Why JD.com once fired an employee over $1.50

The following is an edited excerpt from The JD.com Story: An E-commerce Phenomenon by Lhi Zhigang. The excerpt is provided by LID Publishing. You can buy a copy of the book here.

In one of JD’s product divisions, a story has been told again and again over the years. Once, a JD employee was meeting with a supplier in JD’s office. A bottle of water, bought by the supplier, was at their side. Wang Xiaosong, the president of JD Fresh, deliberately passed by the employee to see whether he would drink the supplier’s water. Passing for the third time, he saw the employee open the bottle and take a drink.

Afterward, Wang brought this matter to the table and criticized the employee. When I first heard this, I thought it was unnecessarily harsh. But as I learned more about the company, I realized that JD’s efforts to combat corruption had gone beyond obsession and could almost be called paranoid. This comes from founder Liu Qiangdong’s hatred of corruption, traceable back to the evils he witnessed in his boyhood village.

“If the company suspects someone of embezzling 100,000 yuan (US$14,600),” Liu said, “we will investigate and dismiss the guilty employee, even it costs us 10 million yuan (US$1,460,000) to do it. Some people say that this is a vengeful mentality. It is not that I am merciless, it is that what you’ve done is completely contrary to my values and has subverted my dreams. As a kid, I was shocked by corruption’s disrespect for human nature and human equality. I cannot tolerate corruption in my life. I won’t accept it and nor shall you, unless you choose to leave the company.”

The purchasing and marketing departments were always the ones that could be most susceptible to corruption. These employees had pricing power, procurement power and settlement rights. It would have been easy for someone so inclined to change the data in the system and hand over to the company just two indicators, sales and gross margins. It didn’t seem like a serious exposure back then, but seemed scary in retrospect.

Share the wealth to prevent corruption

Thanks to JD’s corporate culture, no really big problem occurred. In every monthly meeting, Liu would expound his ideas. And his employees believed in JD. They didn’t need to cheat to get ahead; they would have a better tomorrow by creating value through hard work. Liu liked to share.

All JD veterans held the company’s performance shares. At first they didn’t know what they were, and thought they were just pieces of paper. But they believed in Liu. It was this belief that supported them during JD’s early development. Who could tell what would happen to the company in the future?

Liu believed the first task was to establish common values with the aim of achieving success honestly. The second task was to establish mechanisms to share the wealth with employees.

Liu believed that, after working for JD for five years, employees should be able to buy a house in their hometowns. Power could lead to corruption, so the third task was to ensure that systems and technologies were in place to solve and prevent such problems. Most importantly, if a leader set a bad example, his subordinates would follow it, so management had to set good examples and keep its noses clean. The team had to always stay alert.

After more than a decade of experience in purchasing and marketing, the managerial staff could tell whether there was a problem by observing the state of the employees. The company also had to establish a training system. Many core members of the buying and merchandising team joined JD soon after graduation. The company gave them the opportunity to buy houses and cars, and to live honestly.

After crossing the red line

At JD, corruption represented a red line. However small the amount, once you crossed the line, your days there were over. JD once terminated an employee over 10 yuan (US$1.50). Any kind of cheating was prohibited. Those who asked others to punch the clock for them, or who went out on personal errands on company time, were considered dishonest and were fired.

Kickbacks are a common phenomenon in many cultures and a well-known problem in China, but Liu never tolerated them. A serious case of corruption once took place in the major appliances department. After the guilty employee was fired, Liu was determined to solve the problem regardless of the cost. He would rather suffer a temporary performance loss and transfer people from other departments to fix the problem.

JD signed anti-corruption agreements with all its partners. It also distributed anti-corruption guidelines and provided clear mechanisms for reporting problems. At JD, employees could have meals with suppliers, but they had to inform the administration department and their direct supervisor.