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Toll to enter the company. Employees who live at headquarters. Bonus of up to 30 extra salaries per year. Get to know the improbable management recipe forged by Huawei, one of the icons of China's new capitalism
Carolina Meyer, from Shenzhen

From Monday to Friday, every time the clock strikes noon in Shenzhen, a city of 12 million in the south of China, excitement takes over Huawei's headquarters, a 1.3 square kilometer area occupied by China's largest manufacturer of telecommunications equipment, with earnings of 22 billion dollars in 2009. The nearly 20 000 employees immediately leave the 15 mirrored buildings that are home to their offices and head towards one of the company's three cafeterias. The sight of that crowd walking quickly in the same direction impresses visitors. In a few instants, that bee hive of workers takes to the streets of what until then more closely resembled a university campus engulfed in the deepest silence. In the cafeterias, each employee pays about 30 renmimbis (or 8 reais) for their meal: generally rice soup with vegetables, mushrooms and pork. More than 15 000 meals are served every day to employees of more than 15 different nationalities, from Chinese to Sudanese. They eat quickly. In 30 minutes, they are already back at their desks. At Huawei - pronounced "how-a" - as in all of China, time is not wasted.

The lunch ritual finishes with a nap, of no more than 15 minutes, taken in the middle of the office on mattresses spread about the hallways. The short rest is necessary to withstand the afternoon's strong pace. No one stops producing until the end of the workday at 6pm. There are no coffee machines or snack bars at Huawei that can catch the employees' attention. "With competitors like Ericsson and NokiaSiemens behind us, we have to work twice as hard to win market share," says Xingang Lu, of China, wireless networks director at Huawei. This sense of urgency is one of the company's main characteristics after becoming an icon for China's new and different capitalism. One of the rare local companies without the government as a shareholder, Huawei has developed a management style that tries to privilege innovation - something still rare in an economy whose specialty is to copy the success of others - and which has a certain touch of meritocracy. At Huawei, as in the best American companies, everyone has goals and earns bonuses when they are met. Founded in 1988 by the engineer Ren Zhengfei, a former sergeant in the Popular Liberation Army, commanded by Mao Tse-tung, in just over two decades, Huawei has become China's most international company. Today, two thirds of its earnings come from sales to 45 telephone operators in over 100 countries. Not bad for a business that began with a 3 000 dollar loan taken out by Zhengfei to create a small PABX equipment importer. Today, at the age of 66, Zhengfei is a personality revered by his employees - even among the many who have never seen him personally. One of the reasons that made him so popular was his decision to share control of Huawei with the employees who exceeded their goals. At present, he only owns 1.4% of the company. Although he still bears the title of company CEO, a team of nine executives who jointly deliberate on the company's direction makes the decisions. "As founder and member of the board of directors, Zhengfei is present in every decision," says Kevin Zhang, global vice-president of marketing at Huawei (like many Chinese executives, Zhang has adopted a Western name to facilitate understanding by his international clients). "But our management is 100% professional." In 2009, Huawei obtained 1 847 patents, more than 11 times the number registered by Steve Jobs' Apple. Its technology is used today by more than 2 billion people in the world.

Together with companies like BYD, one of the world's largest manufacturers of batteries, and Foxconn, which produces the iPhone, among other equipment, Huawei was one of the first companies to locate in Shenzhen, as part of a "capitalist" experiment idealized by the government led by comrade Deng Xiao Ping at the end of the 1970s. There, it was permitted to import inputs from Hong Kong, just 30 kilometers away, to produce devices locally. The growing opening of the economy in following years made the demand for Huawei's equipment soar - and the company made its first billion dollars in revenues just ten years after its foundation. "We knew we would be big from the very beginning," says Zhang. "We just never imagined we could pass the European giants so quickly." Since 2004, Huawei has grown on average 30% per year - dethroning Europe's NokiaSiemens as number 2 in the world in 2009. Today, earnings leader Ericsson is 18% bigger than Huawei, but in terms of profitability, the Chinese firm greatly exceeds the Swedish company: it had profits of 2.7 billion dollars in 2009, five times more than its biggest competitor.

Huawei's international expansion counted on a "push" by the Chinese government, which created a 10 billion dollar line of credit to finance clients.

In order to achieve such extraordinary numbers in such a short time, Chinese companies like Huawei tend to share sacrifices with employees, most of whom are engineers dedicated to research and development. The half-hour lunch is just one demonstration of this effort on behalf of the company's success and - most importantly - on behalf of China's own project for global leadership. About 3 000 employees live in quarters provided by the company and for which they pay a subsidized rent of about 100 dollars - half of what would be paid for an equivalent apartment in Shenzhen. They practically never leave headquarters, in a symbiosis between work and personal life. But different from the reality at many Chinese companies, Huawei, at least in its outward appearance, is not what Americans call a sweatshop. Its quarters have a leisure area that includes a pool, sports courts and a bookstore - in a sort of limited reproduction of the Silicon Valley environment in California. Salaries paid - about 200 dollars per month for shop floor personnel - cannot be called vile according to Chinese standards. But the work shifts are exhausting, a reality frequently related to the Chinese style of work. This year alone, Foxconn, the world's largest make-to-order company, registered 12 employee suicides. At Foxconn, it is common for employees, normally migrants from China's rural regions, to work up to 36 hours of overtime per month - which is permitted by the country's laws. Over the past three years, five Huawei employees "died of unnatural causes", a euphemism found by the company for dealing with suicide. "Many executives continue working at home, or put in overtime hours, to meet their goals. It is exhausting," says a Huawei employee who asked not to be identified.

The hallucinating work pace is part of a culture that became famous among its competitors as being more capitalistic than capitalism. Nearly 80% of top executive remuneration is variable, and it can reach up to 30 additional salaries per year. Those who exceed their goals earn the right to buy shares in Huawei. Those who do not achieve their objectives are expelled - there is a tacit rule that demands dismissal of 2% of those employees with the worst performance.
Huawei's growth can be accounted for in the most part by its investments in innovation. The World Intellectual Patent Application, a United Nations agency responsible for protecting intellectual property, says that two companies have been taking turns as number 1 in innovation in the world over the past two years. One is Panasonic, of Japan, a traditional manufacturer of electronics and one of the biggest researchers in robotics in Japan. The other is Huawei. In 2009, the company registered 1 847 patents - 11 times the number registered by Steve Jobs' acclaimed Apple, which totaled 159. It was necessary to create a gigantic research and development structure to achieve this number. Last year alone, expenses on innovation reached 2 billion dollars. "Investment in new technologies has enabled Huawei to charge prices even higher than the competition," says Jouni Forsman, technology analyst at the Gartner Research consulting firm. Altogether, 45% of its 95 000 employees are dedicated to R&D, two times the number at Ericsson. Since every year China graduates a horde of nearly 2 million engineers who work for about 10 000 dollars per year - one-fifth of what they would be paid at Silicon Valley as a newly graduated professional - hiring specialized labor is not a problem. "Today, Huawei is one of China's most prestigious companies," says André Almeida, director of GSM Association, an entity that gathers the biggest cell phone operators in the world. "Although unknown by the general public, it has become one of the sector's major trend definers. Nearly 2 billion people in the world are its clients through their operators."

This international expansion began to take shape, although timidly, in the mid 1990s, in markets like Hong Kong and India. After the Internet bubble burst in 2000, the big telephony companies in Europe and Latin America began to look for solutions to reduce costs. They found Huawei. "They would offer prices up to 70% cheaper than the competitors," says the networks director for a European operator (Huawei denies it ever charged prices that low, but it admits there were differences of about 30%). The next jump came in 2004, when the Chinese government, through its development bank, made a line of credit of 10 billion dollars available to the company so its clients could finance the purchase of their equipment at interest rates near zero - and without having to make any payment for the first two years after signing the contract. With this practically impossible to refuse offer, Huawei gained clients like British Telecom and Brazil's Oi, which maintains a line of credit of 1.5 billion reais with the supplier.

This sudden growth forced Huawei to make some changes. One can be observed on the road that leads to its gates. With nearly 50 000 people passing through the company every day, the Shenzhen government decided to create a toll at the entrance. You must pay 4 renmimbis (just over 1 real) to enter. "Our headquarters is practically a city," says Zhang. "The government plans on building a neighborhood attached to the company, along the lines of Toyota City in Japan. The project should be ready in the next five years." In order to receive so many international visitors - at least ten operator presidents per month - the company maintains a fleet of 70 luxury cars, including Mercedes-Benz C-Class models, Audi A8 and BMW. The 300 square meter showroom, where it is possible to check how IP TV and very high speed Internet function in real time, has just been doubled in size. Every piece of the company - the logistics center, production line or secretive data center - is always presented by a receptionist dressed impeccably in a navy blue tailleur. It is virtually impossible to walk the company's hallways without some sort of escort.

Outside China, Huawei's growth has run into some resistance in recent times, especially due to the close ties Zhengfei, the founder, maintains with the Chinese government. Company growth is suspected to be secretly financed by Treasury funds. "Since it is a private company, no one knows for sure where so much money comes from," says a competitor's executive. "Nor what the Chinese government's real interests would be in supposedly financing this growth." In 2008, Huawei had to stop its move to purchase the 3Com computer manufacturer after facing fierce opposition by the American Senate, which was fearful the company could have access to technologies used by the US Department of Defense. In May, it was the Indian government's turn to prohibit the country's operators from purchasing equipment from Chinese suppliers, also alleging security issues. "There is still a certain amount of prejudice against Chinese companies or products," says Zhang. "We are working hard to prove we are a company like any other in the world." Everything indicates Huawei's executives still have a lot of work ahead of them, and restricting the lunch hour will not be enough.