Sail across the sea

Chapter 388: We're going to go hungry!

"Is there another reason? That is, even if you charge more, the extra portion will be taken by the provincial non-ferrous metals company and won't end up in your hands, so you're too lazy to be the bad guy?" Gao Fan said.

Xiao Ping nodded: "Assistant Gao is right. It's fine for us to use the fees we collect to cover our expenses, but if there's a surplus, we have to hand it over according to regulations. If we charge more, the farmers will be unhappy, and we won't benefit from it either, so why bother?"

Gao Fan asked, "What if Zeyan Institute proposes to the provincial company that it no longer needs funding from the provincial company, and the provincial company will not interfere with your operations, and you can be self-sufficient and responsible for your own profits and losses? Would that be acceptable?"

"Self-financing?" Pei Hengxue glanced at Xiao Ping again and said, "We know about the method you mentioned. It's basically restructuring, turning public institutions into technology companies. Several sister institutes within our system have already done this, all from other provinces and cities. I heard they're doing quite well, with employees' salaries more than doubling."

"Then why don't you do that?" Gao Fan asked in surprise.

The reform of research institutes is common in later generations, but Gao Fan really didn't know that some organizations were already doing it now, and it seemed to be working quite well.

“The institute has actually discussed this matter in meetings, and more than once,” Pei Hengxue said. “But we also looked into it. Those sister units that have successfully restructured are all located in economically developed regions, and some are even in big cities like Beijing and Shanghai. There are many opportunities to make money in these places. But Zeshan is a poor place. If things don’t go well, the four or five hundred people in the institute will go hungry.”

Xiao Ping chuckled and said, "Assistant Gao, you're young, you don't have so many concerns. I'm about to retire, and the country can't possibly deprive me of my retirement benefits. But for people like Director Pei and Director Song, who have elderly parents and young children to support, taking this step is still very difficult."

Pei Hengxue smiled wryly, "If it were just about me, it wouldn't really matter. Several mine owners have approached me, saying that if I agreed to work for them, the salary would be 10 times higher than now. But the problem is, there are still several hundred people in the institute, some of whom are doing theoretical research and can't find a place to eat outside the institute."

"If the reform succeeds, everyone will be happy. But if it fails, at least half of the people in the institute will have to beg on the streets."

When later generations talk about certain entrepreneurs, they often use the phrase "resolutely ventured into the business world." The word "resolutely" sounds very heroic, but in reality, it's anything but easy.

In those days, most people had little savings and no wealthy parents to rely on; many even had to send money to their parents in the countryside every month. Under these circumstances, leaving the stable system and venturing into the market was extremely risky.

You only envy others' success, their ability to live a life of luxury and glamour. If you were in the same situation, would you have the same courage?
"What if we take a different approach?" Gao Fan said. "Zeyan Institute is a large and complex company. It would be too difficult and risky to restructure it all at once. Could we take advantage of this rare earth craze and separate a department, namely the Rare Earth Research Laboratory, from Zeyan Institute to conduct a pilot reform?"

"Many organizations now do this: they set up a third-party company on the basis of the original organization and assign dozens of people to run it. If it succeeds, they promote it throughout the entire organization. If it fails, they bring those dozens of people back, and the higher-ups won't object."

"We've discussed this idea in our department," Xiao Ping said. "However, we're still a bit unsure about how to implement it. Assistant Gao, could you share your thoughts?"

Unbeknownst to them, everyone's way of addressing Gao Fan had changed from "Assistant Gao" to "Little Assistant Gao." This one-word difference might sound a bit disrespectful, but it actually carried a hint of intimacy, implying that they intended to be friends with Gao Fan.

Gao Fan could certainly sense the goodwill emanating from the other party, and he smiled and said:

"It's actually quite simple. Zeyan Institute submits a report to the provincial company, applying to establish a business entity. The name doesn't matter. The entity's staff are placed on unpaid leave and no longer receive salaries from the institute; the provincial company can deduct these salaries from its funding. The entity provides technological services to the public and sets its own prices within a reasonable range. After paying staff salaries and office expenses, the remaining revenue is considered profit. A small portion remains with the entity, and the majority is turned over to the institute. The institute's share is then split with the provincial company according to a predetermined ratio, for example, 20/80, with the provincial company receiving 20% ​​and Zeyan receiving 80%."

“Let’s say this entity has 30 people. With food, animal feed, and office expenses, 100,000 yuan a year should be enough. If we increase the fee for guiding mining tenfold, to 3000 yuan per mine, and do 100 mines a year, that’s 300,000 yuan. The annual savings can reach 200,000 yuan. Give that to the institute, and wouldn’t that be great for everyone?”

"You can earn that much?" Song Xingkang was initially impressed by Gao Fan's description.

As the office director and the unit's chief steward, he has a real understanding of the financial situation. Even after allocating a portion to the provincial company, the annual surplus of 20 yuan is still considerable.

The entire institute has fewer than 500 employees, and each person receives a year-end bonus of 100 yuan, which is only 5 yuan.

If we can give out a year-end bonus of 100 yuan this year, wouldn't the whole institute be in an uproar?

Song Xingkang was momentarily fluctuating, already thinking about what to eat after receiving the prize money...

"You just said you could help us solve the funding problem of 100 million yuan. Do you mean you'd use the revenue from this entity to solve it?" Pei Hengxue recalled the topic from earlier.

Gao Fan said, "Yes and no."

"How so?" Pei Heng asked.

Gao Fan said, "Director Pei just said that if the in-situ leaching process is successful, the utilization rate of resources will be greatly improved, which is equivalent to making more money for the mines. We will promote this process to the mines and charge each mine a technical guidance fee of 10,000 yuan. I believe they will be willing to pay that, because they will earn at least 10 times that amount."

"In this way, the value of our technical services is increased, and we can easily earn back the 100 million investment."

Pei Hengxue astutely reminded him, "But the prerequisite is that 100 million must be invested in the early stage."

“That’s right!” Gao Fan said. “That’s why I said we can’t wait until we make money to invest this 100 million. My idea is that I will help Zeyan Institute find a partner, and that partner will put up the 100 million as an investment.”

"Once the technology is successfully developed, Zeyan Institute will use the revenue from the new technology to repay the initial investment. It would be even better if we could also give this partner some dividends."

(End of this chapter)