Excerpts from Mr Yu's 10-year speech at the Yangtze River Business School

In a speech to the Changjiang Business School, Yu also deliberately focused on the issue of partner-related issues, in reality, he and Xiaoping, Wang Qiang as a partner in the new Oriental, cooperation is very successful, although in the development process of the enterprise has been bumpy also had a conflict, but ultimately is a reasonable solution. Enterprises to bigger, partnership is an unavoidable problem, therefore, Mr Yu summed up the following elements in his speech, I believe that many entrepreneurs have great guidance and reference significance.

First of all, if you do it, it's best if you start at first, even if you do it for one months. For example, to do one thing, set up a company, do one thing, you first do one months, two months, the longer the better. If a company has several partnerships, it can also be understood in partnership with these friends, brothers, or very powerful characters. For me, if I'm partnering with these friends, finally, the reason is very simple, because in the university, Xiaoping is my university culture Minister, Wang Qiang is my monitor of the university, they always think they from talent to vision to ability are far above me, then why do I become a head? The important reason is that it's not like it's written in the movies. Three of us work together. But in the middle of the reality I have been working for five years. I was from 1991 from Peking University, dry to 1993 set up new Oriental, 1993 to 1995, 1995 to find these friends abroad, that time I know, if I want to do it again, must have a bunch of capable people and I work together. I also measured, through my five years of efforts, in China entrepreneurial ability than my college friends, but these friends in some aspects, including their English proficiency, the Western culture must be better than me, so this is a good combination.

When we are partners, we usually think of the simpler, we three together, one person take 33% of the shares, together into 100%, we get rich together. A year later, you will find that some people do more work, some people do less work, this time how to do? This time you have to have a mechanism, there must be a set of evaluation mechanism, the partners and people outside the partnership, how to confirm their performance.

For me, I am in this area, the last new Oriental is also a big problem. Because the new Oriental just started the so-called partnership, in fact, is household, I just put the new oriental into several plates, such as Wang Qiang dry oral, Xu Xiaopinggan Abroad consultation, I will do the exam. Finally, I took my money, he took his money, are in the new Oriental dry, this is a very loose partnership. To turn a loose partnership system into a very strict joint-stock structure is to work together, and finally there is a problem. First, who is the total number of shares? This thing to the last new Oriental in order to occupy the question of how many shares, everyone really took a lot of effort, because in addition to Wang Qiang and Xiaoping there are many other important people. Finally we divided the original shareholders, we divided 11 people, but these 11 people take the number of shares, is a big problem. We are assigned to the contribution that we have made in this field in the past, but who contributed the most and who contributed little? It really took a lot of effort, of course, the final distribution is completed, because everyone wants something to push forward.

Partners together, everyone on an equal footing, it is very easy to appear inconsistent with modern enterprise management norms, we rob each other is face, rather than rob how to do things. It took about 4 years to solve all these problems. Of course, the final result is good, we become a real joint-stock company. I realized at the time that if these people were playing inside, they would end up doing it, because there was a closed door between the partners, excluding other talented people, all the benefits were taken up, and other talented people came in without interest. So I was more intelligent when I split the shares, because they gave me a 55% stake and I was worth it. When it comes to split shares, I also want to correct the episode of Split shares in the film. In the film into the east Green a person, not for the new dream to do what things, completely in two of friends to do, and finally in the office since the words of the shares, to himself 51%, the other one is 25%, 24%, so the shares will be divided. If such an occasion were to appear in a movie, the partnership would fall apart on the same day, because the amount of the shares was based on the contribution of the person, rather than the person who said the words themselves, unless the boss is 100% shares of his own.

In fact, the new Oriental in the shares before the 100% are my own, when the shares, the new Oriental net worth of 100 million yuan, because this 100 million yuan is my input, they really did not vote. If you share the shares with them, give me the money anyway. Like, you get 10%, give me 10 million, very normal, this is the original stock price, but the small shareholders together to tell me, Mr Yu, we want to share, if you do not give us shares, we have to leave, and then can only send, the shares sent. When all the profits were taken, frankly speaking on my own one of the profits in the new Oriental development, other people's profits every penny taken back, now the goal is to expand the partnership, to be listed, if the original one year can take back 2 million, now profits a year can only take 500,000 back, When people suddenly find that income is reduced, they feel that life has not gone on, so that the profits also continue to point, the company also want to develop, that take what development, there is no development, so to the profit in the company, we have a strong dissatisfaction, because we feel that the money to separate away.

Then there is the contradiction of profit distribution, to the end they think, the new Oriental fight for two or three years, as if the stakes are also quite worthless, I said you feel worthless, you can give the shares back to me, they said not yet, you want to take the shares back, to pay money. Later, we discussed how much money to collect, our original net worth is 100 million, I still 100 million of the price recovery, you every 1% of the shares back to me, I give you 1 million, 10% to you 10 million, cash transactions, you give me the shares, I cash to shoot you, for this matter, I also from friends around 3000, 40 million yuan, my own things are not enough. As a result, they will not give me the shares after they have set the price, they say, after all, they have priced, and when we finally give it to you, you at least 1 million of the 1%, the shares will be held in hand. To the listing, now the new Oriental 1% worth 300 million yuan per share. So, there will be a lot of things going on in the middle so that you have no way to understand, but in the process of reform the mess.

In the split shares, I was more simpleton, because I was divided into 55%, this is the result of the discussion, I am more generous to take out 10% as my behalf holding shares, I took 45%, why take out 10%? Because I know the new Oriental must have Up-and, the new manager to come in, the shares are for the new shares left. This 10% left the equivalent of 10 million shares, the new Oriental listed in accordance with the 100 million shares listed, this 10 million stocks finally came out, put there, finally really attracted to the new Oriental second generation managers, I and Wang Qiang, Xiaoping three is the first generation of managers.

In the listing, we give you 500,000 shares, 1 million shares, or even 100,000 shares can recruit very good managers, now the whole new Oriental management echelon, almost all of the 10 million recruit come in, now left a development space. Later we designed a set of the next listing of the management of the development of space, and then the listing is better to do, why? Every year there are options, I apply for options every year, to the competent people, who do more, sent to who, these people will continue to get the new Oriental equity. In fact, a partnership or a business venture, it is not easy to set up an equity incentive mechanism at first, for example, there is also a violation of commercial principles in the film, because Cheng Dongqing do not want to go public, so he wanted to do not want to go on the market to pull some collaborators, he said since the words of the issue of 30% of shares, To the collaborators of the surrounding company, this is illegal, shares can be issued, but must obtain the approval of all shareholders, no one, even if you only 80% of the stock can not issue shares, you must ask the small shareholders agree, because the issue is for all the interests of all good, why to issue shares, It's because I'm offering more shares to talented people who want to do a good job, not to say they don't want to go public, more collaborators, so it's totally against commercial principles, and there are some things that are not very practical in the movie.

The actual need for such a mechanism, can not be a partnership, can also let the people inside dry slowly in the company's rights continue to increase, so there is a relatively stable body. This is my second revelation. In the middle of the reality, the new Oriental did not issue shares before the listing, because I reserved 10% just before the listing used up, after the listing opened the Open option mechanism, and no longer need me to go back to the internal issues of shares. So, everyone here, if you're in a partnership, must have a mechanism, first come up everyone divided good shares, then set up a to do the most people to do the additional mechanism, and then I have a few college students, they also partnership, I helped them design a set of additional mechanism, they have not fought today, Because at the end of each year, it will be based on who do the work of how much to carry out additional, such as one of the people who just began to account for about 40% of the shares, now has been diluted to 20%, because he accounted for 40% of the shares, in addition to the money did nothing. But the other people do there, the annual issue, the issue to the end, the original accounted for a few, a 10% of people, now has been added to 30%, because the whole company as CEO is he has been doing.

The third element must be to use different people according to different periods and stages of development. When I first started, I used the family members of the new Oriental, family members are very cheap, such as my brother-in-law, my wife's brother-in-law and so on. I am in the process of use, of course, there is no so-called modern structure, but very useful, why? Your finances can be messy, do not need to monitor your finances, every day to corrupt your money, corruption is also corruption in their own home. Work does not have to calculate time, because all are family members, but, if in such a family has been doing it will be a big problem, why? Because there is no way to tube, the enterprise will introduce a lot of people outside, your family members are in the inside, the final result is that the family members are not enough education, management experience, Finally, there is no one will have a sense of dignity, you invite whether the professional manager or teachers will be part of the sense of dignity, so this is a process. Since 1995, I have been acutely aware that family members in the new Oriental, will form a new Oriental development barrier, is because of this prerequisite, I went abroad to these university students, middle school students recruit back, they come in from talent to ability, the culture has covered my family members. So, my family members will have to retreat to one side. I belong to a typical see potential, I want to drive the family members not to go, when my mother is in the new Oriental, my wife said to go to suicide to me to see, I drove the wife's brother-in-law to drive away, the wife said six months do not sleep with you, I think this is very troublesome. But, in the end, I have to let them go, they do not go, new Oriental no way to take the next step. Finally, I made my college and my classmates turn upside down and asked me to take the business to the right track, and the first step was to clean up the family members. I took advantage of the strength of these college and middle school students to clean up my family members out of the new Oriental.

Of course, the clean-up process is painful, but I know not to clean up, there is no development now, so must be cleaned up. Of course the price is also very heavy, but at that time I can afford to pay this price, because many are the peasant brothers, give them a 100,000, 200,000, 300,000, and give some stock, they go. This is a process. I used a bunch of my peasant relatives and brothers to help me to do the school, and then gave them a good placement, let them go, and then used the help of the students back, slowly build a modern structure. Therefore, the new Oriental now has no family members, as long as there is a blood relationship three management cadres above the found even cadres together expelled. There has to be a transformation to do your own thing according to the different stages of development.