Veteran recruiters say the policy can be a real hindrance for large multinational search firms — firms that generally have extensive client rosters. Conversely, the hands-off policy gives small boutique firms a bit of a leg up, since they tend to run into fewer conflicts of interest when lining up job candidates.
Still, hiring experts note that big search firms maintain big data bases, and thus have access to far greater pools of executive talent. Problems do arise, however, when a recruiter is less than forthcoming about its hands-off policy. In fact, industry insiders confirm that clients are sometimes completely unaware that such a policy exists.
That can spell trouble, particularly when an employer does not know that certain companies — or even sectors — are off-limits to a recruiter.
IBM’s board of directors was apparently aware of this ethical restraint placed on recruiters when it reportedly hired two executive search firms to help find a new chief executive in 1993. Heidrick & Struggles eventually led IBM to Lou Gerstner, who signed on as the company’s new CEO.
Then again, not all companies have the financial wherewithal to bring in two recruitment firms for one search. For companies with more modest means, Lenarsky recommends that an employer discuss a recruiter’s hands-off policy before inking a search deal. In addition, Lenarsky advises corporate clients to ask to see a list of a search firm’s clients from the past two years.
(Read more about why transparency is also touted as a sign of good financial reporting in “Your Finance Department is Second-Rate.”)
7. Bounced Background Checks
In extreme cases, superficial background checks of prospective hires can lead to lawsuits and embarrassing headlines.
Miami-based Mt. Sinai Medical Center, for example, recently sued recruiter Heidrick & Struggles International for the failed performance of an administrator. The hospital alleges that the search firm should have known and revealed that the administrator apparently had a track record of mismanaging the finances of other hospitals.
In another case, Chicago-based ad agency Fox Associates Inc. sued contingency search firm Robert Half International for placing a convicted embezzler in its midst — an embezzler who then stole $70,000 from Fox. A judge threw out the suit, however, noting that a recruiter “is in the talent business, not the criminal investigation business.”
Richard Reibstein, a partner with Wolf Block Schorr and Solis-Cohen LLP, says there’s real only one way an employer can ensure that a senior level candidate has gone through an exhaustive background check: do it yourself. “Since when do [experienced executives] rely on someone else to evaluate something as important as an senior-level hire?” he asks.
If a company does ask its search firm to conduct a background check, research expert David Carpe says the client needs to know how the investigation is being conducted. Employers don’t always realize, for instance, that search firms often farm out background checks to research firms.