The infamous ‘红包 hong bao’
Handing out red envelopes (“红包” or pronounced “hong bao” ) is a custom that dates back hundreds, if not thousands of years. Before and during Spring Festival, companies, families, and friends dish out large amounts of cash all tucked into a red envelopes.
Red envelope giving is a society wide method of appreciation for family, friends, and employees. This act is shrouded in privacy and laced with tons of incentives which used properly can be an incredibly powerful tool. Private giving is infinitely better than public giving and drives why red envelopes are so effective.
Below I’ll explain why private giving is so important, what red envelopes are, the ideas driving incentives, how our company handled it this year, and I added a bonus section on WeChat.
- Private giving leads to private contribution
- What is a red envelope?
- Ideas driving incentives behind red envelopes
- How we personally distributed them and why
- BONUS – fun game of WeChat + red envelopes
My hope is this serves as a thought guide for you and your company around Spring Festival or if you have Chinese friends. It’s a huge advantage if done correctly.
Private giving leads to private contribution
We’re taught from a young age true giving should happen silently and privately. Those who publicly announce their giving, the reward ends at the announcement. When you give in private, will be rewarded in more ways than you know, especially in the context of an employer-employee relationship.
Think about it this way. If everything you do to acknowledge employees is public (which should happen from time to time), they will want all of their good deeds/accomplishments public as well. Creating a perverse internal political culture that leads to brown nosing rather than driving value to the bottom line.
On the other hand, a private reward system encourages employees to privately add value to your company without needing to be publicly acknowledged for it. If you reward in private, the rewards (or value) they offer back to the company will also be private. Without you having know about it, the employee will drive value in the dark which is where real value is created.
Red envelopes are a method of private giving and I highly encourage you to take advantage of this opportunity to build private giving into your culture. Here’s how.
What the heck is a ‘red envelope’?
Red envelopes are just what they sound like, red envelopes. In Mandarin we call them “hong bao” which translates into “red bag”. In Chinese culture there are two major times when red envelopes are handed out: Spring Festival and weddings. In this post I focus on the Spring Festival, mostly because I’m not married (yet).
At the end of the year, companies pull out a lot of cash – which happens to be red too, stuffs them into red envelopes, and hands them out as a form of bonus for a job well done and/or appreciation for all their hard work for the year.
Traditionally, the rule of thumb is the ’13th month rule’. Which translates to each employee receiving an extra months wage at Spring Festival. This works from a budgeting/planning perspective, but doesn’t leverage the entire effectiveness / meaning of the red envelope.
Chinese companies on the other hand, view red envelopes a lot differently. It’s not only a way to pay less income tax but also lift up the spirit of the entire company. Throughout the year, it’s anticipation of the unknown that drives employees to work harder and longer for a big hong bao (大红包).
Ideas driving incentives behind red envelopes
Red envelopes offer employers the opportunity to appreciate their employees for a year well done. You can pull your relationship (关系) closer and make them more committed to you and the vision.
As an employer, it’s not our responsibility to make employees happy. Ultimately it’s up to each person to make that happen for him/herself. We do however, play a significant role in whether or not our employees feel appreciated. This is a critical distinction in the importance of hong baos.
Think about it, how often do we genuinely thank our employees for all the hard work they do on our behalf? People bleed to be acknowledged and appreciated and red envelopes are an incredible opportunity to do just that. Even if your company is not profitable or having an off year, it’s the thought that counts. Big or small the red envelope is painting a picture for a better future and one that makes them happy.
You might be thinking: physical gifts can accomplish the same thing. On the surface they absolutely can. Gifts allow employees to feel appreciated, but runs counter to the idea that private giving is better than public giving. Red envelopes (other than the thickness of course) don’t allow anybody else to know how much money is inside. They are hidden from view and can be put in employees, friends, or family members’ pockets. Much easier than carrying a ribbon wrapped red box out the front door of the office.
Lastly, since the entire country goes home for Spring Festival, handing out red envelopes right before puts a great taste in their mouths to talk with their family about. It builds positive word-of-mouth for the company amongst family members, which is critical to their support system and leads to a lower turnover rate in the long-term.
How our company distributed them and why.
Distribution, both the actual delivery and total amount of red envelopes is crucial to maximizing effectiveness. You have to think through each individual person, their job responsibilities, key metrics that define their role, and how they will feel compared to others. It’s important to spend time and get it all right. Employees sure pay attention.
Obviously it would destroy the point of my whole theory of ‘giving in privacy’ if I published what we gave on my blog. That being said we handed out nothing substantial except to a few key employees and used it was more a token of appreciation for the people that have committed their lives to our cause.
Red envelopes were broken down into two handouts: company and manager.
The company (or General Manager) portion of the annual red envelope was meant to be appreciation on behalf of the company. We moved at a break neck pace this year and wanted to acknowledge that. This is not to be confused with something we should or have to hand out, it’s purely out of thanks for the employee.
In our case, this portion was significantly larger than the managers (see below).
I invited each employee into my office one-on-one to give them a personalized thank you on behalf of the company. This isn’t a time for a full on performance review, but to acknowledge what they had done throughout the year, ram home our company vision for a better future, and encourage them to truly enjoy the time with their families.
At the end, I’d open a drawer of my desk, pull out the red envelope, hand it over, and wish them a happy Spring Festival. Jaws dropped and some even teared up. It was completely unexpected (good job team!) and they had no idea it was coming. Mission accomplished.
We had three new managers this year and the goal was to improve their relationships with all the people under them, build loyalty, and respect for the upcoming year. Ideally employees felt these were handed on independent of the company and was the managers giving out of their own kindness of their heart.
Since it was meant to be felt as an in-kind give, the total amount were proportionally smaller than the company’s.
We had them write down a unique message for each person and hand them out on their own time. Made it more personal that way. I had teams at each location on the last Friday before Spring Festival have a meal together and assume they handed them out at this time. Didn’t get into the weeds of their distribution but know they handled it well.
Nobody in the company knew red envelopes were coming until the last three days before Spring festival. Everyone thought, “oh well, foreign invested companies don’t get it”. They were wrong.
The entire staff went into the Spring Festival ecstatic and ready to talk about the meaningful work they are doing at HONT. We accomplished our goal but on a completely different level, it felt amazing from an employers perspective to acknowledge all the hard work they put in for us all year.
We all know size (of red envelope) matters on some level, but it’s not the most important thing. The most important aspect of giving, is the act of doing it. We could have publicly announced red envelopes at our company retreat and made a big brouhaha about it but the fact we did it in private goes a long way.
BONUS: WeChat + red envelopes
To keep the buzz going into the Spring Festival while they are home with their families, we used WeChat to pull the team together once again. You hop over to my in-depth introduction of WeChat to learn more about the app itself.
Spring Festival eve, I decided to make giving a game and refocus everybody back on HONT on the most important night of the year.
How it worked, is you set a total amount you want to give, say 100 RMB, and then people click to open and see how much they win. See below for step-by-step instructions.
Choose total people and total amount you want to send.
Sends ‘envelope’ into group channel
As people click, app populates who received how much.
It’s a way for people to get excited about the New Year and to play along – generating buzz around the culture of giving. Our WeChat channels were all dead until I opened up the firehose of red envelopes and everybody started to get involved. People were giving, playing, and having a blast. This runs counter to the idea of private giving but serves more as a function of creating a giving culture, and for 热闹 or activity as they say in Chinese.
What you should do about it.
Red envelope giving is a practice deeply embedded in Chinese culture. My hope is this can serve as a guide for you and your company when you’re considering handing them out, it’s a huge opportunity to leave a lasting impact on the people that work for you. And more importantly, to build in the culture of giving.
Shoot, who says this should wait until the end of the year. Think of somebody you want to appreciate and go do it now.
I’d love to know about your own experiences handing out red envelopes.