The Ethics of Searching for Executives

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In the bloody war for talent that is being waged on today's highly competitive business ground, trust and integrity form the basis of relationships with clients and candidates and are what executive search consultants value almost as much as the fees they are paid. In an industry that remains completely unregulated, with no professional standards to guide it, search consultants must routinely navigate through murky waters during the process of placing senior managers with companies. Ethical issues surface regularly that are, unfortunately, usually given little or no consideration.

GENERALIST VS. SPECIALIST
In these days of industry specialization, gone are the halcyon days when executive search consultants built broadly based generalist practices. Nowadays most search firms, to build their reputations and expertise quickly, work within areas of industry specialization such as telecommunications, health care and consumer packaged goods, to name but a few. Therefore, when a search firm represents competitive companies simultaneously, a question about whether an inherent conflict exists is bound to arise. Granted, working within the confines of one or two industries is considered to be particularly beneficial to client organizations, presumably because of the consultant's in-depth knowledge of industry issues and key players. But what about confidential information that could so easily be leaked, either deliberately or inadvertently, to a competitor by the search consultant? Jennifer Fantini, an employment lawyer with Borden LadnerGervais, thinks the problem boils down to a perception of loyalty because it is well nigh impossible for one search firm to act in the interests of two competitors at the same time.

RECRUITING FOR COMPETING ORGANIZATIONS
This is to say nothing of the temptation to recruit a sterling candidate that had previously been placed with one client organization and then place them with a competitor. It's the old business of pushing them in the front door and yanking them out the back. Frankly, search firms have rather interesting policies with respect to off-limits restrictions in that they feel justified in plucking a placed candidate from a client organization if they have not received any business from them over a period of several years. Many search firms are also happy to announce this policy to the client organization as a veiled threat to continue to give them business.

Phil Wallace, an executive with Aon Consulting Inc., raises the inevitable challenge that arises when a candidate is equally acceptable to two competitive organizations. The search firm may be forced to make a choice about the company to which the candidate should be referred. In such a situation, Wallace feels, the same candidate cannot be presented to both companies. Moreover, if one company has retained the services of the search firm, this company is paying for all candidate identification that results from that particular search. To introduce a candidate found in that assignment to another employer might justifiably raise the indignation of the one footing the bill.

Concurrent representation of two competitive companies, while not necessarily unethical, might also detract from a harmonious long-term relationship between client and search firm because it becomes impossible to represent both companies' interests equally.
Cathy Sprague, a human resources executive with the Canadian Broadcasting Corporation, points out that one company might even recetve less service if they don't pay high enough fees.

FEES APPROPRIATE TO SERVICES
The manner in which professional fees are determined in the search

business is another question for ethical debate. Traditionally, executive recruiters charge a percentage, somewhere between twenty and fifty percent, of the candidate's expected income for the first year. While this approach may be a license to print money, it brings up the question of whether a link can be made between the difficulty and duration of the assignment and the actual fee. Do search consultants risk tripping into an ethical pitfall if they push the placement of candidates with the highest compensation? Is, in fact, some of the objectivity in finding the best person for the role lost in doing so? People who have procured executive search services agree that it may not be ethically wrong to charge as such; however, a flat fee that reflects time and effort would be fairer, wherein the client is able to contain costs from the outset of the assignment. Mark Wilson, a human resources executive with Priszm Brandz, says nothing irks him more than a search firm that charges thirty percent for an assignment, then reaches into their data base of existing candidates, and a week later calls the company to say they have found the ideal candidate and the search is over. Paying this kind of percentage for an exhaustive review of the market and available candidates is fine; however, just pulling a rabbit out of a hat and then charging as if an extensive search had been done is completely unacceptable in his view.

ACCURATE ROLE DESCRIPTIONS
Misrepresentation of an assignment by the employer or search firm not only poses an ethical dilemma but, more importantly, a legal one. A written role description that clearly outlines the hiring criteria is a great way to avoid this potential snare. The employer and search firm can be held liable for negligent misrepresentation as was decided in Queen versus Cognos Inc., [1993] 1 S.C.R.87. Norman Grosman, a Partner with Grosman, Grosman & Gale points this fact out in his article entitled, "Headhunter Or Headache". In highlighting this and several similar cases, he shows that both employer and search firm have a duty "to ensure that representations made are accurate and not misleading." The search firm has a legal and ethical responsibility to communicate effectively with candidates about circumstances they might be walking into.

On the other hand, search firms have an obligation to disclose the way in which they intend to work to the company they are representing. Doug Lawson, a human resources execunve with Sanofi-Synthelabo Canada, experienced a significant problem with a search that was conducted for their company. The contact at the search firm was not the person who actually did the search. As a result, a number of good candidates were turned off by a less-than-mature approach to senior candidates by a junior who was assigned to the file. Now Lawson advises the company that retains the search firm to find out who will actually be performing the work right from the start. Having access to that person throughout the assignment is also very important.

CHECKING REFERENCES OBJECTIVELY
Lawson also sees a huge conflict of interest if search firms conduct their own reference checking. If the search firm has a vested interest in placing a candidate and getting paid for this, he wonders how objective they can really be, particularly in reporting aspects of the person's profile that may have a negative effect on fit and future performance.

In summary, some of the ethical pitfalls that employers and search firms should be aware of may make the difference between building a professional and long-term relationship that can stand the test of turbulent economic times and one that is superficial. The risk of ignoring these issues may even have rather serious legal ramifications that could lead to explosive relations for all concerned.