A Conversation with Tomasz Wardynski

Last week I had a chance to sit down with Tomasz Wardynski, founding partner of Wardynski & Partners, based in Warsaw, which is now a firm of close to 250 people including 137 lawyers with 22 partners, of whom 9 are equity and 13 are salaried or limited partners.

I was looking for perspective on the Eastern and Central European markets, and Tomasz was more than prepared to oblige.

"2010 will be very very tough," he began.  "There is no more inertia" remaining in the system from the end of the boom.  Therefore, he opined, the challenge for senior management is to "change the partners' attitudes."   Tomasz was pellucidly clear that it was not optional for partners to decide whether to go along.

"For the first time in my firm, the equity partners will need to make substantial investments of capital."  And if someone resists making the capital contribution?  "Well, then, they won't be an equity partner, will they?  That is always their choice."  And:  "It's really very simple:  You need to make sure you have fewer people than there is work to do."

Recently the firm has shifted to pure lockstep compensation of partners.  Previously, there had been a small retention, which was then distributed in the discretion of management, but they decided to end it because "it involved too much emotion: not worth it."  Progress through the lockstep is based on a subjective evaluation of performance plus an expectation of 2,000 hours/year, "which is not very demanding, after all."

"How do you train people?"

"Well, this is an issue because the universities are not very good at it.  It's a combination of watching, lectures, and the firm's own 'development center.'" Training clearly represents a substantial investment by, and commitment on behalf of, the firm.

The path to partnership is 8 to 10 years, during which associates are paid based on merit:  "Some of them make more than limited partners."

How does he feel about media coverage of the legal industry?

"Rankings are put together by smart media outlets to play to the vanity of lawyers."  And, he added in emphatic words, those rankings are extremely detrimental to the profession.  "Perhaps the only media phenomenon that's more destructive than rankings is the American Lawyer profits-per-partner numbers.  This is simply awful; they have transformed the profession, and they claim innocence.  Preposterous."

Clearly, Tomasz believes the AmLaw PPP numbers are not only a caustic influence on behavior, but borderline fraudulent.  The problem with the PPP numbers' accuracy?  "Running a law firm is a cash business.  But if I want to inflate profits by accruing some expenses and some revenues, I can come up with any numbers you like."

Tomasz expressed a strong belief in highly professional management of his firm.  "Five years ago we started introducing professional management systems into the business--human resources, information technology, knowledge management, and coaching for all lawyers."  Surely not all lawyers, I interjected?  "Well, yes, all.  And we have a very strong CFO who manages our finances extremely closely."

What's your biggest management challenge in this environment?

"The hardest problem to deal with is people who are very talented but who don't have enough work to do.  That's the hardest by far."

What else are you dealing with that's new?

"Last year we decided not to pay out profits from the firm above the level of partners' standard draw.  This is a protective measure."  And how long will you keep this in place?  "I foresee a downturn in the shape of an 'L,' not a 'V.'"

Let's step back, I suggest:  Why did you decide to start the firm?

"I had no choice but to start the firm.  I had clients needing to get deals done." 

And did you envision its growing so large?

Without missing a beat:  "Yes.  We were clearly in the right place at the right time."

What other issues are you facing today that are new?

"The next issue will be whether clients can pay.  The challenge of course is that you can't really protect yourself because you can't demand payment up-front, and you can't sue clients."

What else?  How about keeping the talent pipeline flowing?

"Yes, absolutely!  You cannot stop recruiting, so all you can do is to share the risk with people, to the extent they can bear it.  This recession may last a long time."

Other worries?

"That state intervention--not just in Eastern Europe, but in the US, the UK, conceivably even Asia--may suppress investment and entrepreneurship.  The very notion that some institutions are 'too big to fail' is monstrous.  Failure is what some of these banks richly deserve; they have it coming to them.  The namesake of your site would be apoplectic."

How's the regional CEE environment?

"Poland actually has +0.8% growth this year; it's not great, but it's greater than zero.

"Hungary has been suffering for two years.

"Latvia is very bad.

"Ukraine:  Disaster!"

But overall Tomasz remains an optimist: 

"Life is strong, and it will continue.  The economy will be boiling again in places where it seems unimaginable today. 

"What really counts at this moment is discipline.  People have to be mobilized.  You cannot lose...[he appears to be momentarily, and uncharacteristically, searching for a word].  You cannot lose speed!

"Even the strong-willed, independent, and autonomous partners have to believe in central management in this environment.  It's too dangerous not to.   Not only our livelihoods, but the welfare of our families and our children are at stake.

"Life is not a fairy-tale."