Interpretation of the Company's System

Recently, most people have asked the same question while discussing the law firm management mode with their peers: What is the difference between the law firms under corporate system and traditional commission law firms on earth? We thought that they were two distinct mechanisms. We also thought that it was a topic that does not need to be discussed. However, after careful thinking, we suddenly found that we got involved in some misunderstandings at the beginning and that it was not so easy to answer this question.

I.    What is the essential difference between the law firms under corporatization (corporate system) and traditional commission law firms?

Before discussing this question, we shall clarify a concept, namely: The law firms under corporate system and the commission law firms are not the completely equivalent concepts. First, the corporate system is a concept from the perspective of the overall mechanism of the law firm but the commission system is a concept mainly from the perspective of the distribution mechanism of the law firm; thus, they have different connotations and extensions; Then, the corporate system emphasizes a kind of direction and idea, which is slightly broad, but the commission system represents a kind of practice and system, which is slightly narrow; Finally, the corporate system contains a system and targets all kinds of people of the law firm but the commission system mainly targets the lawyers and especially the partners.

However, the people have been used to treating these two kinds of law firms in this way: Most law firms under corporate system adopt the point-counting system, without commission lawyers, and such law firms adopt the salary system for the lawyers, share the costs and have the public teams The traditional commission law firms certainly adopt the commission system. Most partners get the commission, and most lawyers do not have the basic pay. Such law firms mostly adopt the cost sharing system and basically have no public team. Slowly, the people have equated the corporate system and the point-counting system and have also made the corporate system and the commission system opposed. We discuss it in this way tentatively.

What is the substantial difference between them on earth behind these representations? In fact, just as mentioned above, the law firms under corporate system are integration and corporatization of the law firms in essence; the opposite are non-integration and non-corporatization of the law firms. Therefore, if the traditional commission law firms are used as law firms of the opposite mode and characteristics, it is not difficult to see that the essential difference between them is the integration and corporatization of the law firms. They supplement each other. Integration is the foundation, and corporatization is the essence. Corporatization will be impossible without integration, and integration will be weakened without corporatization.

From the perspective of integration, we shall mainly master five aspects, namely, are the resources integrated? Is the market integrated? Is the management integrated? Is the team integrated? Is the distribution integrated? It seems that distribution integration is very important but in fact, the market integration and team integration are more important, and the resource integration and management integration protect them. It is a simple truth that it is important to emphasize the gathering of “money” but it is more important to pay attention to the gathering of “things”, gathering of “people” and especially gathering of “hearts”. We must come out from the misunderstanding that “the point-counting system is the real corporate system”. In the final analysis, the essence of integration is the real human integration. If the partners have inconsistent ideas, even the thorough point-counting system will be useless!

From the perspective of corporatization, we find that many law firms have also implemented integration but still cannot develop or cannot develop quickly and that even among the integrated law firms, some of them have become a law firm of one person as their scale has shrunk, and some of them have become the parent-system law firms due to the management dissimilation and some of them have become the chicken rib-type law firms as their quality has been reduced. As for the reason, it is more or less because these integrated law firms have not been corporatized. Corporatization emphasizes strategic positioning, product research & development, manpower development, brand management, marketing and cost control. Among them, product research & development, manpower development and brand management are the most critical. In fact, it is enough to see whether such three aspects have been implemented in place to judge whether a law firm adopts the corporate system.

II.   How do the traditional commission law firms conduct the corporatization (corporate system) transformation?

Some traditional commission law firms have also gradually acknowledged the advantages of the law firms under corporate system and have wanted to conduct transformation. However, many people always worry that they cannot conduct such transformation or cannot conduct good transformation, so they flinch or hesitate. Is there any solution to this problem? I dare not draw a conclusion arbitrarily but still want to attempt facing this problem. Let me talk about my shallow opinion first.

To transform the traditional commission law firms into the law firms under corporate system, the greatest problem is determination instead of method. To transform the commission system into the corporate system, the law firms are disrupting themselves and will face risks, and it is impossible for them to speak with one voice. In case of slight hesitation, slight doubt or slight repetition, they will pass by the board thoroughly and even be worse than what they were before the transformation. Whether a group of partners figure out and want to conduct transformation or a core partner determines to conduct transformation, they must insist and shall endure the loneliness, withstand torture and endure the loss. During the transformation, it is normal for them to lose business, partners or teams. Many people are not willing to give up the immediate and realistic benefits for the long-term possible benefits even if they understand it. So in this game, the determination of the leader seems especially important.

However, it takes more than determination to transform the traditional law firm under commission system to the law firm under corporate system successfully. There are two factors that determine whether such transformation will succeed or fail: first, whether the law firms have a batch of core partners who have the completely similar ideas; Second, whether such partners have the advantageous business or brand business of the certain quality and quantity. Neither is dispensable. Different from new establishment, transformation must have the foundation. The foundation is people and business. In terms of people, there must be a core circle; in terms of business, there must be the existence guarantee. We must first prejudge whether such two premises have been met before deciding to start the transformation of corporate system.

Only the method is left after such problems are solved. The core and essence of the corporate system are the same although the pattern of manifestation is different. There may be more methods as long as we find the correct direction. After considering carefully, we find that there is nothing more than three methods. First, the practice of “one-size-fits-all approach”, which is to directly transit to the corporate system directly, fully and thoroughly from the commission system, without any intermediate state; Second, the “gradual” practice, which is to adjust the degree of integration and the strength of corporatization step by step and set up a certain term to complete the transformation; Third, the practice of “two systems in one firm”, which is to transform a part into the corporate company but still retain the commission system in a part and then to implement the transformation of the party of commission system to the corporate system under the possible conditions. Among such three methods, the third method is the most dangerous. If the reformers do not have the super ruling ability, the integration of law firms will go beyond all recognition very soon due to the coexistence of two systems, and the corporatization will be more fragmented; thus, we do not suggest that it should be adopted easily. Without the absolute disadvantages, the first and second methods shall be determined according to the personnel characteristics, the unified degree of the core circle and the guarantee degree of basic business of the law firms. Finally, I want to emphasize several principles for transforming the commission system into the corporate system: first, it is more important to transform the thought than the mechanism, and it will be the most painful if the thought still stays in the kingdom of commission after the system is learnt; Second, it is more important to wave the people than to transform the people; never expect to maintain or expand the scale by persuasion and even self-deception; “people who walk different paths cannot make plans together”, so it is more rational to give up some people who disagree and are not firm than to transform them; Third, it is more important to create corporatization than to create integration; with the same people, the same things and the same management and operation methods, it will not make any sense even if they are completely integrated.

III.  Can the corporatization (corporate system) be integrated with the traditional commission system in the law firms?  

It seems that the law firm under corporate system are so different from the law firms under commission system and there is no possibility of reconciliation and even integration of them. It is also right essentially. The extreme corporate system and the extreme commission system represent two extremes of the integration and marketization. Reconciliation means moderation and discount and even the destruction of the essence of things. Therefore, I think there will be no way out between them with a simple compromise, and the mechanism dividend will be ruined thereby. However, in two circumstances, we may appropriately consider the integration of the corporate system and the commission system. First, in the process of the selected “gradual” transformation, in the system design, they may consider the appropriate integration of them. In the earlier stage, it is possible to appropriately consider retaining the distribution of commission system in a stage or on a level but must completely eradicate taking the complete commission system as the start point of reform and shall not give up all other integration elements due to the commission distribution method. Second, in the circumstance where the small and medium-sized law firms select the corporate system, but also expect the large scale, they may appropriately consider the integration of them, but they must strengthen the corporatization component to continuously promote the integration process and shall set the adjustment space for the system in a transparent and synchronized manner. The appropriate integration of the corporate system and the commission system is a view point that is quietly popular at present, and many law firms attempt practicing it; however, I still think that they must be careful at the time of selecting it and should try not to select it if they do not have to make such selection. Because there is a big gap between them originally, and if we have to improve, mediate and consider them by relying on our “intelligence and wisdom”, we will pay the cost and the price sooner or later. All things had better be pure.