Chinese firms today know they need to bulk up their ranks to compete nationally, and even internationally. But instead of hiring aggressively as before, they have shown a greater keenness to promote from within.
In the first quarter of 2023, Chinese firms gradually expanded their talent pools. There would be a wave of lateral hires after the Spring Festival in previous years. However, the market has shown a different trend this year: While many firms have announced their new partners and of counsels, most of them are promoted from within.
The firms that have announced promotions include some leading out-fits. For example, Zhong Lun Law Firm promoted 43 non-equity partners/of counsel and 26 equity partners/senior of counsel, Tian Yuan Law Firm announced 31 new partners, Commerce & Finance Law Offices welcomed 14 partners and of counsels, and Haiwen & Partners and Han Kun Law Offices promoted 13 partners and of counsels and nine partners, respectively.
“News of promotions have frequently made headlines this year, which has been a trend over the past two years,” says Liu Zenan, partner of recruitment company Connected-R International (CRI), who has long focused on recruitment for law firms and in-house teams in Greater China. “Compared to previous years, leading firms are indeed more inclined to widen internal promotion paths.”
This trend could already be discerned in 2022. According to the Chinese Legal Industry Development Report 2022 released by local legal media, more than 200 Chinese firms surveyed in the report added 1,204 partners in 2022. Among those whose promotion path is clearly known, 63 percent were promoted internally.
“Promotion has overtaken new hires as the main source for firms to gain new strength, and Chinese firms have entered the era where internal talents play a more crucial role,” says the report.
As a leading firm in South China, ETR Law Firm has been actively promoting its lawyers over the past two years, with 33 partners promoted in 2022 and another seven promoted in the first quarter of this year. Shan Tao, director of its management committee, tells ALB that although the firm attaches equal importance to welcoming new partners externally and internally, internal promotion can bring many benefits. “We can have an accurate and objective understanding of a lawyer based on his/her past comprehensive abilities and evaluation, individual qualities, professional competency and growth potential,” so as to select talents with more “credibility and stickiness.”
In addition, “from the operational perspective, lawyers who are already with the firm have a better understanding of the firm’s basic situations, development strategy and operational model, and can play the role of partners more swiftly. From the development perspective, offering promotion opportunities is also conducive to improving cohesion of the entire firm,” adds Shan.
As a “people business”, almost all firms emphasise the importance of attracting, training and retaining young people. The expansion of internal promotion paths can be seen as an important aspect of such efforts. “Active internal promotion proves that our talent training strategy and promotion mechanism are effective, which facilitates and stimulates the development and growth of lawyers in the firm, truly enabling young lawyers to find their sense of belonging and existence, as well as their role and self-positioning, in the firm,” says Shan.
Moreover, in Shan’s opinion, with most firms doubling down on “soft power” these days, internal promotion is also conducive to “deepening cultural integration, generating high brand recognition, and promoting cohesion.” Lawyers who grow up in a particular law firm culture naturally become the best ambassadors for that culture, accelerating the realisation of the firm’s goals and vision.
According to Liu of CRI, more internal promotions are indeed a win-win for both firms and lawyers. Especially in the current climate where the market is generally cautiously optimistic, increasing the number of partners through promotion is a more rational choice and “helps firms maintain cost effectiveness and expand the market more aggressively.”
Liu explains that, as far as her observation goes, the fixed income of new partners and of counsels has not significantly increased compared to senior associates, “which means that the fixed cost of law firms has not significantly increased either.”
However, “through internal promotion, a firm will have more partners on the market, thereby enjoying greater market development advantages and faster recognition of its brand on the market. On the one hand, this can address the fierce competition for existing businesses. On the other hand, it can also meet the demand of new practice areas for more partners to participate in business development.”
In addition, more new partners can also effectively improve clients’ service experience. “Now that these skilled lawyers are taking on new positions, they will think about matters more comprehensively and deeply, while continuing to provide clients with meticulous and thoughtful services. Improving client experience will also help a firm maintain its existing market share and compete for potential business.”
Finally, Liu believes that expanding promotion paths is also a pragmatic move for firms to ride the economic cycle. “In the past, talents could have multiple employment options upon promotion. Nowadays, through internal promotion, firms enjoy the advantage of choosing internal top talents before others. Further, as promoted partners will be continuously reviewed for three to five years, the postponement in talent selection timing helps firms cope with their development amid economic uncertainty,” says Liu.
Will widening a firm’s promotion path eliminate external recruitment opportunities? Liu believes there would be some limited impact. “Since the fixed income of new partners and of counsels has not increased significantly, firms have maintained the financial ammunition to recruit externally.”
Liu also points out that more and more Chinese firms now have clearer talent strategies, with different objectives for internal promotion and external recruitment. In particular, leading firms are very cautious about recruiting in traditional practice areas where they already have advantages, and external recruitment “focuses more on new areas of the market the firms want to explore, or on partners who can bring in new clientele.”
However, widened promotion paths have indeed brought greater challenges to the management capabilities of firms, raising the bar on their human resources management in particular.
“HR must do a lot of work in talent evaluation,” says Liu. “First, promotion involves selection, as a result of which the appraisal criteria of law firms must be more systematic. Second, after becoming partners or of counsels, lawyers should undergo new training, especially market development training. This means platform services in this aspect should also keep pace. Third, the promotion of some means that more are not selected. Firms must take pains to communicate with the latter group. Doing so helps them maintain connections with potential departing employees and gain access to their resources of respective fields.”
Shan shares this view. He says that internal promotion has actually diversified the firm’s talent appraisal criteria. “We review not only the past conduct and performance of lawyers, but also their contributions to brand building, public welfare undertakings and public affairs of the firm, as well as the recognition of colleagues within the firm. In terms of internal promotion, it is even more important to be both principled and flexible, consider both short-term and long-term factors, and make more use of comprehensive indicators rather than a single criterion.”
For external recruiters who work closely with firms, Liu admits that in the future, their recruitment services “also need to be more proactive, which requires recruiters to have more frequent interactions with firms, participate in law firm demand analysis at an earlier stage, and provide more flexible recruitment strategy services.”