Issues Remain Unsettled for Partners of Ray & Berndtson
Executive
Search Review, September 2002 - ©2002 by Hunt-Scanlon-Ray & Berndtson’s struggle to survive this year
has drawn the attention of search executives across the U.S. and in Europe.
The company’s fall is
“a watershed event in the executive search industry,” says Janet
Jones-Parker, head of Jones-Parker/Starr in North Carolina.
Ms. Jones-Parker, a former president of the Association of Executive
Search Consultants, notes, “You have some small firms that went through
something like this. (But) a firm
as well known and respected as Ray & Berndtson going under is pretty
significant.”
Earlier this month, Ray & Berndtson announced it
had agreed to sell some of its assets to management consulting giant A.T.
Kearney for an undisclosed price. As
part of the agreement, A.T. Kearney Executive Search, the recruiting division of
A.T. Kearney, was to offer jobs to “key Ray & Berndtson partners and
staff.” Paul Ray, Jr., the Texas
firm’s chief executive, and Steve Fisher, president of Chicago-based A.T.
Kearney Executive Search, said the deal would benefit both parties.
“We see significant opportunities resulting from this combination,”
said Mr. Ray.
Still, Mr. Ray has struggled for months to right the
wobbly firm after the soft economy and devastated technology sector wiped out
much of his company’s revenues. Now,
despite selling its name and other assets, and the likely formation of a new
firm under the old name, the future of former Ray & Berndtson’s partners
and employees remains unclear.
Several former partners of Fort Worth, Texas-based
Ray & Berndtson say they don’t know if they will be paid bonuses they
accrued over the past two years. The
bonuses and debts to former shareholders total at least $1 million dollars, say
these people, who left the firm over the past year. Many had already consulted attorneys about their next step
before receiving faxes earlier this month notifying them that Ray &
Berndtson was filing for re-organization under Chapter 11 of the bankruptcy
code. “We don’t want to find
out we left money on the table because we weren’t the squeaky wheel,” said
one former partner. Mr. Ray was
unavailable for comment. A.T.
Kearney referred questions about the matter to Ray & Berndtson.
It isn’t clear how many of the 25 to 30 Ray &
Berndtson partners will join A.T. Kearney or how much of the non-partner
research and administrative staff A.T. Kearney will need.
People familiar with the firm said it was likely that Ray &
Berndtson’s well-regarded healthcare practice and much of its financial
services team would join A.T. Kearney.
Odgers Ray & Berndtson, the London affiliate that
purchased Ray & Berndtson’s name in July, has discussed the possibility of
a number of the firm’s partners joining a new Ray & Berndtson that would
be based in New York, said the company’s chief executive Richard Boggis-Rolfe.
Odgers is now anxious to separate the name, for which it paid about
$250,000, from the struggles of the old firm in Texas.
One former Ray & Berndtson partner has already
agreed to join this new firm, Mr. Boggis-Rolfe said. “We are in discussions with others and hope that a
significant group will be joining us,” he said.
Said a person familiar with both firms: “If you’re going to have a
presence in the U.S., you have to have American partners.”
The end game with Kearney and Odgers this month capped a saga with roots in the tech bust of late 2000 and early 2001. Stung by the slump and saddled with costly office leases and other expenses, the firm started laying off recruiters and staff. By year’s end, a number of the firm’s most successful partners were leaving. The exodus continued through the spring and summer of 2002.
Nevertheless, Ray & Berndtson was still trying to
grow. Last spring, it agreed to
acquire New York-based Rhodes Associates to boost its struggling financial
services practice. Rhodes
Associates pulled out of the deal the following month after Rhodes’ managing
partner Steven Littman learned that Ray & Berndtson was in discussions to be
acquired by Odgers. Ultimately,
Odgers and Ray & Berndtson couldn’t come to an agreement and A.T. Kearney
emerged as the most likely suitor.
Yet Odgers wasn’t entirely out of the picture.
In July, the firm bought the name and Ray & Berndtson’s
well-regarded software system. Ray & Berndtson used the money to pay its employees and
was allowed to use the brand name through October, say people familiar with the
firms. A spokesperson for Ray &
Berndtson said the money was used for operational purposes.
The company also cut costs during the summer, laying off about 30 people
and stopping healthcare-related benefits.
Mr. Ray called the environment “the most
difficult” he has faced in 24 years of recruiting.
A.T. Kearney has had its own difficulties over the
past two years. Its revenues
dropped 45 percent last year, more than any other firm in Hunt-Scanlon
Advisors’ annual survey ranking the largest executive search firms in the
industry. It has changed leadership
four times since 2000 and has seen a number of its best recruiters leave over
the past 18 months. Mr. Fisher is
in his second stint as president. Although
people familiar with the firm say business was sluggish during the first part of
the year, he has insisted in past interviews that it will show a profit at the
end of the year.
-JAMES PETER RUBIN
Read more from The Executive Search Review at http://www.huntscanlon.com.