Summary of Key Points
Recently, SF Express has made adjustments to the compensation for its headquarters staff in terms of their functional roles: 15% of their annual cash compensation has been changed from a fixed amount to a quarterly performance-based payment. This change will have little impact on frontline couriers and employees at the branch level. This is not merely about reducing costs (the overall compensation expense has slightly increased, and the income of high-performing employees may actually increase); rather, it is a continuation of organizational reforms carried out over the past two years. SF Express has already delegated operational authority to the front lines, shifting the headquarters from a “management-oriented” to a “service support-oriented” role. This adjustment is intended to align the income of headquarters staff with the operational results of the front lines, addressing the issue of how to measure the value of the headquarters after delegating authority. However, it also presents challenges in balancing short-term performance with long-term work objectives.
Detailed Explanation
1. Who is affected by this compensation adjustment, and how?
In simple terms, only the headquarters staff in office-based functional roles are affected; frontline employees will not see any change to their compensation. It’s not about a reduction in salary but rather a shift from a fixed payment to a payment based on performance.
- Scope: The adjustment applies only to headquarters staff in functional departments such as finance, IT, HR, and strategic planning. Frontline operators, including couriers and branch managers, will not be affected.
- Method: 15% of the annual cash compensation will be distributed quarterly instead of monthly on a fixed basis. For example, if a headquarters employee has an annual fixed cash income of 100,000 yuan, 15,000 yuan will be distributed over four quarters, with the amount per quarter depending on their performance (for instance, whether the IT team’s system has helped the front lines save costs, or whether the HR team has recruited employees who can generate revenue).
- Additional Information: SF Express indicates that the overall compensation expense will increase slightly, and the income of employees with performance above 10% will be higher than before. In other words, those who perform well will receive more, but this depends on the specific performance indicators set by the company (which have not yet been made public) and the number of employees who meet these criteria.
2. Why target the headquarters first, and not frontline employees?
The main reason is that the value of work at the headquarters and the front lines is measured differently. The current role of the headquarters needs to be aligned with the operations of the front lines.
- Value of frontline employees is easy to measure: The volume of deliveries, delivery times, and complaint rates for couriers, as well as the damage rate and operational efficiency of branches, are all directly observable, and SF Express already has established incentive mechanisms (for example, in 2025, they increased the compensation for delivery personnel).
- The value of headquarters staff has changed: Previously, the headquarters was responsible for issuing directives (such as setting product prices and scheduling). Now, their role is to provide support (developing systems, establishing rules, and training talent). The value of their work is not directly reflected in the volume of deliveries but in the impact on the front lines (for example, whether the IT system has improved decision-making or whether the HR team has helped generate revenue). If they continue to receive a fixed salary, headquarters staff may not be motivated to focus on the front-line’s operational results. This adjustment aims to link their income to the front-line’s performance.
- Low risk, small scale: SF Express’s annual labor cost is nearly 130 billion yuan, so the impact of changing the compensation for headquarters staff is minimal. Testing this approach first is a more cautious strategy than altering the compensation for tens of thousands of frontline employees.
3. This move was not made suddenly; it was preceded by two years of preparation
This compensation adjustment is the final step in SF Express’s “activation of operations” reform. The company has already taken the following actions:
- 2024: The headquarters shifted from a “management” role to a “service” role. The headquarters was renamed “Business Unit,” with a focus on developing strategies, creating system tools, and training talent, allowing regional and business units closer to customers to make decisions (such as setting prices and allocating resources).
- 2025: The focus of incentives shifted from “volume” to “value.” After delegating authority, the front lines might have cut prices to increase volume, leading to a decrease in average revenue per delivery and gross margins. Therefore, SF Express changed the focus of incentives from volume to profit and quality. Data from July 2026 shows that although the volume of deliveries decreased by 3.78%, the average revenue per delivery increased by 6.64%, indicating that the new approach is effective.
- 2026: Compensation is now linked to operational results. After delegating authority and responsibility, the company is now linking individual income to the business outcomes. The 15% of compensation for headquarters staff to be linked to quarterly performance ensures that everyone is accountable for the front-line’s performance.
4. What potential issues might arise?
The biggest challenge is that many of the headquarters tasks have long-term implications, while quarterly performance evaluations are short-term.
For example:
- IT staff: They may prioritize implementing quick-to-deploy small features (such as optimizing reports) over long-term infrastructure improvements that may take half a year or a year to complete but offer greater cost savings.
- Risk control staff: They may loosen the review of high-risk orders to avoid affecting front-line performance, which could lead to more orders in the short term but potential issues in the long term.
- HR staff: They may focus on the number of recruits and the speed of onboarding, neglecting the retention rate and performance of employees over the long term.
This is the so-called “multi-task incentive dilemma” in economics: if only short-term, easily measurable results are rewarded, employees may neglect important but less tangible long-term tasks. SF Express needs to find a way to set performance indicators for headquarters staff that encourage them to focus on both short-term and long-term goals.
5. The ultimate goal of this adjustment
SF Express’s goal is not to save money (the overall compensation has increased). Instead, they want to demonstrate that the work of headquarters staff can help the front lines generate revenue or reduce costs. If the change merely converts fixed salaries to variable payments, it would be a routine compensation reform. However, if the systems, rules, and talent developed by the headquarters truly improve decision-making, reduce costs, and increase profits for the front lines, then the organizational reform will be successful.
The company will monitor three key indicators:
- Whether high-performing employees’ incomes actually increase (if not, the reform will be ineffective).
- Whether the management expense ratio decreases (whether the resources invested by the headquarters are generating value).
- Whether there are appropriate evaluation methods for long-term efforts (such as IT infrastructure and talent development) that cannot be solely based on short-term performance.
In summary, SF Express’s adjustment is an attempt to ensure that the value of the headquarters is effectively realized after delegating authority. Whether it is successful will depend on whether the headquarters can transform from a “back-office manager” to a “front-line enabler.”
(End of the article)
(Note: The years 2025 and 2026 mentioned in the article are hypothetical dates used for illustrative purposes and do not represent actual years.)