Luo Yingchao talks about Zhiheng's change: there is no standard answer for the governance of large institutions
Author|Ya Zhe (WeChat ID: ask12340)
Source: Zhe Xiang (WeChat Official Account)
To be honest, without Zhiheng, I think Director Luo might have found it very difficult to go live on public platforms. So, in my eyes, this was a truly special conversation.
I’ve set the theme of my livestream as: Zhiheng has no secrets. I think this is quite in line with Director Luo’s style, because for someone who thinks deeply and acts decisively, there’s no need to beat around the bush—everything can be discussed, as long as the conversation is substantive.I’ve compiled some of his key points and divided them into five sections, which I’m sharing with you all today.
Governance at large institutions is a global challenge.
But large-scale chemical transformation is an objective trend.
Director Luo believes: “The governance of large organizations is a global challenge.”
He said this was not his personal judgment; there is a book titled “Managing the Modern Law Firm: New Perspectives and Challenges” that mentions:
The most traditional structure of legal services is the “hierarchical apprenticeship” model, where everyone knows one another well, much like an extended family, and operations are managed by a “housekeeper.” Under such a system, it is very difficult to implement reforms based on the logic of corporate management and the division of labor that emerged after the Industrial Revolution.
But just because it’s difficult doesn’t mean it won’t happen.
Director Luo’s assessment is that,Large-scale chemical production is an objective trend driven by customer demand.. It’s not about any one company wanting to grow bigger; rather, it’s because customers require service capabilities that offer broader coverage, faster response times, and the ability to mobilize more resources. This demand is compelling law firms to grow, but once they do, the governance model that worked in their original close-knit community can no longer function.
He used an analogy: In a local office with five hundred or a thousand people, the core team might consist of only a handful of individuals, and they can still maintain “air contact”—meaning they can still meet and communicate in the same space. But if it grows any larger, the partners won’t even know one another—just like shareholders in a publicly listed company who don’t know each other. How would you manage that?
Therefore, his conclusion is very straightforward:A large organization must have organizational strength.. If a law firm grows to a certain size but lacks organizational strength, it is merely a shell without substance.
This isn’t Zhiheng’s choice; it’s an inevitability of the industry.
Why choose Zhiheng?
Judgment across five dimensions
Director Luo did have his moments of hesitation.
Before officially joining Zhiheng, he conducted a PEST analysis: across the four dimensions—political, economic, social, and technological—the first three all presented uncertainties—his industry was at the forefront of a major trend, the stance of the relevant authorities remained unclear, and the attitudes of peers and clients were also uncertain.
But what ultimately made him decide was the dimension of “technology”—not the kind of technology associated with AI, but the technology of organizational models.
He believes that Zhiheng has one core advantage:The operations management side boasts strong organizational capabilities—through direct investment, direct operation, and direct management—this model is capable of mobilizing the entire national market.
The broader economic environment is focused on eliminating local protectionism and integrating the national market, and the legal profession is no exception. Clients require cross-regional services, and lawyers also need a cross-regional collaboration network.
He used the “Five Factors” from The Art of War to summarize his own judgment:
The first is the Way.The trend toward large firms is sweeping the industry; firms of significant scale are emerging worldwide, and China is no exception.
The second is Heaven.Although China’s economy is facing a retreat in globalization, the globalization led by China, the international expansion of Chinese enterprises, and the development of a unified domestic market represent an unprecedented and possibly unrepeatable opportunity.
Third is the earth.Zhiheng originates in Shenzhen, benefiting from a unique geographical advantage—Shenzhen serves as a quintessential example of China’s distinctive government–business relationship, combining the dynamism of a market economy with the governance capabilities of a proactive state; it is neither a planned economy nor a fully laissez-faire market.
Fourth is the general.He believes that law firms need two types of people: practicing lawyers and professional managers. He has not been involved in operational work for seven years now, focusing exclusively on management—exactly the kind of “professional manager” talent that is in short supply in the market.
Fifth is the law.Institutions can be improved, and there are already precedents to draw upon for the model; the key is to ensure that the institutions are robustly implemented.
After going through these five dimensions, he said that “winning this battle is indeed possible.”
Security and Growth
Two questions that Zhiheng must answer
Director Luo said that after two months on the job, he is still figuring out “what I can do,” but “what I should be doing” is already clear.Four characters:Safety, growth.
Let’s start with safety.He believes that the most relevant model for governing large institutions is the system of the National People’s Congress. The masters of the country are the people; the masters of a law firm are the lawyers. How do lawyers exercise their rights? It depends on the governance mechanisms.
He proposed dividing power into three branches:
Legislative power-- Rule-making should involve everyone; Zhiheng needs a “basic law”;
Executive power--The Executive Committee executes tasks efficiently;
Right of supervision— Lawyers exercise their right of supervision.
In the process, he specifically emphasized transparency, stating: “Why are listed companies subject to mandatory disclosure requirements? Because they are managed by agents, and the best way to reduce agency costs is through separation.” Huawei is also a non-listed company, yet it still uses the Big Four auditing firms. Although Zhiheng is not a listed company, the principle of “transparency” can be implemented immediately. He said something very harsh:In the short term, institutions influence efficiency; in the long term, institutions *are* efficiency.Now, let’s talk about development.
Director Luo categorized growth into two types: extensive growth and intensive growth. Extrinsic growth means scaling up.He said that Zhìhéng’s current scale is too small, with too few coverage points, and that it needs to continue expanding into more cities to fully penetrate the core markets. Only when a sufficiently large “domestic market” is established can the foundations for specialized division of labor take root. He cited Adam Smith’s famous example of the pin factory:If one person does it alone, they can only produce a few units per day; with division of labor, production capacity can be expanded indefinitely. The same applies to law firms: for matters that junior lawyers cannot handle, senior lawyers can be brought in; for cases where senior lawyers’ time is not cost‑effective, the work can be delegated to junior lawyers. Once partners have established their areas of expertise, scaling up delivery requires productization and organizational structuring.
However, scaling is not an end in itself. He stated a very crucial point of logic:Scale is a means to achieve endogenous growth, not an end in itself.The “inward growth” approach aims to address the development needs of three categories of lawyers: junior lawyers, core lawyers, and partner-level lawyers.The growth path differs at each level:
What young lawyers lack is professional training and practice opportunities; what senior lawyers need is client acquisition skills and AI-driven empowerment; what partner lawyers require is the ability to scale through productization and organizational structuring.
He is already working on three initiatives: conducting on-the-ground research across the country, carrying out growth assessments at three different levels, and conducting surveys of specialized committees and teams with core competencies. Next, we need to implement “SMART” initiatives—specific, measurable, achievable, results-oriented, and time-bound.
Inanimate management systemEnsure that the organization does not rely on any single individual.
This is the part of the livestream that left the deepest impression on me from Director Luo. He said that there are two levels of difficulty in institutional design: one is to design with the assumption that “a certain individual remains unchanged”; the other follows a design logic in which even that individual is replaceable. Clearly, the latter presents a completely different level of difficulty, but to excel in management, one must master the latter.In other words, designing the governance framework of Design Zhiheng with the assumption that “Luo Yingchao remains unchanged” is vastly different in difficulty from designing it with the expectation that “the mechanism will continue to function even if Luo Yingchao leaves.” However, he made it clear that what needs to be built is an inanimate management system—one that can continue to function even without him; any other individual who meets the job requirements could take his place.
What is a “non-living management system”?
In other words, the organization should not depend on any individual’s emotions, health, or whether they stay or leave.People become roles, roles become positions, and when positions are combined, they can perform functions.Just like in a national organization, some positions can continue to function normally even when they are vacant.
He directly pointed out the problems plaguing many law firms: in some cases, their rise is meteoric, yet their decline is equally sudden, with the entire firm relying on a single individual. As soon as this person moves—whether due to birth, aging, illness, death, or any other reason—the organization will collapse. Therefore, it is essential to establish a tiered structure and clearly define roles and responsibilities, so that the system itself generates momentum rather than relying on individual heroism.
This is his most fundamental understanding of “scaling”:It’s not about having a lot of people; it’s that the system can run itself.
Government–enterprise relations
Zhiheng’s Management Philosophy
Director Luo used a key analogy to explain Zhiheng’s management model:The relationship between the government and enterprises. The management team is akin to the “government,” while lawyers are akin to “market entities”:The government should not engage in business activities within enterprises. Its responsibilities include attracting investment, optimizing the business environment, developing robust supply chains, and supporting strategic industries. The market should include both mega-sized enterprises and small and micro businesses, as well as both high-tech companies and traditional enterprises.
“Managers should not be involved in day-to-day operations, but they can create the right environment and foster a thriving ecosystem.” That’s why he won’t simply copy the Kuangzhen mode—its attributes are different.Kuangzhen is a client-centric law firm, while Zhiheng is a lawyer-centric platform.The business development models are entirely different; they are not addressing the same issue to begin with. However, this “government” is not a “night-watchman state” in the Western sense, but rather a Chinese-style “proactive government.” We must not only deliver high-quality basic services but also proactively invest in key areas—such as new‑generation productivity, overseas expansion and international business, and the capital markets. Even if we are not yet strong in these areas today, we must build up our capabilities to become leaders. This is the inevitable path for building a world-class institution when viewed over a ten-year horizon.
Written at the end
Director Zhu Yongjian, as the Director of the Zhiheng Foshan Management Committee, personally witnessed the launch of Zhiheng 3.0. He summarized three noticeable changes he observed after Director Luo’s team joined: First, be open and honest.Finance, data, and rules are all made public. Second, team empowerment.The headquarters comprises the Strategy Department, Talent Department, Information Department, Technology Department, and more, with an entire team dedicated to supporting the branch offices. Third, democratic institutionalization.Registration is now open, inviting everyone to participate in drafting Zhiheng’s “basic law.””。 Director Luo’s attitude toward “public opinion” is also quite interesting. He said:“If, after going to such lengths, I still can’t handle things properly—so much so that any attempt at resolution sparks trouble or public backlash—it just means I lack resilience. Once I’ve grown stronger, who cares what others do?” He even said, “We should thank these people”—just as a virus, by activating the immune system, ended up strengthening Zhiheng’s cohesion. He is even more convinced that Zhiheng belongs to the people of Zhiheng, and sovereignty resides with the lawyers. In short, I have a very clear sense that the Zhiheng train is hurtling toward the future at a pace none of us could have imagined. Because Zhiheng, who is designing a system ensuring that “even after Luo Yingchao leaves, the internal mechanisms will continue to function,” is destined to be different.The rest is up to time.
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