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July 11, 2015

The DHR International Way

This post is split from another post.

David Hoffmann has often said to people at DHR that "DHR is the most successful search firm ever". He is right... at least for the Hoffmann family, DHR have been a great success. DHR are a great example of a ruthless, shameless, unscrupulous business. The business model has made David Hoffmann the most successful executive search consultant ever.

This is "The DHR International Way":
  1. Make DHR International look more substantive than it is. You will find other posts on this web site that detail how DHR International exaggerate their significance, e.g. by claiming to have more offices than they do, to be on more continents than they are on, by exaggerating their size, by having inaccurate bios and by having a large external and internal PR team. This makes DHR International look - at first glance - like a viable alternative to prospective consultant recruits and clients. Don't judge a book by its cover!
  2. Hire as many consultants as you can, generally from other firms. By hiring from other firms, DHR International offer very little in the way of training. It keeps the costs down and profits up. It does not matter if there isn't an office in a market - in fact, DHR International prefer lots of small offices as it allows them to inflate their size
  3. Make lots of acquisitions. Over the years, DHR have made lots of acquisitions usually funded by earnouts; in other words, the consultants get paid for their business if they perform. We've tracked down 19 acquisitions, not including the selected assets of CTPartners. These are Apogee Executive SearchBarrett WebbBeechTree Partners, Boyden Chicago and Upper Montclair, Dragonswood AdvisorsEMS ConsultingESLGundersen PartnersHylê Human CapitalJade GroupMAC & AssociatesThe Magellan GroupPrestonwood AssociatesR.W. Elam & Associates, Stratford GroupTurrini AssociatesVenni Partners and Woessner & Associates. Very few of the consultants from the acquired firms remain and are burdened by non-competes when they work out that DHR International are not a cultural fit. You will find very few of the acquired consultants still there today.
  4. Use an "Internal Recruitment" team. DHR employ a large number of "internal recruiters" or "talent acquisition" directors. Some of them are listed on the DHR web site. Those currently employed include James AbruzzoBuckner BellAmélie BonnevilleApril DruryAmy O'NeillLorenz Pestinger and Kan Phongjaroenwit. The team is led by Serge Lamielle, the Vice President of Global Talent Management. It is a large team and they are not client facing, but call every executive search consultant (or recruiter) they can find and try to "sell" DHR to them. They are rewarded on a success basis and so will do whatever they can to get people in. 
  5. Offer incoming consultants impressive titles. DHR give many new recruits titles such as "Managing Director", "President" or "Chairman" of an office or region, "Global Head" of a Practice Group or even "Board Member". Other search firms promote people to senior roles based on many years of proven performance, but DHR International uses these titles as a carrot to "get 'em in".
  6. Offer incoming consultants illusory upside. Many of the most senior hires (Chairs, Presidents, Managing Directors or Global Heads) are offered profit shares of their regions or practice groups. However, DHR manipulate the profit result so that the upside does not get paid - they say they are a private company and keep the numbers opaque. See, for example, the post regarding Adam Charlson
  7. Make a big PR splash. The DHR International web site shows a large number of press releases for new consultants and acquisitions. DHR quickly delete the press release when the person leaves as if they never existed. (Fortunately, the Internet keeps a record). 
  8. Work with a "media outlet" who will tell your story. DHR have a close relationship with Hunt Scanlon Media, who also run a PR company. As a result, Hunt Scanlon will readily put across the DHR story, repeating DHR's spurious claims without any verification.
  9. Use a commission-based pay system. As revealed in the litigation covered in other posts on this web site, DHR employ consultants on a commission-based model. It means that fixed costs are very low. If consultants sell assignments, then they get a higher payout than they would at the leading global firms, but DHR International still keep the majority. 
  10. Hold onto commissions for as long as possible. According to the publicly available information in the lawsuits posted on this web site, some consultants are on an annual commission plan where commissions are paid in April of the following year: this means that DHR International have the benefit of the "float" of fees for an average of ten months! Where disputes arise, they tend to happen in the lead-up to the commission payment in April and DHR International gets to keep over a year's worth of commissions.
  11. Keep costs low. Compared to superior firms, DHR do not invest much in anything other than PR. For example, the lawsuits on this web site show that DHR get consultants themselves to fund their own business development e.g. taking clients out to lunch. 
Very often - at least as shown by the list of ex-consultants in another post and the number of court cases uncovered by this web site - DHR International and the consultant end up in dispute. So, for example, if there is a profit share arrangement, DHR International (as it is owned by one family) are not transparent as to the financials and ensure the books for the region or practice group show they are loss making. See, for example, the post regarding Adam Charlson

If you are a prospective DHR client: be careful - given the amount of turnover amongst DHR consultants, are you sure the person you are engaging will be there for the duration of the search? See CDI's experience when Gayle Mattson disappeared in the middle of a search.

If you are a prospective DHR consultant: be careful - are you sure that DHR will honor its promises or will you have to sue them to get what you are owed? Why don't you speak to some of the people below and make sure you know what to expect? If you are a half-decent executive search consultant, then you should take references even if they may not support the picture your prospective employers are giving to you. We've made the due diligence easy for you: look through the list of ex DHR consultants and contact people you know.

If you are a prospective DHR acquisition target: also be careful - are you sure that DHR will honor its promises? Why don't you speak to some of the people at the firms acquired by DHR and make sure you know what happened.

4 comments:

  1. Great summary of the DHR business model.

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  2. Is it just me, or does David Hoffmann remind you of Donald Trump?

    1. They both spend a lot of time bragging how successful they are.
    2. They are both proud, card-carrying Republicans.
    3. They both have two sons and a daughter that followed them into the business.
    4. They both have bizarre hair.
    5. They both like firing people.

    ReplyDelete
    Replies
    1. Yes! Let me add some.

      6. They both use PR extensively.
      7. They both believe their own press.
      8. They both name business after themselves: eg Air Hoffmann and Trump Airlines; Hoffmann Commercial Real Estate and Trump Luxury Real Estate; Hoffmann Leasing Corporation and Trump International Realty.
      9. They both have been party to many, many lawsuits.
      10. They are both American

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  3. They enjoy illusions. For instance: "Managing Partner" - Technology -Boston office - while he/she lives and works in Des Moines IA.

    Clients beware: They like to "fatten up" reports. 90% of feedback to clients is fudged.

    ReplyDelete