Search Endeavor Questioned

Association of Governing Boards touts its expertise as it starts new business, but some potential competitors say conflicts of interest may emerge.
September 9, 2010

As the Association of Governing Boards launches into the search firm business, some are privately questioning whether the move shifts the group away from its core focus and introduces conflicts of interest.

The formation of AGB Search was announced in April, and the group’s leadership said they expected to raise some eyebrows. AGB abandoned its search firm business nearly 15 years ago, and has since concentrated on branding itself as a neutral purveyor of best practices for boards of trustees. One of AGB’s crucial roles has been to advise boards on conducting presidential searches – arguably a trustee’s most important job -- and association officials say that makes AGB a logical entity from which to launch a new search firm. The flipside, of course, is that AGB’s neutrality as an adviser may be questioned by some who now see the association trying to drum up business from the very trustees it consults.

It’s important to note that AGB, a private, nonprofit group with 35,000 members, is a separate entity from AGB Search, which has been established as a for-profit subsidiary of AGB. Both entities answer to AGB’s board, however, and the two share the same office, even though AGB Search foots its own expenses, according to search firm officials.

“One of the reasons AGB has done its best and will continue to be both transparent and diligent about separation between AGB and AGB Search is in part because of the issue [of conflicts of interest],” said Rick Legon, president of AGB. “AGB will continue to advocate best governance practices, and AGB Search will compete on its own. If there are certain advantages by carrying at least part of the AGB title, that’s fine.”

Predictably, many of the people questioning AGB’s foray into search are their natural competitors. One search consultant, who asked not to be identified, called the move “curious.”

“They’ve got to be careful about the appearance of impropriety, because historically they’ve branded themselves as independent and above the fray,” the consultant said.

AGB has also relied upon search firms to sponsor its conferences, and the consultant questioned whether that practice would continue.

“I’d be very surprised if other firms gave money to what could be emerging as a competitor," the consultant said.

AGB's arrangement differs from that of the Association of Community College Trustees, a nonprofit organization representing two-year colleges. Rather than having a for-profit arm for search consulting, ACCT runs its search operation in-house and provides the service only to its paying members. While there is an additional fee for search consulting, ACCT is essentially trying to "cover costs" and charges about "one-fifth of what the going rate might be," said Noah Brown, the association's president.

“It sounds like [AGB is] looking to have an income stream, so they may need to structure it differently because a question might be raised about whether that’s germane to their overall mission and nonprofit status," Brown said.

“We use [the search consulting service] as a laboratory, essentially to learn more [information] about effective governance that is not only spread to the membership but is part of our overall mission," he added.

Heading AGB Search is Jamie Ferrare, a former senior consultant for Academic Search -- a firm that still houses consultants who worked for AGB when it was previously in the search business. Ferrare, who commands the respect of many in his field, says he envisions AGB doing fewer searches than Academic Search, which does about 100 a year. Ferrare also expects AGB Search to distinguish itself by assisting new presidents well into their transitions at a new college, staying on in a consulting role for as much as a year in an effort to help launch successful presidencies.

As for carrying the AGB name, Ferrare says he’s not so sure it will give the firm a real leg up.

“I honestly don’t think and believe that institutions are going to automatically come to AGB Search just because they’re a member [of AGB],” he said. “I suspect it will be very, very competitive as it always has been, I do. I’m seeing it now.”

AGB Search lists three active searches on its website, and has four consultants in addition to Ferrare. The other consultants include Jim Lanier, a former AGB consultant, who previously served as vice chancellor for institutional advancement, president and chief executive officer of the East Carolina University Foundation; Oscar Page, former president of Austin College; Arnold Speert, former president of William Paterson University; and Blenda J. Wilson, former president of California State University at Northridge, and a former trustee at numerous colleges.

While Ferrare works to build AGB Search, his former employer is entering a new era as well. Academic Search announced this month that Paul H.L. Chou will take over as president, succeeding Tom Courtice, who remains a senior consultant at the firm.

Chou is something of an unconventional leadership choice in a field that is the province of many former university presidents. While he was most recently a senior consultant at Russell Reynolds, Inc., Chou was previously an endowed chair of music at Lehigh University, where he taught violin. It was Chou’s faculty participation on a presidential search committee at Lehigh that first drew the attention of Russell Reynolds, which recruited him into the search business.

Having looked at academe through the eyes of a professor and a search consultant, Chou says he’s increasingly aware that “cultural fit” is a key component of a successful presidency. A president has to work well with varied constituencies, because all the president can really control is the make-up of his or her cabinet, he said.

“You can’t move the board out, and you can’t move the alumni out, and you can’t move the professors out,” Chou said.

Chou declined to weigh in on the wisdom of AGB’s move into the search business, other than to echo praise for Ferrare. Others, however, are whispering about the impact the search firm could have on AGB’s core consulting function.

“Business-wise, it doesn’t look like a strategic move at all to me,” said a consultant from a competing firm who asked not to be identified. “It looks like something to pull them off target.”

Another consultant wondered how AGB’s work with presidents might be affected. There’s a potential scenario where AGB could consult a president having trouble, knowing that if the president were ousted then AGB Search might be positioned to help find a successor, the consultant noted. The consultant would “never go that far” as to suggest AGB would undermine a president to score a potential new client, but a president might be reasonably leery of the prospect.

“I wouldn’t claim there would be a real conflict there, but we all deal with a world of perception,” said the consultant, who works for a competing firm and asked not to be identified.

It is also lost on no one that AGB frequently advises boards on how best to conduct presidential searches, and the firm even publishes a widely used booklet on the subject. AGB is working on how its publications – including a listing of search firms – might be altered given the firm’s new role.

“It’s unlikely we will produce that directory again,” Legon said.

Before Founding Firm, AGB Sought Business

While AGB Search only came into being this summer, AGB sought business in the search world as early as January. Its Ingram Center for Public Service, which advises state institutions as part of the nonprofit AGB, made a bid for the Arizona Board of Regents presidential search. Legon said the regents, who have a longstanding relationship with AGB, solicited a bid from AGB without knowing the association was planning to get into the search business.

“It’s the purest coincidence,” he said. "It didn’t inform nor was it affected by any of the conversations going on internally related to search. In fact, when we were first invited to do so we said 'Well isn’t that an interesting coincidence.' ”

AGB, which put in a $69,000 bid plus $16,000 estimated travel expenses, was not selected. Academic Search, Ferrare’s former employer, ultimately won the business.

Ironically, Greenwood/Asher & Associates Inc. was also among the firms to bid on the Arizona search. That firm also handled the Virginia State University presidential search, and Legon -- a former Virginia State trustee -- served on that university’s search committee. But Legon says his participation on the Virginia State search isn’t what got him thinking about AGB getting back into the business.

“Our intent always is to do good for higher education through strength and governance,” he said. “Since this is so centrally what boards are about … and there’s a sense we can add value to how this is done, our board and I thought it was deserving to get back in and see if we could be helpful.”


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