Dentons set to overhaul Chinese management structure

Dentons is mulling an overhaul of its China management structure with the launch of a new China board, as the firm sets a goal of a single Chinese profit pool.

Almost six months into the merger between Dentons and Chinese firm Dacheng, the firm’s global and China leadership teams are understood to be putting stronger emphasis on integration in China.

Sources in the firm told The Lawyer high-level discussions are currently ongoing over plans to create a new China board this year to oversee the operational integration among its 44 financial independent domestic offices.

Currently the firm’s Beijing office acts as the headquarters, drafting firm-wide policies and steering developments in the 43 mainland branch offices.

In another key post-merger integration move, Dentons’ Shanghai-based lawyers are set to move into Dacheng’s new Shanghai office, which is located in the city’s tallest skyscraper, Shanghai Tower, later this month. Legacy Dentons Shanghai partners Mitch Dudek, Alex Wang and Todd Liao are thought to be joining the China practice as global partners, meeting regulatory requirements which prevent them being partners of the Chinese firm.

Consolidation in Beijing is expected to follow soon after, but in Hong Kong the two sides are yet to agree on a plan.

The news emerged following Dentons’ global board meeting this week in Nanjing.

The Chinese firm’s current management line-up is made up of a 17-member partnership council, a five-member supervising committee and an executive committee. The current leadership team, led by founder and chairman Peng Xuefeng, was elected in April 2014 prior to the merger talks with Dentons, which started in July that year.

A senior Chinese source indicated that discussions about the new board have been on going for quite some months, and a draft plan with specific implementation details is expected to come out later this month.

“Under the new structure, Beijing will be one of the 44 China offices that are led by the China board, which will represent the China region in Dentons’ global management. The new structure will be more compatible and better aligned with the global structure,” said the source.

The board members will be elected by the firm’s senior equity partners. As Beijing is the largest office by lawyer headcount and revenue, it will have a greater representation on the board, although its final composition is still being discussed.

To support the new structure and the implementation of a unified management and back-office system across the 44 offices, Dentons’ Chinese verein member is also in the process of appointing five national operational directors to oversee five key functions: IT; HR; risk control and compliance; business development and marketing; and financial management.

“The new appointments are also to ensure China is better connected with Dentons’ global network and ensure consistent approach domestically and globally,” said the source.

He said these integration moves were a precursor to the firm’s ultimate goal of having one profit pool in China.

“The ultimate goal is to have all offices in China share revenues and one profit pool,” he added. “Reforming such a giant firm is not easy. There’s no strict deadline but the global management wants to have it done as soon as possible.”

Integration and specialisation were two top priorities of the firm’s management, as was documented by The Lawyer’s leadership interview with Peng in 2014. The process is said to have been delayed by the Dentons combination last year but is now back on the agenda.

Prior to its merger with Dentons, legacy Dacheng grew exponentially by adding existing firms around the country to its national franchise. Although they share the same brand, almost all of them remain financially independent and have different cost and profit sharing arrangements and remuneration systems.

Key performance metrics also vary hugely from office to office, such as annual turnover, average equity per partner, and average revenue per lawyer.

For example, in 2014 the Shanghai office generated RMB500m (£54.5m), accounting for 22 per cent of the firm’s national revenue of RMB2.25bn. However Shanghai’s average revenue per lawyer was among the highest at RMB1.3m, almost double the firm-wide average of RMB723,000.