Monday, 17 December 2012

The unprincipled Agent

On whose behalf does the agent work?

The procurement world is one immersed in the legal and economic world of Agents. The Chief Procurement Officer is an Agent of their organisation (the Principal) when they represent the organisation in negotiations. The CPO is required to act in the best interests of the organisation and not for their own personal benefit. Equally those dealing with the buyer can be expected to accept that the buyer has the authority to  make commitments on behalf of the buying organisation.

When the CPO lets a contract, as part of a recruitment process, for someone to run an assessment centre, who is the Principal and who is the Agent? To me the Principal is the buying organisation and the provider is the Agent. The provider will be paid by the buying organisation and not by the successful candidate - indeed the provider can expect payment whether or not a successful candidate is found.

When the organisation lets a contract though for intermediary services, say, Executive Search or interim placement services, who is that Principal and who is the Agent? 

Let's assume a headhunter contacts the CPO and asks if they would be interested in a potential new role, who is the Principal?  Is the Principal the CPO who will be represented by the headhunter or the organisation seeking the new CPO who will pay for the headhunter when a shortlist of potential candidates is provided? 

When the scenario is the placement of an interim CPO, who is the Principal and who is the Agent? The assumption of the buying organisation is that the 'interims' provided have been checked by the placement agency and that they have completed the relevant due diligence. Isn't it?

These questions were triggered by a report in today's Financial Times on Page Executive's approach. Page are alleged to be now taking a more cautious approach to the organisations they place candidates with. Not, it appears, to protect the buying organisation, the 'headhunted' or the interim. but to protect Page's financial investment should the buying organisation, which may be among those who, in Page's eyes "live week by week", default on Page!

If an organisation wants an interim CPO, perhaps because they realise they need a financial 'turnround', it implies Page will managing Page's risk exposure and not those who may have assumed they were the Principals, who have a lot of 'skin in the game'. Is this yet another change to the world of procurement as a result of the financial crisis?  Either way, it strikes me that before you jump to the conclusion that you are the Principal and the Agent is working on your behalf, perhaps reading the small print may prove advantageous and recalling: 'caveat emptor'. 

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