What does "off limits" entail and why should it matter to you?

If you hold a senior position within an Asset Manager, such as Chief Investment Officer, Head of Human Resources, or Head of Distribution, chances are you’ve encountered the concept of “Off Limits” when dealing with recruitment firms. This practice, commonplace in the industry, serves to safeguard the interests of all involved parties—employers, employees, candidates, and recruitment/search firms—by upholding confidentiality and fostering trusted relationships. 

Essentially, the “Off Limits” clause stipulates that a recruitment firm engaged in a contractual agreement with a client agrees not to actively recruit or approach their employees for a specified period. Typically associated with retained searches, this clause is not usually applied to contingent assignments or ad hoc, one-off introductions. 

The terms and duration of the agreement between the recruitment firm and the asset management company are often outlined in the initial contract negotiations.  When explicitly defined, the industry standard for “Off Limits” typically spans at least one year from the completion date of the last candidate placement.  However, often the arrangement is open-ended, for the duration of the supplier agreement. 

This offers mutual benefits for both the client company and the recruiting Search firm. It fosters trust, nurtures long-term relationships, and demonstrates a commitment to being a trusted advisor to that firm.  Additionally, it allows for closer collaboration and understanding between the two parties, particularly in ongoing hiring efforts. With ‘off limits’ in place, the client may freely share information about its employees and teams, needed by the recruiting firm for insight into the client’s culture and team dynamics, without fear that the recruiter might try to poach those staff. 

By adhering to these “Off Limits” terms and conditions, recruitment firms underscore their dedication to integrity and prioritise the best interests of their clients. Failing to do so could erode trust, tarnish their reputation, and jeopardize future business opportunities. 

Managing their ‘Off Limits’ list is one of the most important aspects of a Search Consultant’s client strategy.  Too few ‘Off Limits’ clients will result in too few retained Searches.  But too many ‘Off Limits’ clients will restrict their ability to deliver candidates, because there will be too many firms that they cannot headhunt from.  So, ideally, Search firms aim for a diversified client list, including a blend of large, top tier globals, combined with a broader array of smaller niche players as well as asset owners, including endowment funds, family offices, etc.   

When engaging a retained search firm, some may assume that “size matters”, and pick the global firm with the largest practice.  But it may be that the larger the organisation and client base, the more conflicted they are from head-hunting the right talent for your organization.  More clients means more off limits and fewer houses that they can headhunt from.  So, it is important to always check which firms are already off limits to the Search firm. 

In practice, the higher the quality of the Search firm, the fewer the clients they serve and for longer periods.  At Godliman, we have worked with our two longest-standing clients for over 20 years.   Beware recruiters who detail long lists of clients on their websites: this indicates either a fast and loose approach to Off Limits, or else a regular churn and burn of clients, with a regularly rotating client list.  

Sometimes firms can themselves play fast and loose, deliberately entering into agreements with many Search firms to build widespread off-limits protection, and giving each firm only one Search – or even no Searches, but just the promise of one on an ‘approved suppliers list’.   

From the Search firm’s perspective, it’s important to ensure that open-ended “Off Limits” agreements are entered into carefully and reviewed regularly: there is a high cost to the Search firm in maintaining unproductive “Off Limits” clients.   

This is why key account or preferred supplier arrangements serve to safeguard the interests of both parties: where clients engage a limited number of recruitment firms, giving each of their providers a regular number of Searches each year; or else specifying a duration for the “Off Limits” agreement.   

It’s a delicate balance for Search consultants to manage.  Our approach has always been to try to build longer term, trusting partnerships with our clients and, for longer term clients, we often give them de facto off limits even when their off limits may technically have expired.  In the end, it’s about building trust on both sides. 

Last edited 18th March 2024