Referral Fees, Success Fees, La Mordida Is La Mordida

Jason Averbook did a great post today on the sleezy (my term, not his) practice of so-called consultants who accept payments from vendors for favoring them in some way, e.g. putting them on the short list when they’re assisting end-users with vendor evaluations and selections. His post got me thinking, and the beauty of my now being a blogger is that to think is to write.

I’ve been offered these arrangements by some less than reputable vendors — please note that the best HRM software vendors wouldn’t think of doing this — and even by some naive vendors whose experience up to that point was that this is the way our industry works. And we’re not talking here about clearly advertised VAR (value-added reseller) arrangements in which one firm agrees to resell the products of another, adding (one hopes) value to those products via product extensions, implementation services, etc. VARs are understood to be biased in favor of the products/vendors they resell. So-called HR systems consultants are understood to be working solely for the end-user when the end-user is their client, hence Jason’s and my outrage at these referral/success fee practices.

And there are more subtle versions of “pay to play,” including thinly-veiled puff pieces that showcase a specific vendor or appear to prove a specific vendor’s point of view written by so-called analysts/analyst firms who’ve been paid by the vendor(s) in question to do this work, fees charged to vendors by producers of various vanity-style speaking engagagements/podcasts, and reduced consulting fees charged to end-users by so-called consultants during the vendor evaluation and selection because they know that they’ll be suggested by the “friendly” selected vendor for the implementation work to come.

The bottom line. There’s a terrific Mexican expression for these arrangements, la mordida, which is translated literally as “the bite.” And la mordida by any other name is still sleezy business. If you’ve been a victim of these arrangements, perhaps it’s time we named names.

Full disclosure: I work with end-users, with a wide range of HRM software vendors and outsourcing providers, and with investment firms that are interested in our space. My standard consulting agreement says that end-users with whom I work are told about any past, ongoing, even prospective work with vendors/providers that may be relevant to my work with them. I do all client work, regardless of the nature of the client, on the basis of clearly visible time and materials arrangements. I have never entered into any arrangement remotely resembling la mordida, and my vendor/provider clients are quick to say that I’m as hard on them as on non-client vendors/providers, in both my consulting and analyst roles, perhaps harder because of having greater knowledge of my client vendors/providers.