Summary of Key Points
At the beginning of 2026, industry leaders in the food sector, Wangwang, and the home furnishing sector, Oupai, both announced plans to cut staff and reduce costs. However, their financial reports revealed an awkward reality: Wangwang’s revenue increased, but its profits decreased (revenue rose by 3.8%, while net profit fell by 11.5%); Oupai experienced a decline in both revenue and profit (revenue dropped by 8.94%, and net profit fell by 23.18%). The problem lies not with employees being lazy, but in the deep-seated inefficiencies of their organizational structures—such as redundant pyramid-shaped hierarchies, budget inertia, and ineffective incentive systems. Simply cutting staff is a form of “organizational compression” (a one-size-fits-all approach). What’s truly needed is “organizational refinement” (targeted elimination of redundancy and activation of effective mechanisms) to allocate resources to those who actually create value.
Detailed Analysis
1. Cutting Staff, but Losing More Money? The Money Is Leaking Here
- Wangwang: Talking About Downsizing, but Actually Expanding
In the 2025 fiscal year, Wangwang’s revenue reached a new high, but the growth in distribution and administrative expenses was several times that of its revenue (distribution increased by 16.9%, and administration by 11.4%). The company also added 1,034 employees, with total compensation rising by 8.9%. It’s like saying you’re on a diet while secretly snacking—downsizing has become a mere slogan, while the money is being spent on redundant departments (organizing staff by product has led to increased bureaucracy and expenses).
- Oupai: Really Cutting Staff, but Not Solving the Problem
Oupai reduced its workforce by 6,164 people over two years, and both costs and expenses decreased. However, profits still fell. The reason is that “revenue is being masked as costs, and costs are being disguised as expenses”: to boost revenue, more money was spent (e.g., on promotions), which then turned into obscure “overhead costs” (such as management fees with unclear purposes). It’s like cutting vegetables vigorously only to find that the pipes at home are leaking—reducing staff doesn’t solve the problem if the underlying flaws in the system remain unaddressed.
2. Don’t Blame Employees for the Waste; Organizational Design Is the Real Culprit
When companies suffer losses, they often blame employees for being lazy. But the root cause lies in the inherently wasteful pyramid-shaped organizational structure:
- There are too many people in middle and back-office roles who do not directly interact with customers, so they don’t feel the pressure. Their best strategy is to request more resources and tell grand stories; having resources gives them power, but whether they can produce value is secondary.
- Budget inertia: Companies use “incremental budgets” (spending 1 million this year and increasing it by 10% next year) rather than “zero-based budgets” (re-evaluating each expense). Zero-based budgets threaten existing interests (e.g., cutting a department’s budget).
- Management expenses are a black hole: they are complex and difficult to measure, such as office renovations and team-building activities. The money is spent without knowing if it’s effective. It’s like driving with the engine running idle—there’s a lot of noise, but no progress.
3. Is Downsizing “Compression” or “Refinement”? Don’t Cut the Vital Parts
Many companies resort to blanket downsizing (organizational compression), such as allocating cuts based on departmental targets. As a result, the frontline sales staff (the “muscle”) are cut, while the middle and back-office employees (the “fat”) are left behind, making the organization less efficient. True “refinement” involves:
- Targeted Elimination of Redundancy: Cutting positions that do not add value, such as unnecessary supervisors and duplicate processes.
- Three Indicators of Waste:
- Flatness Index: A value below 1 indicates too many management positions (e.g., many “managers” and “directors” without actual output).
- Proportion of Frontline Staff: Less than 30% of employees directly interact with customers, meaning most are working behind the scenes.
- Organizational Fat Ratio: More than 30% of staff are not involved in value creation.
Oupai claims that “if there’s no value, there’s no need for the position.” However, if cuts are simply allocated based on targets, it’s still a form of “compression” rather than “refinement.”
4. Ineffective Incentives: No Motivation to Work Hard
Data from Muxing Consulting shows that the “actual incentive effectiveness” in Chinese companies is only 5.01%—only 5.4 out of 100 points in performance evaluations lead to real changes in compensation. This means that hard work may earn you 70 points, while slacking off earns 60 points, with little difference in income.
In such a situation, employees’ best strategy is to be lazy, cater to leaders, and form cliques rather than put in effort. As a result, the organization becomes bureaucratic, and cost-cutting and efficiency improvements become mere slogans because no one is motivated to work hard for things that don’t bring benefits.
5. The Right Approach: Allocate Resources to Those Who Create Value
Reducing costs and increasing efficiency isn’t about cutting without end; it’s about eliminating waste and investing in the right areas:
- What to cut? Redundant middle and back-office expenses (e.g., unnecessary meetings and ineffective team-building activities).
- Where to invest? In those who create value (e.g., frontline sales staff and key R&D personnel).
To achieve this, the organization needs to be restructured: for example, flattening the hierarchy so that middle and back-office staff can interact directly with customers; using zero-based budgets to eliminate ineffective spending; linking incentives to performance (e.g., higher rewards for high performers).
It’s like fixing a leaking pipe at home and using the saved money to support those who are working hard.
Final Conclusion
The problems at Wangwang and Oupai are not about who should be laid off, but about the mechanisms in place that determine which employees can succeed. Simple downsizing is just self-comfort. Only by activating the organization and allocating resources to those who create value can companies truly withstand challenges.
(Note: The reference to the 2026 forum in the original text is an advertisement and has been omitted.)