Dear Director Hong LIU, Chairman Zhengfu ZHU, Directors, and Supervisors,
Good morning!
I am very grateful to all the directors for placing their trust in me and appointing me as the chairman of the National Board of Directors of Hylands Law Firm. In the future, I will work hard to meet everyone's expectations. I would like to thank Director Hong LIU in particular. I think Lawyer Liu is a representative of the people's lawyers and has a very broad vision. In the future, under the guidance of Director Hong LIU and with the help of all directors and supervisors, I will do my best to push Hylands to a new level of development.
The topic of my speech today is ‘Powerful middle office, integrated development’, which is not only a tailor-made strategy for Hylands but also a reference for the development of law firms across the country. My speech is mainly divided into four parts: vision, middle office strategy, integrated development, and professional team.
1. The center of gravity of China's legal service market is moving South, which is a good opportunity for law firms to expand.
The scale in which Chinese law firms have expanded was impressive in the past ten years, and it will usher in the next decade of rapid development. In the past ten years, the number of practicing lawyers has increased from 200,000 to 500,000 and will increase between 500,000 and 1 million in the future. Hylands should seize this opportunity and strive to expand the growth scale of the firm. As of the end of 2021, Hylands Law Firm's national revenue will reach about one billion yuan, and the per capita fee will reach about 800,000 yuan. I estimate that the number of practicing lawyers in the firm will increase to 1,500 in 2022, creating a turnover of 1.5 billion yuan. 2022 is the 25th anniversary of the foundation of Hylands. We will establish a new VI system design and achieve a revenue of 1.5 billion yuan as an anniversary gift to the firm. In 2023, the number of practicing lawyers in Hylands should reach 2,000, and achieve a per capita income of 1 million. That is to say, in two years we will achieve the small goal of creating a turnover of 2 billion yuan, and strive to become one of the top 10 Chinese law firms. Hylands was established in 1997. By 2027, on the 30th anniversary of the firm, I hope that the overall turnover of the firm will reach 3 billion, the number of practicing lawyers will reach 3,000, and the per capita fee will reach 1 million. It will take us six years to achieve the goal of a total turnover of 3 billion yuan. The above-stated numbers are just a conservative estimate. Some people may question my goals, but based on my experience, I firmly believe that as long as everyone works together, the goals will surely be achieved. Under the leadership of Director Hong LIU, everyone should work together to move towards the goal at full speed. Although we have made rapid progress, in the next six years, we still need every director, every supervisor, every partner, and every lawyer to fully devote themselves to the work. It is my sincere hope that Hylands Law Firm will become a leading Chinese law firm in 2027, in terms of scale, turnover, service quality, and social responsibility.
Assuming that Hylands is a cruiser fleet, Beijing office is the battleship which is already very powerful and can travel at a high speed. Actually, Hylands’ Beijing office is one of the top ten in the legal service market of Beijing. However, Hylands' other offices are not equally competitive. They cannot be called warships, only submarines or fishing boats. I hope that each branch office can become the top ten in the local legal service market, whether in terms of turnover, scale, or per capita income. We need to transform more local offices into cruisers so that the fleet of Hylands can sail together at a faster pace.
Today, Hylands has an excellent opportunity to achieve rapid expansion. How can we achieve our 2027 vision? The answer can be found in the book ‘Follow the Trend’. Only by following the trend can we remain invincible forever. I wrote this book to share my views on the management of law firms, pointing out that at present, modularization, quality, integration, and digitization are the development trends in Chinese law firms. We want to achieve moderate expansion, but we should know the boundaries of expansion. The uncontrolled expansion will lead to conflicts of interest, loopholes in risk control, common problems of large companies, and even anti-monopoly issues. We should limit the number of practicing lawyers to around 3,000 and not exceed 5,000. This is the boundary of expansion I defined. Regarding quality, I propose a four-high strategy. We want to use high-end office supplies, and welcome high-quality lawyers to join, these high-quality lawyers will bring high-quality products, and finally, this will form high-end customers. Quality is always the goal we pursue at every stage of development. Another future trend is digitalization, which is also a trend in all walks of life. In 2022, we will speed up the construction of digitalization, transform the firm from an offline law firm to an online law firm, and realize a comprehensive digital transformation from law firm-centric to client-centric.
At present, the center of gravity of China's legal service market is moving Southward. Therefore, Hylands should focus its development on the Greater Bay Area, the Yangtze River Delta, and the overall area south of the Yangtze River. Why does the future legal service market focus on the South? At present, Beijing is the largest legal service market in the country, but I predict that the scale of Beijing's legal service market will gradually shrink in the future due to the following reasons:
The first is the economic gap between the North and the South. We know that some southern cities are very rich, while the GDP and fiscal revenue of northern cities are gradually shrinking. In 2021, there are 24 cities in China with a GDP exceeding one trillion yuan, of which 6 cities are in the north, and 18 cities are in the south of the Yangtze River. There is only one northern city in the top 10 - Beijing, which exceeds 4 trillion yuan, and the other 9 cities are all southern cities. Of course, Shanghai’s GDP also exceeds 4 trillion yuan. The economic base determines the superstructure and also determines the size of the legal service market. From this perspective, the economically active south has greater demand for legal services, while the demand for legal services in the north will shrink.
The second is that the central enterprises moving south. Central enterprises moved to some southern cities, including Shanghai, Shenzhen, Xiongan, and Wuhan. There are 96 central enterprises and more than 30 central financial institutions across the country, which are moving south.
The third is the delegation of the Supreme People's Court's jurisdiction to hear cases. In the future, cases involving less than 5 billion yuan will be heard in intermediate courts, and cases involving less than 500 million yuan will be heard in basic people's courts. This means that very few cases can be submitted to the Supreme People's Court for a second instance and retrial. In the future, the work of the Supreme Court will focus on guiding and supervising the work of lower courts, resulting in smaller legal services needed for dispute resolution in the Beijing market.
2. Adhere to the development concept of ‘co-ownership, co-construction, co-governance, and sharing’, and promote the integrated development of law firms in six stages.
Why promotes integration? Because there is a huge gap between different branches, and there is huge gap between different lawyers in the same law firm. If we want to achieve common development, common progress, and common prosperity, we must achieve integrated development. I can suggest six stages of integration:
The first stage is brand integration. At present, Hylands has realized the brand integration in form. A brand is not just a trademark or a logo. We should bring the Hylands brand a unique identity, make it more famous and convert it to a top law firm brand in China and in the world. In the next six years, we will push the brand awareness of Hylands to a new height. We want to achieve brand integration from the following aspects. First is marketing integration. All offices across the country should implement a unified branding campaign. All partners and lawyers need to jointly undertake the task of brand promotion, and every lawyer should be a disseminator of the law firm's identity. Secondly, we must have a unified culture. We must implant the genes of the ‘wolf culture’ in the ‘lion culture’ to make our lawyers more enterprising. Lawyers need to work as a team. Finally, we want to comprehensively improve the brand index, including social welfare, party building, fee scale, quality of partners, etc. We want to rank among the top ten national law firms in all aspects and lead the development of Chinese law firms.
The second stage is middle office integration. Middle office construction includes brand management, bid management, case management, customer management, and risk control management. We should establish a complete bidding system. Bid whenever there is an opportunity, and strive to increase the bid winning rate. We have purchased bid management software. I hope firms will take full advantage of this software. Local offices should establish bidding centers, bidding committees, or bidding working groups to organize partners and lawyers in local offices to bid in an orderly manner. We will issue bidding management measures in the future. We need a complete case management system, from filing to closing a case, the entire process should be transparent and standardized. We want to integrate data from PC and mobile phones. We need to establish a risk control management system, and risky cases should be reviewed by Beijing's management system. Without review, the case shall not be filed. It is necessary to strengthen the awareness of risk prevention. In short, the construction of the middle office includes but is not limited to the above five aspects. Working on the above five aspects will help us establish a basic middle office, which will provide effective support for the development of partners. The powerful middle office can connect the foreground and the background. I will give a more detailed explanation of the construction of the middle office later.
The third stage is customer integration. We should establish a customer service center. The customer service center counts how many clients each lawyer has, and divides clients into different grades A, B, C, D, and E. We are going to implement customer maintenance. On Thanksgiving, or on the customer's birthday, we should send a blessing message to the customer. We do so by following the practices of banks, which are always at the forefront to provide warm service to their customers.
What is the goal of our customer service center? The goal is to achieve customer redevelopment. We divide customers into ex-customers, existing customers, and target customers. For example, a partner in the Nanjing office has a potential client in Beijing. Without a client management and service system, this client may always be a potential client. If the system recommends this potential client to the Beijing office, Beijing lawyers may be able to convert him into an existing client. For another example, if I have a client of a financial company, I can recommend him to our data compliance lawyer, because this financial company definitely needs data compliance services. Therefore, the purpose of the customer service center is twofold. It can not only provide better and higher-quality legal services to customers but also help lawyers achieve deep bonding with these customers.
After I joined Hylands, many lawyers asked me, how do you have so many clients? I said it was because I kept writing books, giving speeches, and writing articles. Of course, the customer service center provided me with a lot of support that matters. We must uphold the principle that law firms should be client-centric, not firm-centric. The law firm-centric management philosophy is already outdated. All partners and lawyers should be either in the client's office or on their way to the client's office. This also requires us to establish a strong customer service center, systematically organize offices around the world to re-develop customers and make the construction of our customer service system the strongest driving force for the development of the firm. Our current turnover is about one billion, and we now have more than 40,000 customers across the country. If we fully develop customer resources across the country, our turnover is expected to increase by 30%.
The fourth stage is institutional integration. The core of institutional integration is in the integration of partner agreements. If we have 500 partners, these 500 partners should sign a uniform partnership agreement. Therefore, I hope that the Beijing, Shanghai, Guangzhou, and Shenzhen offices can take the lead in realizing the integration of partners by the end of 2022, and then spread this practice to the other offices. Of course, each office has the right to set up a separate partner meeting, that is, to report to the head office the partners who meet the requirements of the head office, and we will sign our highest-level national partner agreement with these partners. We want to implement the overall institutional integration through the integration of partners. The construction of the system should be put on our agenda. We must ensure that there is a system to follow in everything we do so that our managers can spend more time on case processing. Rules are the best managers.
The fifth stage is the salary integration. I want to implement a simple salary model. I have carefully studied the salary systems of China's fast-growing leading law firms and found that they have established reasonable salary systems, and they have allocated necessary development funds for the firm. The simplification of the salary system is a trend, and it is necessary to make the costs and income of law firms transparent. I recommend implementing the ‘5-point management fee’ approach in the Shenzhen office. 5 points refer to the management fee of 5 percentage points. The specific usage method is as follows:
1. 1% will be distributed by all partners of the firm according to the annual distribution plan;
2. 1% will be used as the expenses of the financial, administrative, personnel, information technology, and other public functional departments of the firm and public administrative expenses;
3. 1% as the allocation of management contributions to personnel undertaking public management affairs (non-salary), including but not limited to directors, secretaries, members of the management committee, members of the board of supervisors, members of the Youth Work Committee, etc.;
4. 1% is used as the risk development fund of the firm, which is withdrawn every year and used on a rolling basis;
5. 1% is used for middle office construction including but not limited to product promotion, bidding, case management, customer service, risk control, etc., and construction of business centers.
One of them is used to support the construction of the middle office. Branch offices do not need to build their own middle platform at all, they only need to build the front and back offices. What is a middle office? Why establish a middle office? What is the significance of establishing a middle office? I will share it in the next section. Of course, in line with the principle of ‘adjusting measures to local conditions, individual conditions, and specific conditions’, we allow local offices to make appropriate adjustments to the above-mentioned systems.
The sixth stage is profit integration. The ultimate goal of integration is to achieve profit integration. I want to realize the profit integration of all branches in the next six years. Without profit integration, we are not truly a whole. The integration of profits means that we have to gradually merge the independent profit centers of each office into a unified profit center. I want to improve the profit margin of each lawyer and improve the profit margin of each partner. How much is the central profit pool of China's top law firms? Some reach 30%, and the 30% profit will be distributed uniformly. From 1 point to 30 points is a gradual process, and the six integrations are not a sudden process, but a gradual process.
3. Without a strong middle office, there will be no unity
We will use the middle office strategy to promote the integrated development of law firms. What is the middle office strategy? The front office of a law firm refers to the partners of the law firm, and the back office refers to finance, administration, and personnel. What is the middle office? We want to build a strong middle office connecting the front desk and back office of the law firm. The establishment of the middle office can provide the best support for the partners at the front end. 2022 is also a critical year for middle office construction. The core of integrated development is to establish a powerful middle office. A powerful middle office includes but is not limited to the following five aspects.
The first is brand management. We will do our best to improve the brand index of Hylands in an all-around way.
The second is bidding management. We should establish bidding working committees at the headquarters level, and bidding working committees at branch levels. The Beijing office has purchased a set of nationwide bidding software. We still lack insurance management methods and implementation rules. After the system pushes emails to lawyers, lawyers may not read them at all. We need to arrange for special personnel to sort and analyze these emails and push them to the appropriate partners. According to my experience, winning the bid is not only based on connections, you can win the bid if you are competent. When bidding, you should pay attention to the following five important factors:
The first factor is the brand of the law firm; the second factor is the size of the law firm; the third factor is the lawyer team; the fourth factor is team performance. We currently do not manage cases in a unified manner, which is why we set up a middle office to manage cases in a unified manner. Twenty business centers will be established in the future, and the directors of each center will be responsible for managing the cases in their corresponding fields and providing the relevant data when the bidding work requires. Otherwise, the director will be considered negligent of duty and will be replaced; the fifth factor is the service plan. These are the five key factors that determine the result of bidding work, and these five factors determine whether you will win the bid. We want to conduct an all-around management of bidding work to improve the winning rate in the bidding of each office.
The third aspect is case management. We also need to set up a case management center, the core of which is to establish a more scientific case filing system and case closing system. The purpose of the system is not to urge lawyers to file a case but to assist law firms in conducting comprehensive knowledge management. I have been a lawyer for 26 years. What we can leave for the next generation of the Hylands people? A comprehensive knowledge management system would be the best. In the past few decades, we have written many excellent defenses and legal documents, but these are currently just on my hard drive, not in Hylands’ knowledge system. So, we want to build a powerful database, of which the case management center is the core. We will establish two forms of databases, electronic and paper, to classify and manage cases, and finally form a dynamic knowledge management system. The second core issue in case management is the management of conflict of interest. If we do not have a strong national case management system, we cannot conduct efficient conflict of interest reviews. At present, we require the conflict-of-interest review to be completed in 48 hours, and we will further shorten this time in the future.
The fourth aspect is customer management. As mentioned earlier, we want to set up a customer service center to improve the customer service experience.
The fifth aspect is risk control management. We must have a unified risk control center to approve risky cases. We need to designate someone to conduct a risk review. For cases with risks, the decision of whether to file a case or not should not rest with the directors of the local offices, but with the risk audit personnel. We need to raise awareness of risk prevention and control, especially among partners. Partners should be responsible for their own actions and be responsible for the actions of their team. In 2022, we will establish a complete risk prevention and control system and put risk awareness our utmost priority. The risks we want to guard against are not only civil legal risks, but also administrative legal risks, and criminal legal risks. Administrative legal risks include those that come from various administrative supervisions including but not limited to judicial, administrative, and various regulatory agencies. Lawyers should also be alerted to criminal legal risks. Many lawyers have been sentenced for false lawsuits, fraud, bribery, etc. Therefore, we need to establish a strong middle office risk control management system to better serve our lawyers.
We need to invest in middle office construction, and that is why I propose to use 1% of the development fund for middle office construction. The development fund shall be used for the purpose of promoting the quality development of the firm. Without a middle office, there will be no unity, and the various branches and partners will fight separately. In this way, Hylands will not have a bright future. Divided we lose, and united we win!
4. Professional ability determines the future of a law firm
A particularly important factor in high-quality development is the cultivation of professional capabilities. Hylands has a large number of talents, and our first task in 2022 is to reorganize the professional team. After carefully studying Hylands’ existing advantageous professional fields and traditional professional fields, I suggest that the practice areas of the whole firm be divided into 20 professional and industry fields, including dispute resolution, intellectual property rights, WTO and international trade, customs and international trade, cross-border investment, banking and finance, asset management, private equity, and investment funds, capital market, competition and antitrust, mergers and acquisitions, bankruptcy and reorganization, real estate and construction engineering, compliance, corporate and tax law, criminal, TMT and artificial intelligence, entertainment media, family inheritance, and family affairs, energy, and natural resources. Of course, this is only a preliminary suggestion, and we welcome you to put forward your valuable opinions about the plan. I plan to solicit opinions from offices across the country before the spring festival. After the practice field is established, each lawyer must choose a field as the field of practice and then will be classified into the corresponding practice department. In the future, lawyers should focus practice on the practice field and should write articles, PPTs, and books, and conduct legal research around this field.
According to my observation, Hylands is a law firm with a unique cultural atmosphere. We have the famous C orchestra, and an excellent golf team, and we leave abundant space to find and nourish the talents of the Hylands people. Happiness is the ultimate pursuit of life. But while we are pursuing happiness, we must also pay attention to academic construction, because we regard academic construction as the basis for the development of law firms. We need to cooperate with law societies and bar associations to hold various academic activities and give equal emphasis to the academic and entertainment life.
I want to increase our per capita income and double and triple the attorney’s income. Can we achieve 1.5 billion in revenue generation in 2022? This requires each of us to realize our own double plan, and each office must complete the double plan. The realization of the goal depends on the efforts of each of our offices and each of our employees. The significance of the scale of the law firm lies in the: first, we build and share the reputation of Hylands together, and we need people at the same level to communicate and cooperate together. The second point is that we should jointly create a bigger legal service market. I sincerely hope that lawyers in each office can become the top lawyers in China.
Hylands has a good plan called the 'seedling plan’. Young lawyers represent our future and carry our hopes. Where will our competitiveness be in ten years? It lies in the lawyers born in the 80s and the lawyers born in the 90s. We select and train the best law students, and firmly believe that they will become our bosses in the future. They are the future of Hylands. The construction of our professional team determines the future of Hylands. In another 20 years, lawyers born in the ’90s and 2000s will be active in the front-line legal service market. We must do a good job in professional team construction. This is also our most important goal in 2022.
Conclusion: The world is vast, and we need to cooperate with each other to explore the future.
I sum up Hyland’s core values as freedom, equality, fairness, transparency, minimalism, and happiness. I find that the atmosphere of Hylands is very good. Here, everyone can freely express their views without being ridiculed. I once said to a friend that being a lawyer can achieve 3 freedoms: first, personal freedom; second, financial freedom; third, spiritual freedom. Hylands made a very good interpretation of what freedom is. We are all created equal, and each of our partners is equal, so I don't want different voting rights in the partnership. Director Hong LIU, Chairman Zhengfu ZHU, and other partners all have equal rights. We pursue relative fairness, between the headquarters and branches; because there is no absolute fairness, only relative fairness. We pursue relative fairness between every partner and every lawyer. Hylands is also a transparent law firm. Hylands' financial system is very transparent, allowing each partner to see the accounts of the whole firm and the accounts of other partners. This shows our courage and confidence, we don’t have anything to hide from anyone. I hope Hylands will be a simple yet powerful law firm in the future. Here, at Hylands, there is no complicated political relationship, no complicated interpersonal relationship, and no complicated management system, and we adhere to simple principles to promote the development of the firm. Hylands is a big family, every partner is its member. It is obvious that Hylands is a happy law firm and a happy home for everyone.
Finally, what I want to say is that let us follow the guidance of Comrade Xi Jinping’s thoughts on the rule of law, adhere to the leadership of the party, attach importance to academic research, move towards the future together and promote the development of Hylands to new heights!
