Off limits

What you don't know can hurt you.

By J. Larry Tyler, FACHE, FHFMA, FAAHC, CMPE
Chairman and CEO | Atlanta Office

Virtually all retained search firms have a set of professional standards and ethics that govern their actions and set expectations for the search firm, its clients and its candidates. Among those is usually an “off-limits” policy regarding the subject of recruiting individuals away from client organizations.

Not only would a trusting relationship not exist absent a policy, the search firm has the opportunity to create its own business at the client’s expense by recruiting away a key executive and thus creating an opening it can fill.

Keep in mind two key parameters that an off-limits policy should cover:

  1. Duration. The most common time frame is from the beginning of the search until one year after the search is completed. If a new search for the client organization is undertaken, then the clock would restart.

  2. Scope of the organization covered by the policy. Much thought has to go into the definition of which part(s) of the organization is off-limits. If a search firm is doing searches only within the finance area of the organization, then it might be unreasonable to have the information systems department off limits. The same would be true of searches at the corporate level where field operations would not be off limits. The tendency nowadays is for off-limits policies to be a negotiable item as a part of the search contract.  The Association of Executive Search Consultants, of which Tyler & Company is a member, also stresses these parameters in its Client’s Bill of Rights.

Admittedly, most clients would prefer that all executives be off limits forever, and search firms want strict limits on both duration and those whom the policy covers. Absent a discussion about the issue, the search firm will most often opt for a standard policy that may, in some cases, say that no one is off limits. Therefore, you should be forewarned that the existence or lack thereof of an off-limits policy is an important discussion point when engaging a search firm.

One of the most important questions you should ask when interviewing search firms and that should greatly influence your selection is: If a search firm has done work for most of the clients in a particular field, where is it going to get candidates? Off-limits lists are the self-limiting factor in developing a pool of qualified candidates to be recruited and the factor that can ultimately limit the revenue growth of search firms. Obviously, you want to hire a search firm with a lot of experience in a particular area and with a healthy number of qualified potential candidates. That said, if that firm has too much experience, it may not be able to recruit enough viable candidates or it may not be able to approach certain organizations known to harbor excellent talent.

Therefore, when interviewing search firms, be sure to ask:

  1. What is your off-limits policy regarding our personnel?
    The firm should be able to articulate a reasonable policy and provide it in writing.

  2. What organizations are currently off-limits and would be excluded from the search?
    The firm should be able to produce an off-limits list for your industry or region and satisfy your concern that it still has the resources to find a number of qualified candidates.

  3. What procedures are in place to ensure that off-limits policies are followed?
    Hopefully, the firm has a system like Tyler & Company’s that flags all personnel of a client when they are entered into the database. When a new client is brought in, a keystroke automatically flags all personnel employed by the organization who are in the system. 

As with all rules, there always are exceptions. Some organizations don’t mind having members of their management team recruited away. They may have a commitment to providing opportunities for their management team to move up — even out — and may actually congratulate the executive on advancing his or her career. This is one of those quirks we find more often in healthcare than in our corporate practice. And there are also organizations that might like executives to move on for other reasons, such as an imminent downsizing or incompatibility with the current management team. Saving the costs of severance packages is a reason that some organizations do not to feel strongly about off-limits policies.

With off-limits policies there is often a safety valve controlled by someone in the organization who acts as a “go-between,” facilitating contacts with a search firm and internal personnel. This person could be the Vice President of Human Resources or the CEO.

From the client perspective, the general rule is: “Don’t recruit anyone unless I tell you it’s alright.” Off-limits policies can admittedly make it difficult for someone within a client organization seeking a new job to work with a search firm. Our firm makes it a policy that an executive from one of our client organizations can always come to us for career counseling or even to discuss interviewing for a job with another client without compromising their situation. If they plan to go to the next step, an interview with the client, then we have to receive permission from their superior. This policy is somewhat onerous for the candidate, but it protects the client and keeps Tyler & Company from compromising its client relationships.

The future of off-limits policies is murky. The publicly owned nature of many of the multinational executive search firms is such that so many individuals are ending up off limits that some search firms are resisting any limitation on their recruiting abilities.

Because of the off-limits lists, some organizations have engaged two search firms simultaneously on the same search in order to get around any limitations. This was the case, for example, with the CEO search at IBM. Other examples — one of our former clients made it a policy to engage every major search firm at least once a year in order to protect itself as fully as possible from poaching. On a CEO search, the search committee wrote into our contract that the CEO was to be off limits forever.

Whatever the final outcome of all of these changes, you have a responsibility to learn about a search firm’s off-limits policy, how it affects the organization, and the potential impact on you. In today’s competitive marketplace, you have a right and a need to know about off-limits policies.

Reach J. Larry Tyler, FACHE, FHFMA, FAAHC, CMPE, Chairman and CEO, at +1 770 396 3939 or ltyler@tylerandco.com.

Back to Tyler's Tidbits, Winter 2010 issue.