The bane and bonus of headhunters

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A cowboy industry in pinstripes. That's one recruiter's description of headhunters. Variously called cowboys, second-hand car salesmen, or even carbuncles by HR professionals, 'people brokers' do not rank highly on the financial services hierarchy of respect. Events of recent months suggest that they may be set to slip further still.

A leading City of London headhunting firm stands accused of obtaining a bank's headed paper and using it to send spurious faxes in an attempt to obtain names of employees. Another headhunter, Sheffield International, is engaged in a legal battle with Lehman Brothers over the bank's alleged failure to pay its headhunting fees.

Wrangling over fees is nothing new, particularly where relationships with headhunters are not long established and the stakes are high. Fees are falling anyway. In recent years, the rate of commission charged by headhunters has dropped below the traditional one third of the candidates' salary. Capped rates are common and leading firms such as Korn Ferry profess a greater willingness to accept payment on a deferred basis.

But lower fees alone will not redeem headhunters it is not the terms of payment that irks banks. It is the industry's willingness to resort to the techniques of industrial espionage.

The head of recruitment at a European bank says: 'Headhunters are the bane of my life. Only last week someone pretending to be the head of HR called our Asian offices and asked for a list of employees' names.'

Names are a valuable commodity. All headhunting firms employ researchers to 'map' the people working in a sector. If necessary, they will indulge in what is euphemistically referred to as 'covert research'. According to the head of HR at an international bank based in London, this usually means concocting false names and personas in an attempt to glean information. A graduate research student looking for data, or a conference organiser gathering a list of potential speakers, are among the most popular Trojan horses. Receptionists and junior HR staff are routinely warned to be on their guard.

Although banks claim to be frequent recipients of disingenuous calls, few search firms admit to using covert techniques. Instead, all point the finger at shadowy 'unprofessional' individuals who work contingently on jobs as they come up, and who do not enjoy the retained fees paid to the so-called 'blue-chip' headhunting elite.

But recruiters in banks do not share in the conviction that unethical practices are restricted to the minority. 'All search firms behave badly,' says the head of recruitment at a European bank. Others agree. One head of HR says: 'It is general practice that they will resort to any means necessary to get information. All will deny this and all will claim to offer a 'secret ingredient' that prevents them resorting to these techniques, but it is rubbish.'

According to banks' recruiters, it is independent researchers that are the greatest problem. 'Researchers working from home are frequently behind misrepresentative telephone calls,' says one head of recruitment. Smaller firms frequently use independent researchers, but large headhunters also employ outside assistance when necessary.

Companies that regularly use freelance researchers deny that standards are lower. 'We spend a lot of time getting to know these people. They have usually come from a blue-chip search firm and have a high degree of credibility,' says Colin Bewick, a consultant at Robert Kimble Associates.

For their part, freelance researchers claim that the pressure to bend the rules comes from the headhunting firms themselves. 'We are under pressure from our clients to get these names at any cost. They don't ask us where we got them from,' says one leading financial services researcher, who claims to have worked for a headhunter who was willing to provide insurance in case she was sued during the course of her work.

It may not always be against the law to employ covert research techniques. Although using a firm's headed notepaper without their permission is a possible infringement of copyright, masquerading as someone else is not necessarily punishable in itself.

Fraser Younson, a lawyer at McDermott Will & Emery, says that if the names being sought are already in the public domain, as they often are, misrepresenting oneself is not necessarily illegal. Only if names are confidential may it be argued that someone is being induced to break that confidentiality. Alternatively, the misrepresentation may amount to the common law tort of deceit, says Younson, but the employer would have to show that the misrepresentation had caused it actual damage.

An absence of regulatory supervision facilitates the use of underhand techniques. 'Headhunters are the last bastion of unregulated practice,' says the head of HR at an international bank.

Government plans to introduce future regulation are currently targeted at search companies operating in the temporary sector. According to Dr Geraldine Kaye, chairman of the Association of Search and Selection Consultants (ASSC), this is misguided. Kaye is not convinced that government regulation is the answer: 'The existence of professional bodies, such as the ASSC, enables the industry to regulate itself. If a complaint is upheld against a member of the ASSC, their membership is revoked.'

Kaye says that banks must also bear some of the responsibility for improving standards: 'Cowboy firms should not be used just because they get results more quickly than professionals.'

Recruiters deny encouraging cowboy practices, but there is a willingness to turn a blind eye. One head of recruitment says: 'Headhunters are like estate agents: We hate them when we are losing someone, we love them when we are buying someone. They are a necessary evil. All's fair in love and war and headhunting.'