Hiring a big search firm? Get ready for conflicts of interest.

October 17, 2017

Conflicts are nothing new in the world of executive search.

They typically go something like this: Search Firm X works for a large bank on a critical hire. That bank is attracted to talent that resides at their biggest competitor, but when said bank indicates as much, Search Firm X divulges that they are doing a similar search for that very competitor, thus making the competitor’s talent off-limits.

So much for getting the best talent for the role you’re looking to fill.

I have never understood why clients stand for this.

One would be hard-pressed to find another services-oriented industry where the “offering” is so constrained as it is in search, and all due to conflicts.

These conflicts, by the way, are due to greed.

Partners sell as much work as they can, independent of whether a conflict may impede their ability to solve the search. It happens in both retained search firms and those with a contingency element. It’s like Mel Brooks’ "The Producers", wherein two musical promoters oversell interests in a Broadway play, only to find that the show has become the talk of the town, turning their get-rich quick scheme on its head. Except that in the world of high-stakes executive search, this is no laughing matter. 

Take for example the case of a major Canadian company who sought to replace its CIO, after she announced her retirement. A big search firm arrived to pitch for the mandate. It presented its impressive credentials, and was awarded the search.

However, the search firm did not disclose that it was also working on a CIO mandate for one of this client’s competitors. This fact eventually did surface when they presented their list of candidate profiles. Next to a few of the most promising names was an asterisk, noting the “sensitivity” of these candidates to the search firm. Sensitivity meant that the candidates worked for the search firm’s other clients.

That's what we mean by conflict. (An avoidable conflict, by the way.)

Returning to our story, this left the client with a tough choice: proceed with their existing search or cancel the mandate and re-launch with a new search firm who didn't have such conflicts. The latter would have wasted months of work and delayed the process further.

Worse still: Throughout this time, several of the company's competitors learned about the stalled search and launched their own CIO search, attracting - and signing - top candidates for themselves. 

In the end, due to these conflicts and a limited candidate pool, the company had to expand its search to the US, which delayed the hiring decision. It also forced the company to pay up to make the role attractive to U.S. candidates.

This scenario would - and should - never occur with truly independent firms if they operate with a no-conflicts policy. 

Client companies benefit from the advice of independent search firms who limit themselves to one functional role in the same industry at the same time, thus preventing conflicts. If they're worth their salt, search partners should never deviate from this model - whether at a big search firm or a boutique.Why? It goes to their agility, professional backgrounds and their approach to the search profession. That said, most Canadian search boutiques, in particular, are “functional-role specific” (sales leaders, IT executives, etc.) or limited to a specific industry (such as financial services or energy). So, while boutiques develop a specialty in a given space, most are not positioned to serve as a broad thought-partner on talent since they have limited experience hiring beyond a certain number of roles or industries. As such, companies have to hire multiple boutiques for their various searches...on top of having limited access to talent since their search partner works for all of their competitors.

Generalists adopt a much better approach where, together with a network of experts (practitioners with expertise in specific industries and positions) , they place senior executives across the functional role spectrum in a range of different industries. The benefit to you from this approach is an absence of conflicts and a far greater range of candidate choice, as well as a single provider to address your various talent needs.

Big Search firms and boutiques may have some amazing people working on your search, but these firms are also working for your competitors at the very same time. When you’re seeking to fill a key executive role, the only thing that should matter is fast and unfettered access to the best available talent. In other words: your interests, and not those of your search firm.