Article | Yu Yangyang

Editor | Yang Xuan

Tencent (HK.00700) will continue to cut staff in the second half of this year, kR learned from multiple sources familiar with the matter.

According to 36KR, Tencent's organizational optimization plan is made by the group in a unified way, but the pace of each BG is different. Among Tencent's major business groups, CSIG (cloud and smart industry business group) and PCG (platform and content business group) are the hardest hit areas for layoffs in the first half of the year due to their large employee base, especially PCG's overall layoff rate may exceed 10%.

Among other business groups, IEG (interactive entertainment business group), CDG (enterprise development business group), TEG (technology engineering business group) and WXG (wechat business group) have some business teams completed 10% or more personnel optimization during march to June this year, especially IEG's recent action is more obvious.

36KR learned that in the second half of the year, the above BG will continue to lay off staff on the basis of the first half of the year. Among them, PCG will lay off 40% to 50% of its business segments, and a few businesses will face the overall reduction. Some teams in the remaining BGS are also about to perform optimizations.

According to 36KR, Tencent's overall layoff plan is formulated by the HUMAN resources department based on various opinions. After receiving the layoff plan, the department head (usually GM) will assign the layoff target to the subordinate (usually director level), and the director will make the specific layoff list. Or in the reduction target formulated by GM, a director's team is eliminated as a whole, and the business is cut as a whole.

36 krypton to Tencent respect for confirmation, the other side said no comment.

A person familiar with the matter told 36kr that PCG's job cuts in the first half resulted in overall cost savings of around 3%. Senior management is not satisfied with the execution of the job cuts in the first half of the year, and believes that the expected cost optimization target has not been achieved. "In the first half of this year, we mainly laid off junior staff, even fresh graduates, while middle and junior managers and senior staff who did not act as employees moved less."

The second half of the year will see more cuts from management down. One laid-off PCG worker told 36kr that he received layoff notices in early June. Several people were laid off, including the team leader, and the entire team was no longer in existence. He knows teams around him who were laid off at the same time had similar cases where the boss and the subordinate were laid off at the same time. A CDG source also told 36 kr that he had heard of similar plans.

PCG is the hardest hit area of Tencent's layoffs, the overall rate of layoffs in the first half of the year has exceeded 10%, and the layoffs are continuing. Tencent Sports eliminated six business groups at the end of May, according to a statement issued by Tencent. According to 36 KRYPton, Tencent news and QQ departments continue to lay off employees on the original basis recently. Just yesterday, Tencent News business departments opened a new round of layoffs ranging from 30% to 50%.

Wechat business group is Tencent's most core, and the expansion of the most cautious business group, even so, its part of the team has recently optimized a small number of 10% of the staff, even affecting wechat in the last two years focus on the business - video number. According to 36Kr, video is not an independent business team inside wechat, but a "virtual project team" formed by the support of multiple middle and background departments. A number of middle and background teams whose main work is to support video business have recently carried out a small reduction of personnel, the proportion is about 10~15%.

36KR learned that Tencent's war investment department has also cut some staff recently, but it is not to cut the whole war investment business, but according to the company's overall requirements of "cost reduction and efficiency" to cut "negative staff" -- that is, the number of original staff exceeds the company's new HC number. Tencent's investment arm, which is part of CDG and is run by its two managing partners, Haifeng Lin and Zhaohui Li, has only about 50 employees.

Strategic investment used to be a crucial performance sector of Tencent. According to financial statements, the investment amount disclosed by Tencent in the first quarter of 2021 was over 60 billion yuan, and the outbound investment of Tencent in the first quarter of 2022 was about 21.8 billion yuan, about 60% lower than last year, and Tencent's outbound investment activities decreased significantly.

One CDG employee said he even asked his supervisor to be made redundant after learning that he had recently been saddled with a 20 per cent target.

In the first half of this year, Tencent's core game business was not significantly affected, but in the second half of the year, the game business is not immune, recently, social media also reported that IEG user development center layoffs. A person familiar with the matter told 36kr that the hr department is working on IEG's staff reduction plan for the second half of the year and will not be too aggressive.

On the enterprise wechat, all employees can publicly see the total number of employees and dynamic changes of each business group, while Tencent has recently hidden the total number of employees on the enterprise wechat.

According to public statistics, Even if the total number of employees increases by 30,000 in 2021, Tencent is still the Internet company with the highest employee efficiency in China, but it is currently at a low point in Tencent's performance. According to Tencent's first-quarter earnings report in 2022, adjusted net profit (non-IFRS) decreased by 23% year-on-year, marking the third consecutive quarter of net profit decline.

With revenue growth under pressure, Tencent must pay more attention to people efficiency and return on business investment. Ma huateng also expressed concern about controlling expenses after the earnings release: "During the challenging first quarter of 2022, we implemented cost control measures and adjusted some non-core businesses, which will help us achieve a more optimized cost structure in the future."

At the end of March this year, Tencent published an internal letter from CDG (Enterprise development business Group) on its Intranet, which all revolves around the four words "cost reduction and efficiency increase". The letter warns that every manager "must first assume operational responsibility and calculate inputs and outputs like a startup." The layoffs were under way -- Tencent's headcount rose 30 percent to 116,000 in the quarter from a year earlier, according to the company's financial results.

One employee with more than eight years of experience was even relieved when his department was eliminated altogether, along with a department director with more than 10 years of experience. He believes that given the high proportion of older employees in his department, the organization will be more creative as more older people move out of positions for younger people.

36 krypton predicted after Tencent's quarterly earnings report that "saving money" became Tencent's top priority as it could not expect growth in the short term, and there may be more measures to "reduce costs and increase efficiency". It now seems inevitable that this is happening. Just this month, Tencent reformed its employee performance management system and promotion system. Combined with these moves, Tencent's layoffs are not to stifle innovation, but to better stimulate it.