Protocol | Workplace

Facebook thinks big companies can't compete without remote work

If you make employees come in, you’ll be at a ‘distinct disadvantage’ in attracting talent, says Miranda Kalinowski, Facebook's head of recruiting.

Facebook's head of recruiting

Miranda Kalinowski, Facebook's head of recruiting, loves how remote work has made potential candidates more open to calls from recruiters.

Photo: Miranda Kalinowski

Facebook laid down a gauntlet to other big tech companies earlier this month when it said it would allow all employees to remain remote indefinitely, if they chose.

Facebook's about-face — the company had previously planned to allow only senior figures to work remotely — could set the stage for a new battle over tech worker benefits and culture. Apple, Amazon and Google have all doubled down on the idea that permanently remote work should end with the coronavirus pandemic. While Facebook employees can now work from anywhere, even from some other countries, Apple and Amazon alike have both set requirements for three days in the office, and Google is allowing only 20% of its workforce to apply to remain remote.

"The fact that it's offered, I think, is becoming more and more table stakes for candidates. Companies that are not able to offer it will see themselves at a distinct disadvantage," Miranda Kalinowski, Facebook's head of recruiting, told Protocol, explaining how and why Facebook decided to create its remote work benefits, and what this means for the future of hiring at Facebook.

Compared to one year ago, the biggest permanent shift in what candidates are asking for (and expect) is flexibility — and unlike other Big Tech firms, Facebook has decided to take advantage of that fact. "In the past, we had a well-understood emphasis on working in close proximity to your peers," Kalinowski said. Removing that emphasis was a weighty decision for the company, but it's what candidates and current workers wanted, according to Kalinowski.

Facebook isn't the only company with workers who want to stay home, and its new plan may be staving off an employee rebellion. At Apple, a contingent of workers has launched a petition to end Apple's required three days in the office, alleging that people are quitting because they're going to be forced to go back to work and that Apple's obsession with in-person culture is more harmful than helpful.

Facebook's new acceptance of remote work will also change how the company recruits. Not only will it be able to go after the workers seeking flexibility who currently work at other Silicon Valley companies such as Apple, but recruiters will also be able to look for engineers across North America, rather than just those living in the few Facebook engineering office locations. "Obviously from a recruiting perspective we love it, because it means we can attract a much more diverse set of candidates who otherwise might not have considered our company," Kalinowski said.

"There's no secret to the fact that across the tech sector, we've got a huge opportunity to attract more [remote] candidates who have been from underrepresented groups that we may not have been able to attract in the past," she added.

And for potential candidates who've long been skeptical about Facebook's intentions or reputation, new remote-work benefits can differentiate the company in a new way. "Look, I think healthy skepticism can be a good thing. It's no secret that we're working on really challenging problems … We don't always get the answers right. The skepticism about our decisions and the actions can really benefit us," Kalinowski said when Protocol asked whether the new policies could help ease Facebook's reputational problems. "We definitely want people who don't shy away from helping us challenge those decisions and problems," she added.

Beyond widening who Facebook can now recruit, the new policy has already changed how the company thinks about its physical locations. Facebook originally planned to set up new company hubs in Dallas, Denver, Atlanta and other cities. Given that remote work means teams working together could be scattered across the country or the globe, however, it is difficult to project if people will be interested in building office-based communities where they live. "I think more likely, shortly in the more immediate to mid-term, the pull will be toward the team that you're working with," Kalinowski explained. "We will need to find more virtual ways of keeping those community bonds."

For Kalinowski, the most exciting change caused by remote work is that recruiting got easier, not harder. The end of face-to-face requirements simplified people's abilities to make connections. "Not having to get people on a plane, on a shuttle, to a building, in a room, taking time off, stripped it all back," she said. And at home, people are willing to answer their phones in a way they were unable to in an office. "That's been a surprising benefit, and one I hope we can continue," she said.

And even once people can again fly everywhere, the recruiting team has learned an important lesson from the last year: Just because someone can do something, or the company can afford it, does not mean flying people across the country is always the best for everyone. "We will when it's convenient for candidates and for interviewers," Kalinowski said. But "what will be more important is getting the candidates to meet with the right person, and that right person might be in another country or another time zone."

"We do know that [candidates] are looking for companies that look after their people well. We have a really obvious opportunity to demonstrate that," she said.

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

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