Chinese national firms need to learn a lesson in collaboration

Time to take the kid gloves off. A pecking order is emerging in China, but you can already see mistakes being made by some of the biggest firms there. Those dubbed the Red Circle – Fangda, Haiwen, JunHe, KWM and Zhong Lun – have opened up a gap between them and the national firms – and that gap doesn’t look like closing any time soon. The reason? While the red circle firms have successfully institutionalised their businesses, many national firms can’t let go of their traditional structures where each partner and his or her team represent a separate profit centre. What’s more, the partner shells out for the salaries and business development costs of his or her team members. The partners simply contribute to overall overheads such as property tax and some administration. This isn’t a firm as we know it, it’s a set of atoms. Given the pace of the Chinese legal market, firms such as Longan, W&H, Yingke and Zhong Yin don’t have the luxury of time to reform themselves. They currently languish near the bottom of The Lawyer’s China Elite 2016’s revenue per partner table.

As Asia editor Yun Kriegler has uncovered in the latest, magisterial edition of The Lawyer China Elite, these old-fashioned structures are rife among a swathe of mid-level Chinese firms, and even some traditional leaders in the field, such as Commerce & Finance and Grandway, many of which are dominated by successful first-generation rainmakers. Moving away from this reliance on the individual will be painful. Longan has already started this process and many like Commerce & Finance are contemplating a reform, but it’s going to be a hard slog. As Yun documents, the wealthy red circle firms are investing considerable amounts of money on practice management and IT systems, with significant results – not just on client intelligence, but being able to evaluate partner contribution in a fairer way.

Some firms have practised serious innovation. JunHe has pioneered a lawyer referral app called Lvxie, an interactive database of lawyers across China. It allows participants to refer work to each other and leave reviews. Jiang Yong, the managing partner of Beijing litigation boutique Tiantong & Partners, has founded Wusong Internet Technology, which runs a search engine and mobile app that gathers latest legal updates and shares know-how among Chinese law firms.

It’s a mixed picture of innovation and conservatism, but the message is clear: Chinese national firms had better start attending to their internal structures. The gap between them and the red circle is widening by the year.

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