Slaughter and May Chinese best friend Jun He is undergoing a profound transformation, as its founder and managing partner Xiao Wei leads a major reform on the remuneration structure of this 26-year old partnership.

As reported exclusively by The Lawyer this August, the Beijing-headquartered firm has undergone a major partner remuneration overhaul. Founder and managing partner Xiao Wei speaks out the necessity and rationale for the new system.

Xiao Wei
Xiao Wei

“We’ve been encouraging teamwork and cross-referrals for a long time, but in reality, in the past partners had been clinging on to work and maximising their own earnings and as a result creating many small teams that had been working in silos,” says Xiao, hinting the old system is partially to be blamed.

Previously, each partner’s drawings were decided by a set of clear formulas, a calculation based on five elements including seniority, client development and billable hours.

In Xiao’s view, the firm’s old system was clear and transparent. But instead of creating a collegiate environment, some partners worked around the formulas to maximise their own earnings, creating small teams working in silos.

“The resistance to deploy the best resources for clients’ best interests had caused a growing number of client defections. It really raised the alarm when several big clients approached me to discuss this problem,” he continues.

Under the new structure, profit allocation is essentially decided by a six-member performance review committee based on a thorough annual evaluation of the relative contribution of each partner to the overall success of the firm. The results are only for the knowledge of the management and the review committee.

“This is not to promote secrecy but to divert partners’ full attention to solely on doing a good job for clients without having to constantly worry about calculating economic returns,” says Xiao.

This approach is a step away from the mainstream trend towards more transparency in Chinese firms’ management, but Xiao is confident that he has his partners’ backing and the move is heading towards the right direction.

“The new structure ensures the firm’s ability to allocate the best talent for the most appropriate matter, whether it’s for documentation or negotiation or a certain type of transaction in a particular sector. If a client is not satisfied with a team we as a firm can react quickly and change the lawyers until the client is happy. The end result we want to achieve is to increase both the quality of service we provide to clients and the overall productivity of the firm,” he adds.

This approach is distinctly different from all of Jun He’s “red circle” peers, although it is similar to that adopted by a number of US firms including Jones Day.

“The majority of our partners recognised that the old way of working was not sustainable and would lead to the firm’s decline. They are eager for changes and agree the new structure is heading towards the right direction. The effects can only be seen over the next two to three years. But we are not afraid of failure. If this method doesn’t work, we can always try something else next,” he concedes.

“Finding the right model is a long process, and may take several generations. We are exploring our way through the mist,” he concludes.

This interview is an extract from the cover feature looking at the profound changes Chinese firms are taking to rationalise their partnership for a strong footing in the international market, which is to be published on Monday 2 November.