Analysis of XiaoHongShu's Organizational Restructuring and Its Impact on R&D Management

On August 2, XiaoHongShu sent a controversial internal letter highlighting symptoms of "big‑company disease" such as senior staff avoiding hands‑on work, leaders over‑analyzing directives, and decision‑making delays, and urging a return to a flat, agile startup mindset.

"With the company's growth, even small companies develop big‑company problems. Some colleagues act arrogantly, push frontline staff to solve issues, and some leaders waste time analyzing upper‑level intent while ignoring user‑impacting problems. The founder emphasizes the pain of frontline staff whose ideas are blocked by organizational entropy. To address this, the company will restart in its 11th year, keeping the team agile and focused."

On August 16, the company announced three structural changes: (1) abolishing the professional R‑sequence grades, (2) removing the dotted‑line L0 team‑lead role, and (3) making management positions directly appointed by the organization.

R‑Sequence

The R‑sequence was XiaoHongShu's internal professional grading system, comparable to Alibaba's P‑sequence or Baidu's T‑sequence. A diagram (image) illustrated the eleven‑level hierarchy.

L0

L0 corresponds to a small‑team manager (roughly equivalent to a senior manager in large enterprises). The role primarily involves project management. However, many senior engineers prefer deep technical work over management, making the forced managerial responsibility a mismatch.

Good managers are the core of execution; thus, many L0s were promoted to L1, a role similar to a director‑plus or senior manager overseeing dozens of people.

Management appointment is typically handled by a professional committee, which now loses its promotion‑approval authority.

Upward Career Channel

The article defines the "upward channel" as a crucial management tool that maps positions/grades to explicit resources (salary, bonuses, stock) and implicit resources (project opportunities, training, market value). A table (image) shows the mapping for junior, mid‑level, senior, leadership, and executive positions.

Key resources include critical roles, grade‑to‑role mapping, equity, salary, bonuses, and verbal recognition. Implicit resources involve high‑impact projects, market information, advanced training, and personal stability.

When the channel breaks, problems arise: stagnant salaries, lack of promotion, low morale, high turnover, and increased management difficulty.

Failure Cases

Examples of channel breakdown include: no salary increase for years, missing grade system, and abrupt removal of the grade system without a ready replacement, leading to talent loss.

Specific issues at XiaoHongShu: senior engineers with high salaries not contributing, leaders avoiding business understanding, and excessive analysis of directives.

Entropy Analogy

The article uses the physics concept of entropy to describe organizational decay: without continuous energy input (effective management), a system's disorder increases. Maintaining an open system with energy injection (leadership, clear incentives) counters entropy.

Top‑Level Design & Pricing Thinking

Proposes a systematic approach: identify redundant resources, clarify business priorities, adjust structures, promote high performers, and allocate resources based on project ROI. Introduces an internal procurement model where departments bid virtual currency for tasks, aligning incentives.

Steps include: (1) internal purchasing for transparency, (2) data‑driven pricing feedback, (3) balanced assessment of short‑term gains vs. long‑term investment, (4) protecting mid‑to‑senior managers' indirect contributions, and (5) supervisory mechanisms to ensure fairness.

Conclusion

The core of "big‑company disease" lies in a flawed evaluation system that misallocates resources and hampers talent identification. XiaoHongShu's abrupt removal of the professional grade system is a drastic attempt to reset the evaluation mechanism, aiming to restore focus on business value and improve R&D efficiency.

Ultimately, a transparent, fair, and business‑aligned evaluation framework is essential for sustainable growth and preventing organizational entropy.