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Deadlines, rewards and punishments fuel Wanda’s growth

Ambitious real estate projects in China are not hard to come by. In 2012, an unknown developer made a splash with plans to build the world’s tallest building with a prefabricated structure. Cranes are pulling up the last remaining pieces of Shanghai Tower, which aims to be the second-tallest building on earth.

It is rare, however, for them to be completed on time, on budget – or even completed at all. The centerpiece project in the country’s financial capital is unlikely to open as scheduled and its developer, Shanghai Construction, is reportedly struggling to find tenants. The prefab monster in Changsha remains an unfulfilled vision amid problems with building material quality and ballooning costs.

So a man who can deliver such grand constructions to the market as planned stands out. Wang Jianglin, chairman and founder of Dalian Wanda Group, one of the biggest and most talked-about property companies in China right now, is such a figure. His Wanda Plaza shopping malls are ubiquitous in big cities and his firm is taking on Hollywood with a US$2.6 billion buyout of US cinema chain AMC and a planned US$8.2 billion investment into a film complex in the northern seaside city of Qingdao.

At a lecture on Saturday at the China Europe International Business School’s (CEIBS) Shanghai campus, Wang narrowed down some of factors that have led the company to take on larger-than-life projects like the one in Qingdao. To Wang, the difference between success and failure has simply meant “walking the walk” with the works he takes on. That is to say, meeting or beating project deadlines.

Wang said meeting the deadline for projects has been one of the most important ingredients for building what is now among China’s most valuable property development companies. By completing massive commercial and cultural projects on or before the originally set date, Wanda has elated customers looking to buy space and, perhaps more importantly, ingratiated itself with local governments eager to stimulate business and generate tax revenues.

Wanda isn’t a listed company but Wang says it has grown 30% annually for the past eight years. Forbes named Wang the richest man in China last August. With a net worth of US$14.2 billion, he was the world’s 128th richest person in 2013.

Wanda’s track record on some of its latest projects is solid – amazing by the measure of some local officials. The government of Guangzhou pressured Wanda to build, market and open the 400,000 square-meter Baiyun Wanda Plaza before the start of the Asian Games in November 2010. That gave the company 11 months to complete the massive project. To the surprise and delight of cadres in the city, the doors of the mall swung open in October, a month before the major sporting event.

“One official [at the project in Guangzhou] thought that Wanda must be operating like an army, where people who don’t meet their targets are whipped,” he said jokingly.

Before breaking ground on a new project, the company often holds what Wang called a “town hall” meeting where information, including the opening date, is distributed to potential customers, mainly the owners of businesses that plan to buy space in Wanda’s malls. If customers know when a project will open, they can organize labor and products accordingly. That can make a big difference for a mall that opens at the end of China’s lunar year, when hundreds of millions of people return to their hometowns, draining labor markets for more than a week. “A lot of shop owners have become very loyal to us … On the opening day, 100% of shop owners can exhibit their products in our shopping malls. In tens of years, we have never seen one delay,” Wang said.

Opening a multibillion-dollar project in a country known for bureaucratic obstacles and delays is no simple task. Wanda keeps tight central authority over its many regional projects. The company does not allow its regional projects to adopt their own financing systems. Managers must adhere to a highly centralized plan. A strong reward and punishment system for the people responsible for raising these massive developments has been key to making sure the projects finish on time, Wang said.

“It’s easier said than done,” he said. “Everyone wants to set up a reward and punishment system but it takes courage to implement it.” Courage might mean taking down one of your top executives.

Wang has taken a hard line against the kind of malpractice that often slows other Chinese projects, namely self-interest at a managerial level that can lead to inefficiency and poor quality. He spoke of an executive vice president who was tasked to take bids for building materials for a project. Instead of looking to the top industry players, the vice president planned to source cable from a company on the verge of bankruptcy, a transaction rife with corruption. He was fired after an internal investigation.

Wang said he’s tried to eliminate the loyalty-above-all-else mentality from his internal business in exchange for a philosophy based on structure. Many Chinese companies build their business around family and friends with the hope that they won’t be betrayed. At the same time, deadly family feuds still make headlines in the country. Wang said he’s kept his family and friends out of Wanda, if anything for the perception of transparency. To him, loyalty and trust are fleeting. “When you’re faced by a very beautiful girl, your loyalty might disappear,” he said.

Rewards have also been for crucial to motivating employees to meet their target, and competing with clunky state-owned firms where hard work can easily go overlooked. At a project in the city of Wuhan, Wanda’s sales team was told to achieve US$1.12 billion (RMB7 billion) in sales in a matter of months. The team of 100 people came up with US$1.6 billion (RMB10 billion) in sales by the deadline, Wang claimed. Wanda handed out bonuses to those employees that were several times greater than their peers on other projects.

“In some state owned enterprises, people at the same level cannot have this kind of compensation,” he said. State enterprise, which is on the cusp of undergoing its biggest reform in 20 years, should take note. The often inflexible reward system for lowly sales people at state companies could be holding projects back.

The company’s biggest challenge still lies ahead of it in Qingdao.

The ground-breaking ceremony was dazzling. Wanda flew in film stars such as Leonardo DiCaprio and Hong Kong’s Tony Leung for the opening of the multibillion dollar film studio. But Wanda and Wang have a lot riding on the ambitious project, which is slated to open in June 2016. The sheer size of the film metropolis in a region unknown to the film industry and without the lifestyle attractions of Beijing or Shanghai will test both the company’s ability to build and sell its products. As the scale increases and the deadlines tighten, Wang is pushing his team to the limit of what’s possible while raising the bar for everyone else.

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