Alibaba Group Holding’s recent decision to split its USD257 billion business into six independently-run units has been largely welcomed by investors, but internally, some employees are worried about the future of less profitable departments and job security, the South China Morning Post reports. The six entities would each report to their own CEO and be responsible for their own funding. The units include cloud computing, Chinese commerce, smart logistics, local services, global business, and media and entertainment. “When the kids are grown, they need to leave home to face the market by themselves,” Alibaba CEO Daniel Zhang told employees in a widely-circulated video. “I hope there will be multiple listed companies emerging from the Alibaba system, and that they will continue to nurture their own sons and daughters, and cultivate more listed companies.” Alibaba’s share price shot up in both New York and Hong Kong after the announcement of the restructuring plan.
Being spun off into a smaller organization could deprive employees of a sense of belonging to a bigger group. The restructuring might work out best for the domestic commerce unit. Over two-thirds of Alibaba’s recent revenue came from China-based e-commerce, while the other five units each generated 3% to 8% of the group’s sales, according to Scott Kessler, global sector lead at business consultancy Third Bridge. Another employee expressed concern about job losses, as CEO Zhang has said the company would “lighten” its middle and back-office functions. In 2022, Alibaba axed almost 20,000 jobs as China’s Big Tech companies streamlined their businesses and rein in costs under a regulatory crackdown and slowing economy. One employee said breaking down Alibaba into smaller units would not solve the challenges that it currently faces. Collaboration has already been difficult between teams, and the restructuring could make communication even harder.
