decided on the basis of their performance during probation. Such collective, democratic decision-making, based on strict procedures, has ensured successful appointment and removal.

Merit-based appointments require a set of reasonable criteria for measuring merit. I used to work in a personnel department, and have been in the position of a leader for a long time; therefore, I have developed an intense interest in documents and books on talent. One example is Guan Zhong’s views in Records of the Grand Historian:

I used to be poor, and did business with Bao Shu. When we divided our earnings, I always took the bigger part. Bao Shu did not think I was greedy because he knew I was poor. I used to work for Bao Shu, which made him poorer. Bao Shu did not think I was stupid because he knew that there were ups and downs in life. I served as a government official three times but was expelled by the princes three times. Bao Shu did not think I was useless, because he knew that I had not had the chance to demonstrate my abilities. I ran away from battlefields several times. Bao Shu did not think I was a coward because he knew that I had an old mother at home. Prince Jiu was defeated and Zhao Hu died for him. I was imprisoned and tortured. Bao Shu did not feel ashamed because he knew that I did not feel guilty for small mistakes, but I felt shameful for being unable to serve society. It is my parents that gave birth to me and raised me, but it is Bao Shu who really understood me.

Every time I read this, I am deeply moved by Bao Shu’s respect, understanding, generosity, and caring towards talented people. I have often discussed the subject of talent with others. What is talent? Based on the actual conditions of Air China, I can summarize my understanding of talent in four points. First, the person should be ambitious and have new ideas and perspectives. In other words, he should be good at thinking. Second, this person should excel in business, being able to accomplish his tasks. In other words, he is good at his job. Third, he should not be afraid and back off in the face of problems and contradictions, especially in times of emergency. And he should be good at crisis management. This can be further summarized as being good at task control. Fourth, he must respect the law and related regulations, and be well disciplined. He should behave well and be surefooted in work. This can be further summarized as playing by the rules. Talent selected and appointed in accordance with these four points can win the support of the employees.

A leader or a banzi who can manage the company in a broad-minded and considerate way will surely win the support of their employees. A leader must understand that his tolerance is proportional to his work performance. In Air China, we have always stressed that civil aviation was a sunrise industry in China. As the reorganization of the civil aviation industry and market competition continue, whether Air China can become a giant in China’s civil aviation industry depends on whether the managers of Air China are tolerant enough. For the sake of Air China’s future, the management of Air China, especially the young managers, must be tolerant. The tolerance in question also finds expression in human resource management as merit-based appointment.


Bo Le4 exists in the world, and thereby, swift horses are selected. Swift horses are common, but Bo Le is not. Therefore, even though there are good and swift horses, they may simply be tortured by slaves, toiling in the fields, dying in the stalls, and never earning the reputation of swift horses.

These words from an essay by the Tang dynasty writer Han Yu aptly describe the significance and responsibility of Bo Le. But human beings are not saints, and they are destined to make mistakes. It is likely that a Bo Le also makes mistakes by selecting sick or bad horses. What is more, Bo Le only has limited time and energy to select horses. Therefore, as time goes by, the best way to discover and appoint talent has evolved from “horse selecting” by a Bo Le to an open and systematized “horse racing.”

Following this line of thought, Air China started a gradual and difficult reform of its personnel system in the hope of putting in place a “horse racing” mechanism. When I began to work at Air China in November 2000, there were 1,116 cadres at the section level, and 548 cadres at the division and director levels. The company suspended its cadre-related work for three years in a row. One major reason was that the internal relations were too complicated to adjust if troubles were to be avoided. To eliminate the malpractice in personnel issues, destroy the “iron chairs” (a Chinese term referring to the lifelong appointment of cadres), and reactivate the cadre personnel work, Air China launched a cadre assessment and appointment system in 2002. The cadre administrative-level system, which

4 Bo Le, a legendary expert judge of horses during the Warring States period. Later the term Bo Le is used to refer to people who are good at discovering talents.

had been in force ever since the founding of Air China, was terminated, along with the lifelong appointment of cadres. In their place we introduced competitive employment for most managerial positions. This was followed by the appearance of some important positions on the open competitive employment list, such as president office administrator, deputy general manager of aviation security, deputy general manager of corporate management. The whole process of recruitment was carried out in an open way.

To fully evaluate the candidates, Air China established various procedures, ranging from a written test, a speech, and an oral defense for democratic evaluation. The test covered political theory, current affairs, management knowledge, document writing, etc. The speech and oral defense, conducted by a well-structured evaluation team, was designed to assess the candidates’ thoughts on work, innovative ability, logical thinking, and ability to express themselves. Democratic evaluation varied in scope, methods, and weighting percentages for different positions. Such evaluation procedures, which can reflect public opinion and give due consideration to work performance, are a way to make sure that only the best will be selected.

Once the major policy had been mapped out, attention could then turn to the details. Air China adopted measures to supervise the open recruitment process. For example, several sets of exam papers for different positions were all sealed before the exam, and the content of the exams were totally unknown to any member of the competitive employment work group. On the day of exam, the group randomly chose a set and unsealed it for use in the exam room.

It is of course a huge step forward from “horse selecting” to “horse racing.” But unless openness is emphasized, problems can still occur. Only through racing horses in an open and transparent manner, allowing public supervision, and prohibiting a behind-the-scenes operation, could the final results be real, effective, and convincing.

Gone are the days when cadre appointment was conducted in secret by a minority who selected from a small group of people. Instead, equal opportunity was given to all employees, sending a breath of fresh air through the company. Air China put up for competitive application 41 positions in the passenger cabin service, which attracted 86 candidates. And 17 people from the old crew failed to be reappointed. I asked one of them about his opinion on his failure. He answered, “It was an open competitive recruitment based on public opinion. Those who got the job have won it fairly and squarely, and those who failed have nothing to say. I must work hard. I hope I will be able to participate in the competitive employment for this position again.”

All must stand up before they sit down again. All must go out before they come in again. ” This is a new measure to ensure that everybody exerts his talent and all talents are fully utilized in a company. Air China decided that competitive employment should be conducted on one third of the current positions each year. Someone asked, “I’m doing well in my position. Why do you want me to leave?” “It doesn’t matter, if you do well, you will definitely be back again.” “What if I lose my job in this employment exercise? Will reemployment and salary review cause internal instability?” The purpose of competitive employment is to put pressure on employees and stimulate them to progress. Position adjustment every three years is not that frequent, and so is not likely to stir unease. Rather, it should only heighten the enthusiasm of cadres and employees for their work.

What truly reflected Air China’s innovation in personnel appointment and attracted wide attention from the whole civil aviation industry was the introduction of an open recruiting system targeting all talent in the country. The previous practice of assessment and competitive employment among internal employees was sometimes termed as “inbreeding.” Recruiting from the general public reflected the company’s courage to break with traditional patterns. In 2005, the Chinese Civil Aviation Group Company openly recruited a general manager of capital management out of 294 candidates from across the country, including 86 PhD holders. In 2006, the Chinese Civil Aviation Group Company hired 57 senior management positions through both nationwide and in-company recruitment. As a result, the corporate management team had become more professional and much younger.

Would people recruited from a variety of backgrounds have trouble adapting to the new environment? We put in place appropriate measures. All new recruits had to go through a half-year probation and a one-year evaluation, so as to let them learn by trial and error. If they still could not fit in, we offered the position to someone else. All these measures were designed to break the closed pattern of employment, cultivate a modern corporate culture, and eventually establish a modern corporate governance framework.


On the issue of talent, a leader must bear in mind two important things: the selection of talent and its cultivation. Yan Zi, a famous statesman in the State of Qi during the Warring States period had this comment:

Planting crops will bring rewards the following year. Planting trees will bring rewards in ten years. Cultivating talent will bring rewards in one hundred years. Once planted, crops can be harvested only once. Once planted, trees reap repeated benefits. Every talent that is cultivated will make many more contributions to society.5

These words are often quoted to illustrate that the cultivation of talent is very important and requires a lot of time and energy. In fact, Yan Zi had another intention: investment in talent gets the most returns.

On the issue of cultivating talent, some historical lessons are worthy of our attention. Readers of The Romance of Three Kingdoms should know this sentence very well, “Since there are no other generals in the Kingdom of Shu, Liao Hua6 has to serve as the vanguard.” Erudite and informed as Zhuge Liang was, this military genius lagged far behind in terms of talent cultivation, as compared with the large number of talented people working for Cao Cao and Sun Quan. In the peak time of the Kingdom of Shu, talent was not rare. Besides the five most talented generals (Guan Yu, Zhang Fei, Zhao Yun, Ma Chao, and Huang Zhong), generals like Ma Dai, Wei Yan, and Deng Zhi were also very combat-worthy. However, while Zhuge Liang was strategizing for wars, he neglected the training of professional talent. He always treasured experienced generals, and before each battle, he made a point of calling a particular person to his camp, telling him what to do, and then everyone just carried out the orders. What was worse, for those generals tasked with a special mission, Zhuge Liang went further to offer the so-called “excellent tactics.” They were written on a piece of paper and sealed up in a silk bag and the timing and procedure of

5 “Guan Xiu” of Yan Zi (ca. 3rd Century B.C.)

6 Liao Hua (?190–264), an able and loyal general in the Kingdom of Shu. He was appointed to the vanguard in his seventies.

opening it were strictly specified. In the end, everyone was simply amazed, and exclaimed, “Our military counselor is a true saint!” However, in the long run, many generals became more and more dependent and learned nothing from any victory. Before the three Kingdoms were eventually unified by the Jin dynasty, the Kingdom of Shu was the first to collapse, due in large measure to its lack of talent.

For the fast-growing Chinese aviation industry, talent cultivation is especially important. As is known to all, civil aviation is an industry featuring a long production chain. A 150-seat passenger airplane requires at least 150 people, including flight crew and ground management. And according to the forecast of the International Air Transport Association (IATA), China will need 2,400 new airplanes in the next 20 years. Boeing predicted a need for 2,900. The current global average ratio between employees and airplanes is 100:1 against China’s 150:1. This means that China will need 200,000–400,000 civil aviation professionals in the coming 20 years. I am convinced that for a long time from now, China’s aviation industry will face a shortage of domestic aviation professionals. In recent years, as the domestic civil aviation market has further opened, major foreign aviation companies have been quick to enter the Chinese market. This has further increased the need for aviation talent.

In view of this, Air China has attached great importance to the cultivation of professional talent. In recent years, Air China has dispatched its employees to such big companies as General Electric, Rolls Royce, Lufthansa, and Cathay Pacific for learning purposes. At the same time, some Air China employees have also studied how to improve their leadership ability and executive power at Pudong Cadre College under the Ministry of Organization, Dongfeng Motor Corporation, and Shanghai Baosteel Group. In 2005 alone, Air China selected 831 people for 53 internal and external training programs. In the past three years, all levels of leaders and cadres in Air China have received special training.

I also have a dream to build a University of Air China. This major project is currently under preparation. We have signed an agreement with the Beijing municipal government to purchase 33.33 hectares of land and started the infrastructure construction. The College of Aviation of the University of North Dakota and Hong Kong Cathay Pacific Airways expressed their intention to co-run the university. The University of Air China will set up majors such as aviation, operation control, aviation engineering, management, and aviation service with equal emphasis on in-service and degree education. It will enroll around 2,000 students each year. This is a major event that will have a bearing on the sustainable development of the Chinese Civil Aviation Group Company, and will also be a major strategic move toward building a learning company.

I owe the idea of setting up a university to my experience in Yan’an, the Shrine of the Chinese revolution. During my service in a division of the Air Force based in Xi’an, I paid a visit to Yan’an, where I was shown the site of an agricultural machinery school in a cave-house. I was surprised that a school like this, which had so little to do with the war, had been founded despite the adverse conditions then. What surprised me more was that, as many as 28 schools of various kinds had been set up during the era of Yan’an! Few people know about these schools, apart from the well-known institutions such as the Chinese People’s Anti-Japanese Military and Politics University and the Luxun Academy of Literature and Art in Yan’an. The victory of the Chinese revolution was, I believe, also a victory for education. Despite the harsh conditions back then, the Communist Party of China still set great store by education and talent cultivation and was rewarded with diverse results. This experience is well worth all company managers learning from.

The idea to establish a university also results from my critical thinking on the recent development of Air China. Why has Air China been able to come up with so many innovative ideas since the major reorganization? How does it respond so swiftly to the changing market? All these factors are attributable to our emphasis on learning. It is fair to say that Air China is not a learning company in the true sense yet, but we are making tireless efforts towards that goal. Only through constant learning and knowledge updating can a company have a bright future, and instill a sense of gratification in its employees, while working hard to keep customers satisfied. This is where a corporate university can play a part.

It is nothing strange to see companies with their own universities. It is reported that there are more than 2,000 corporate universities in the United States alone. In terms of the aviation industry, the Lufthansa School of Business has developed into a prestigious institution. McDonald’s Hamburger University believes that for every dollar spent on training, over ten times the output value will be generated. How similar this thinking is to a point made by Yan Zi 2,000 years ago—every talent cultivated will make many more contributions to society.

As a company leader, your top priority is not to do everything by yourself, but rather to set up a platform on which talent can easily emerge, the intelligence of every manager and employee can be fully utilized, and their enthusiasm, initiative, and creativity can be unleashed to the maximum extent. Whoever achieves this is qualified to compete in the future market.


Cankao Xiaoxi (Reference News) once published a Reuter’s article that was very inspiring. The article presented the results of research that demonstrated that the bad behavior of one employee could influence others and spread like a virus. This phenomenon could damage relations between colleagues, and might even destroy a good work team. The research done by scholars from the University of Washington showed that, similar to the phenomenon that one rotten apple will gradually make the whole basket go bad, one or two bad employees are enough to ruin a good work atmosphere in a company, whereas it is hard for a minority of good employees to direct the work atmosphere in a positive direction. Once a harmful or misbehaving employee emerges, the behavior of the whole work team will gradually be negatively impacted. A rotten apple may cause enormous harm. Therefore, in an attempt to track down the problems, uncover the hidden troubles, and tap the potential, one company under the Chinese Civil Aviation Group Company began a discussion on searching for the rotten apples and the red ones.

After I started working at Air China, I realized that a company was different from an army. The organizational system of a company is founded on mutual understanding and tolerance. Self-management is an important part of corporate culture. But in the eyes of those who have no self-discipline or desire for progress, an organization thus structured is weak, and they can take advantage of the corporate culture and become the rotten apples. If these people are not spotted and dealt with quickly, they may spread their sickness to the collective. Furthermore, it is unfair for those employees who work hard.

As an old Chinese saying goes, strictness comes with love, whereas tolerance leads to harm. If one’s mistakes are ignored and tolerated, a person is destined to become bad. One of the important reasons behind Air China’s depression was that for a period of time, the company was not strict with its employees. American educationalist Porter Johnston Goss once said that if you always imposed low standards on someone, he would just get worse and worse. Since the year 2000, in Air China’s handling of crimes and cases of rule violations, nine people were sentenced and two of them were sentenced to death. Disciplinary punishment was imposed on 28 people for violating party and administrative regulations and 12 of them were stripped of their party membership. Such a high crime rate was indeed the consequence of tolerance and indulgence. The directive of the party must be strict, as must be that of the army and the company. Being strict is a must in all kinds of work, and it denotes a high level of care for management and employees.

But then, why was it so difficult for us to be strict in the past? There are four points worthy of our critical reflection. First was the lack of a sense of responsibility, meaning that the leadership did not want to be strict. Could a responsible and ambitious leader or manager turn a blind eye or a deaf ear to the problems in his company? Second was the failure to be a role model, which meant that the leader did not dare to be strict. Confucius said, “If the official is honest, his underlings will follow his example and be honest. If the official himself is corrupt, even if he orders his underlings to be honest, they will not listen.” If you want others to be honest, you should first make yourself honest. If you want to strike the iron, you must be strong yourself. If the leaders or managers are not honest enough, how can they be strict with their employees? They are afraid of recriminations!

Third is the lack of an honest atmosphere, which means that it is hard to be strict. Flattery can make people happy, while truthful statements tend to be offensive. In a place where people like flattery and are offended by criticism, and cannot tell right from wrong, it is very hard to be strict with employees. Those who dare to lay down strict regulations and punish the violators may even be marginalized.

Fourth is the lack of a complete set of rules and regulations, making it hard to implement strict management. In the past, when Air China punished those who should be suspended from flying and those who violated the rules, questions like “What’s your legal basis?” were frequently heard. This reflected a dearth of clear and strict rules and regulations. The Chinese phrase yan ge (strictness) means that one should be strict in terms of rules and regulations.

The first two points are the fundamental reasons. Only when the leaders or managers have a strong sense of responsibility and a strong desire for success, as well as play a model role, can they be strict with their employees in management.

To be strict with employees, we should first be strict with leaders and managers, so as to avoid a situation where the employees are strictly regulated while the leaders are not. Otherwise, no one will be strictly regulated because the leaders dare not be strict with others. Shortly after I began to work in Air China, one manager spoke with great passion that if the employees did so and so, he would “behead Ma Su with tears in [his] eyes!”7 I told him that it was very heroic of him to say so, but did he know what Zhuge Liang did after he had beheaded Ma Su? He demoted himself by three levels, while still serving as the acting prime minister. Zhuge Liang had looked into the defeat, shouldered the responsibility, and punished himself. Leaders or managers enjoy more power than average employees, and have a greater chance of committing mistakes. They must bear this in mind.

On the issue of promoting the corporate image, the effect of good news and bad news is largely disproportionate. This gap can be summarized by a proverb: The fragrance of ten flowers cannot cover a slightly unpleasant odor. In fact, all employees are responsible for establishing the reputation of a company, whereas the company name can be spoilt by the misbehavior of just one employee. In the same way, in the modern information age, a single letter of complaint can overwhelm dozens of letters of praise. Years of safe operation records

7 A scene from the Romance of Three Kingdoms where Zhuge Liang beheaded Ma Su, who violated his orders in the battle and was defeated, in order to discipline the whole army, even though he knew Ma Su was an able general, and he personally admired him very much. Before the battle, it was Zhuge Liang who insisted on appointing Ma Su as the vanguard.

maintained through the efforts of everyone may be destroyed by the reprehensible actions of a single person. Brand image established through the tireless endeavor of all employees may also be damaged by the errors of a single person. In view of this, we have explicitly given top priority to strict management that applies first to the management team.

Contrary to the rotten apples, we always have some managers and employees who are active in pursuing progress and are surefooted. They are the red apples of the company. They can maximize profits with the least costs. In return we reward them with the honor and benefits they deserve.

To promote an honest atmosphere in the company, we have put in place an incentive scheme based on achievements. The scheme stresses post differences, performance assessment, as well as knowledge and skills. Income can be different for people holding the same position and performing the same duties. As a result, leaders and employees have shifted their attention. Through strict management, all leaders, managers, and employees have seen room for improvement. Only when a company has created an environment conducive to the elevation of employee quality and development of professionals, can a solid foundation be laid and a greater vitality be reaped.


Talented professionals are the most treasured asset of a company. How can we guarantee that this asset is preserved and even increased in value?

In a market economy, an attractive salary offer is an effective way to draw talent. But it is also the most primitive way. For Air China, the most important factor used to attract professionals and make them stay is a platform for them to utilize and flaunt their expertise, as well as secure their career development. This will give them a sense of achievement that cannot be gained in the long run just by an attractive pay packet.

I once had an in-depth discussion with Air China employees about happiness. In fact, the concept of a degression rate also applies to happiness. As our material life improves, the more capital you invest, the less sense of satisfaction you feel. In economics, this is termed as the “diminishing marginal utility.” What is happiness? People are divided on this. To me, happiness means no physical pain and no cares. Money cannot equate to these two points.

Therefore, a company must create a positive work atmosphere. Otherwise, it cannot attract the best professionals. Typically, material rewards can attract talent, but not the best, because the best professionals are those who desire both material and personal satisfaction. If a leader cannot map out an enticing blueprint and point out a clear direction, the team will become slack. After the new Air China leadership took over the reins in November 2000, they designed an overall strategy on the basis of the actual conditions under the pressure of huge losses. Specifically, we would take advantage of reorganization to launch reforms centered on security and economic results, improve pilot team training, strengthen corporate management and moral education, and faithfully implement the “cohesive power project.” As a result, Air China turned from loss-making to profit-making in the following year, with all operational and management activities getting back on track and progressing with a good momentum. This has pacified all the employees. I still remember a captain who told me that another company had offered him a higher salary, but he chose to stay on in Air China. I asked him why. He answered, “I have the feeling that Air China is like an ocean now. Fish in the ocean won’t swim up rivers.

In recent years, the Air China management team has successfully formulated a set of first-class standards for cutting costs and raising profits through a series of measures. Currently, Air China’s cost per kilometer is 5.1 cents in the U.S. dollar. Compared with that of the world’s leading aviation companies, such as 5.9 cents for Cathay Pacific Airways and 6.9 cents for Singapore Airlines, Air China enjoys an obvious cost advantage. Most importantly, we have gradually completed our strategic distribution during our operations and further refined our operating concepts. Air China has not only listed its shares, but has also formed a powerful air route network in China. Moreover, it has enhanced its presence in the international market through the integration with Cathay Pacific Airways and joining the Star Alliance group.

As a result, Air China’s management and employees have become more united than ever. In recent years, as foreign aviation companies have begun to pour into the Chinese market, many of them tried to entice Air China’s high-caliber management and employees with higher salaries, even up to RMB 1 million. Most of those who had such tempting offers declined, because they wanted to stay on and develop their career together with Air China. As of today, not a single senior managerial staff of Air China has quit.

Air China makes professionals stay loyal through its business, its development, and even more by its care. Marx said that the human essence is the sum total of all kinds of social relations. As a normal human being, you hope to live in a friendly, harmonious, and warm environment. We make our management and employees feel cared for, and create an environment that makes the talented stay. Specific measures include caring for their livelihood, making personnel work more people-centered, and ensuring smooth communication between leaders and employees.

In the past, the room and board conditions were not good for cabin service crew on international flights that required an overnight stay in foreign countries. In some cases they even had to bring their own food. This naturally affected their mood and did not ensure a good rest after the flight. From 2003, Air China earmarked RMB 22 million in budget to improve the conditions for international flights, providing free room and board for the front-line crew.

Air China’s leaders have also established channels for smooth communication with front-line employees. Once, an Air China pilot was hurt by a bear while taking a lakeside walk in Alaska. The captain of that flight informed the leaders of Air China immediately, who then instructed, in no time, the flight command and medical departments to appropriately deal with this issue. “How come the leaders got to know about this in such a short space of time?” People were surprised. It turned out that the leaders had the cell phone numbers, home addresses, and home phone numbers of more than 1,000 Air China pilots. This is an unblocked information channel, which cemented the relationship between management and employees and reinforced the most basic productive forces of Air China.

Over these years, every time when there was a transfer or a change of position among Air China’s managers, the leadership of Air China always made a point of talking to the affected staff member in advance, listening to their opinions, and trying their best to address their needs and concerns. Personnel change is a thorny issue. Many people could not understand why we handled it in such a special way. Were we asking for trouble if we respected the opinions of the people concerned? Wouldn’t the managers be spoiled if we agreed to respect their opinions? In fact, personnel management does not have to be that problematic if appropriate measures are adopted and full trust is given to the people concerned. On the one hand, individuals should obey corporate decisions, but on the other, the company should also care for its employees. In the past, we put more emphasis on the former to the neglect of the latter. In the future we must dialectically handle these two sides.

Caigen Tan (Vegetable Root Discourse) states, “You should not be overcritical in human management: otherwise, even those who want to work for you will try to leave. You should not be casual in making friends: otherwise, flatterers will come to you.” In recent years, before any personnel adjustments were carried out, the leaders would talk to the people concerned. Sometimes they were even offered two or more positions to choose from in order to make them, the leaders, and the general employees happy. In the major reorganization moves in recent years that have involved hundreds of management staff from the former Air China, Southwest Airlines, and CNAC Zhejiang Airlines, nobody has yet appealed.

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The Strategy of Human Resource Management

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