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▲ 2014 Subsidiary Director Empowerment Seminar, Ren Zhengfei, Hu Houkun, Li Jie and directors discuss

Huawei emphasizes empowering the front line, so there needs to be a neutral organization representing the group to conduct on-site comprehensive supervision at the front line. This is the mission and responsibility of the board of directors of Huawei's subsidiaries.

Since 2012, Huawei has vigorously promoted the establishment of boards of directors of its overseas subsidiaries, raising the compliance operations of its subsidiaries to a strategic level.In 2014, Huawei proposed to build a comprehensive governance platform for the boards of directors of 100 subsidiaries within 3 to 5 years, and to gradually delegate power to regions and projects through the authorization system to enhance front-line combat capabilities and the ability to meet customer needs.

The board of directors of Huawei's subsidiaries is a power body and a supervisory system representing Huawei. It supervises the internal and external compliance of subsidiaries and fulfills its supervisory responsibilities through the value of power.Therefore, the board of directors of Huawei's subsidiaries is called a supervisory board, which is essentially different from other supervisory bodies.

01 Why set up a subsidiary board of directors?

The establishment of the subsidiary board of directors is to increase the authorization to the front line and strengthen supervision. In the future, we will gradually move towards full authorization of the front line, so that those who can hear the sound of artillery fire can call for artillery fire. First of all, we need a good supervision mechanism so that the authorization will not be chaotic. The authorization to the front line is mainly the decision-making power of the battle, so that they can organize the charge and call for artillery fire in a timely and accurate manner. However, the right to dispose of the results of the battle (contract effectiveness, budget, accounting, etc.) may be handled by the agency twice during the service because the matter is no longer urgent.If we cannot establish a good subsidiary board organization, we cannot fully delegate power to the front line.

How many shells are needed to capture the city wall? Now the rear authorities need to approve it. The front said, "I need nine shells," and the rear said, "Six shells are enough." In the end, after six shells were fired, only half of the city wall collapsed. The charging troops had to climb this half of the city wall, and blood flowed like a river. In the future, authorization will be given to the front-line combat troops as many shells as they want, and the accounts will be settled after the battle. We can count the shells for the final settlement, "I was given nine shells, but there were only three shells. Where did the remaining six shells go?"Although this authorization mechanism cannot be achieved now because end-to-end project management has not yet been realized, it will eventually reach this step in the next 5-10 years.

02 It reflects the "power value"

1. The subsidiary supervisory board of directors supervises the internal and external compliance of subsidiaries, and gradually extends from the current supervision of external compliance to internal compliance.Subsidiaries must pay attention to both internal and external compliance, and fulfill their supervisory responsibilities by examining risks and mechanisms.

Supervision focuses on internal and external compliance. Through due diligence and interviews, we can see what risks the subsidiaries have, what loopholes there are in the mechanism construction, and whether the management has managed themselves and their subordinates well and established a good mechanism.BCG violations, business fraud, organizational atmosphereAs a starting point, the purpose is to build and prevent, rather than directly manipulate. The goal is to discover problems, expose problems, remind management to eliminate loopholes and promote the optimization of mechanisms.

First, look at the risks：First, we need to scan high-risk areas and obtain input from several aspects: first, the output of audit, internal control, HR, legal and other departments; second, previous cases in the region, which problems are frequent? Third, combined with the identified key risk areas, we will sort out the risk scenarios in these areas.

Second, look at the mechanism: Through the risks and loopholes discovered, we can see whether the subsidiary management is effective in implementing the group's policies, whether it has established effective processes and a dam for subsidiary supervision, whether the education, management, investigation and punishment laws have been implemented, and whether there are loopholes and deficiencies in the mechanism, and remind the management to improve.

2. The unique value of a subsidiary supervisory board is to conduct comprehensive on-site supervision on behalf of the company at the front line.

Firstly, why is it called a subsidiary board of directors instead of a department?The subsidiary board of directors is not a department, but a power body. The tentacles of supervision should be deep and wide. If supervision is not strong, we should say "we need to strengthen supervision". What if no one is going to strengthen supervision? You should write a report asking them to strengthen supervision. If they still don't do a good job and problems arise, you should report to the higher authorities with an accountability report. The subsidiary board of directors is not a replacement for the functional departments in every detail.

The subsidiary board of directors also has the power to recommend outstanding cadres and the responsibility to impeach cadres. You can also make recommendations for the promotion of employees you think are particularly outstanding, and let the regional department refer to them; you can also make suggestions for employees you think are particularly bad. The subsidiary board of directors should be established first, and when the work goes a step further in the future, it should have the right to propose, evaluate and impeach cadres.

Second, the subsidiary's board of directors represents the company in conducting comprehensive on-site supervision at the front line and is an authority.Audit, inspection, internal control, OEC, legal affairs, etc. are all executive agencies, and they must support the subsidiary board of directors to do a good job of supervision. The subsidiary board of directors embodies the "power value". It is not to compete with these systems for work or divide work, but these systems must be responsible to the subsidiary board of directors. However, this cannot be done at the moment, so a "dual track system" is implemented. These systems report to both the business line and the subsidiary board of directors, but some aspects may be reported to whom more important, and some aspects may be reported to whom less important. At present, the business line still has more weight, but it will gradually move towards the subsidiary board of directors. The power supervision of the internal audit department is vertically led, but it is transparent to the group supervisory board.

The subsidiary board of directors is to exercise supervisory power. I just want you to move forward slowly, crawling forward, and not to move forward too fast all at once.Corporate change cannot be like a revolution, where the sands must be washed away by the mighty waves. Otherwise, the company's organization and operations may be destroyed.

03 How to build a good subsidiary board of directors?

First, you need to focus on one or two countries as pilots, truly establish a subsidiary board of directors, and learn from the experience. A subsidiary board of directors can be composed of five full-time directors of Huawei employees, three business managers, and two to three external directors. You need to thoroughly dissect the country, and then split the five full-time directors to serve as directors in other countries.Only by taking the key points and combining the key points with the whole can we do this job well.

Under the current situation of Huawei, because the full-time directors are not competent enough, a board of directors must consist of at least 5 full-time directors to be able to discuss and consult, and people who really understand the law must be added as crutches. If you spread the directors too thin, they will not know how to do it, and there will be no one to discuss with, and in the end they will just do superficial work, so at least 3-5 full-time directors are needed to form a fist. One subsidiary board of directors has 5 full-time directors, and one full-time director serves as a director in 5 countries.These five full-time directors form a core team to supervise a country. One full-time director is transferred to another country, and then 1-2 new people are added. With the basis of mobility, personnel are continuously circulated.This kind of cyclical training and growth is a very important part of realizing the transformation of the operational functions of representative offices and regional departments. We must learn how to make the transformation.

The subsidiary board of directors should look at the process from outside the process, focus on internal and external compliance management, and provide advance reminders and post-event management. The process has been authorized, and you should look at it from outside the process: Is it compliant internally and externally? Is the operation method appropriate and mature? There are many ways to do a good job of advance reminders and post-event management.The subsidiary's board of directors must establish a regular operations management system.The CEO of a subsidiary company is not only responsible for compliance, but also for operations. If he always breaks the rules during operations, then he is no longer needed. If the performance is not improved, the last one should be eliminated every year. Now we have established regular operations through empowerment. The frontline combat troops should get rid of some burdens as much as possible and focus on improving combat capabilities.The rear must ensure the combat capability of the front and leave things that the front should not fight for to be managed by the rear.This is management reform.We need to both empower the frontline and seize powerHow to do it? We have no experience now, and Huawei University has no experience either, but Huawei University has some scattered forms. As long as we use these forms to fight, we will gradually systematize it and become a modern combat in ten years or more.

The establishment of a subsidiary board of directors is a long-term goal. Reform methods can be identified and explored, and the criteria for success are to produce more food while complying with regulations.Huawei's future business model: The executive board is the company's highest decision-making body, the full board of directors is the restraining body, and the rotating CEO is the company's highest leader during his or her tenure; President Sun and I are figureheads and exercise veto power; the board of directors leads EMT/regional organizations at all levels to complete combat missions, and operations are completed by a vertical system.

Our supervision system is still a non-process organization. How can the construction of the subsidiary board of directors operate outside the process? How can we skillfully integrate into the operational team and have an impact on the process? These are all things you need to explore on your own.Because you are from the front line, your words are the most powerful. We have only one standard: produce more food and do not violate regulations.

The board of directors should be continuously empowered. The subsidiary board of directors should first do compliance management. They should find cadres from employees who are good at producing food and good at compliance management. At the same time, they have the right to propose, review and impeach cadres, but not the right to approve. If the directors think which cadres are good or bad, they can write a report and send it to the management team. This is the start of the review. The directors of the subsidiary should not rush to impeach cadres. They should first learn to review and then carry out impeachment.

An important criterion for assessing whether the board of directors of a subsidiary is performing well is whether the subsidiary under your management continues to grow effectively.The assessment is very simple. What we want now is food. If we don’t produce food, we will be rejected.

04 The subsidiary board of directors is the strategic resource pool of the "general"

The water from the Himalayas can flow to the Amazon River. The district association should strengthen the circulation of cadres. If one deputy representative is transferred away, a large number of people can be promoted. Now many people want to give you outstanding members.In the past, everyone wanted to keep the lid on it, thinking that "one general's success is the result of the sacrifice of thousands of soldiers." If there is no mobility of cadres in your area, the ability will stagnate.

The subsidiary board of directors is actually a resource pool of "generals" and a strategic reserve for subsidiary governance. The film association and the subsidiary board of directors should be a team with one mind, and the film association should select some cadres from the regional department to supplement the board of directors.Currently, a large number of our cadres are from technical and sales backgrounds. They do not understand corporate governance and are local cadres. We need to transform them and put them on the board of directors of subsidiaries to learn business management and how to govern the company.Allowing you to serve as directors is not a cadre elimination, and the subsidiary's board of directors is not a retirement institution.

In the future, the company may move towards the IBM model overseas, with the representative office being a platform organization and the operational organization being the system department. In this way, the representative office may become a subsidiary, responsible for public relations, legal compliance, management...The directors of a subsidiary represent the company and the capital side to manage the subsidiary. As the company's highest-level cadre reserve, after working as a director for a few years, they will learn local business management and have a global perspective. They can also choose to return to the front line and return to the regional department as president or representative; they can also choose to continue to serve as directors on the board of directors of the subsidiary. In the position of director, you must learn to think, think hard, and become a thinker.

In the future, representatives of representative offices, regional managers and district managers of regional departments will all require work experience on the subsidiary board of directors as a prerequisite for their qualifications.Of course, it is not required today, but a recycling mechanism will be established in the future.

The budget of the subsidiary board resource bureau and the budget of the relevant expert team of the investment management department that supports the operation of the subsidiary board of directors are included in the group alliance like the heavy armored brigade and major project department, which eats up the empty expenses. Regarding the work promoted by the board of directors, do not make a systematic report in a package. If there are any specific problems, report them one by one and solve them.

05 Subsidiary directors should strengthen their study of methodology

The directors of subsidiaries should turn around, strengthen their learning of methodology, and keep pace with the international standards. The directors of subsidiaries should not only have the ability, but also the qualifications. Nowadays, young people in their twenties are more educated than the old village chiefs, but why can't they lead the village? Because they have no qualifications.Having knowledge and culture does not entitle you to manage the world. It is possible that people do not meet each other on the Internet, but people need to meet each other. It is not possible to manage without qualifications, so we need to select qualified people to become directors.I am not asking you to review and approve the process, and don’t hold on to power too tightly, otherwise you will become the village chief again. If you think that only those who carry a gun to the front line have power, then I think your understanding is biased. Of course, you must also follow the grassroots combat procedures in your handling. In the future, we will cut off the "hands and feet" of the rotating CEO, leaving only the "head", and he will become a thinker; soon we will also cut off the "butt" of the Chief XX Officer, let him look at the process end to end, bear the end-to-end process responsibility, and become a strategist. The generals fight in the war, and below them are the organizing generals of the process.So don’t think that generals are the highest form of organization. From this perspective, everyone must first completely change their thinking.

Directors need to learn methodology, and more importantly, learn financial analysis and how to read financial statements. We hold this meeting today to empower the candidates for full-time directors. Directors are commanders and representatives of the capital side. They have great power and need to master methods. We choose Western teachers to empower you. We hope that directors can strengthen their learning so that we can master many skills.Don't think you have won the battle. The past victories were achieved by Huawei's waste., can we stop wasting from now on? You can see the various problems of compliance management through financial statements; to keep pace with the international standards, you need to have a broad vision.

We don’t know whether there is a most suitable subsidiary board model, so we need to have full discussion and continuous communication.We can pilot this in one or two mature subsidiary boards, explore and accumulate successful experiences, and then gradually promote it. In the future, we can establish a WeChat platform for subsidiary directors, so that everyone can share experiences and lessons. We will not step on others just because they made a small mistake, nor will we promote it universally just because it is successful. Only through consultation and exploration can we make progress.

Last time, I told Li Jie to find a quiet and comfortable place to convene full-time directors for a four- to five-day empowerment seminar. Let people relax, discuss, and activate everyone's emotions before going to the battlefield. After the full-time directors are empowered and leave the resource pool, I can review their qualifications and submit them to the Human Resources Committee for record.

Huawei lacks strategists and thinkers because we all come from "The Battle of Shangganling". We like to hold a gun in one hand and a manuscript in the other. We like to hold power in our hands. We always look down and do not like to be thinkers.We need some people to look up at the stars, drink a cup of coffee to absorb the energy of the universe, and then become thinkers and strategists. We need people who can think about the overall assets and structure management from the perspective of the company. This is the leader.

Subsidiary directors should combine company requirements and regional input, analyze frequent regional cases, interview regional supervisors and employees, sort out regulatory priorities, make adequate preparations, and then conduct field research. Interviews can also include external customers, suppliers, partners, and other stakeholders.The interviewees do not need to prepare any materials, and the interviewees and the interview contents can be kept confidential to encourage them to speak freely. In this way, the directors can see what the management cannot see, hear what the management cannot hear, and hear the "truth".Directors should watch more, listen more, and think more. They should not be in a hurry to express their opinions, and should say less if they are immature. They should fully discover, identify, and report problems. They should not endorse or sing praises for the regional departments. There is no need to take a bullet for the CEO.

The directors of subsidiaries should personally conduct investigations, read statements and reports, etc., understand the real situation, and learn how to write investigation reports. Guo Ping's report "The headquarters must serve and support the front line. It is incorrect to always ask the front line to prove that "your mother is my mother"" is a model. You should learn from it. Investigations do not necessarily have to reflect all problems. It is also good to reflect a local problem.

06 Relationship between the Subsidiary Board of Directors and the Supervisory Board

First, the Supervisory Board and the Legal Department must develop a compliance plan to address the problem from an institutional perspective, focusing on construction and prevention.The compliance plan formulated by the Board of Supervisors is more inclined to prevent and control risks, while the compliance plan of the Legal Affairs Department is more about complying with external regulations. Of course, the two can also overlap. Don't spend all your energy on catching "bugs". After catching this round of bugs, if the system construction problem is not solved, the next round of "bugs" will appear.

Second, the company’s Dali meeting determined that the Supervisory Board would go vertically downward, starting with internal and external compliance, and deepening supervision step by step.The Board of Supervisors starts with establishing internal and external compliance, strengthening the supervision and empowerment of cadres and establishing rules, and going deeper step by step. If the Board of Supervisors does not participate, it will not know the cadres of the subsidiary, nor the business of the subsidiary, so how can it supervise well? The subsidiary board of directors and the Board of Supervisors work together to strengthen the supervision of the cadre cycle of the heavy armored brigade, and the Board of Supervisors must participate.

The Board of Supervisors will begin to assist the Subsidiary Directors’ Resources Bureau and the Investment Management Department in establishing the Subsidiary Boards, which will be directly managed by the Board of Supervisors in the future. The Investment Management Department and the Subsidiary Directors’ Resources Bureau should strengthen the empowerment of directors and increase the number of full-time directors in the Subsidiary Directors’ Resources Bureau.Whenever a supervisor is transferred to another position, he or she must go to the Supervisory Heavy Armored Brigade to "take a bath". Then, those cadres who may continue to move into administrative management positions can also work on the board of directors of a subsidiary for a period of time. This is a two-way flow.