The Referral That Blurs the Lines
A consultant completes a successful 10-week lean engagement with a mid-size manufacturer. Two months later the client's VP of Operations asks the consultant to recommend 'a good IT systems integrator' for an ERP project worth roughly $1.5M. The consultant happens to have a close friend who owns an ERP integration firm and would earn a referral fee if engaged. The consultant has no expertise in ERP selection and has not evaluated any integrators. The client trusts the consultant's judgement and says 'I'll just go with whoever you recommend.' The consultant's friend has offered a 5% referral fee, about $75k, if the client signs.
1. How should the consultant handle the referral request and the fee?
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The consultant should not present a personal-friend recommendation as an expert selection, and must disclose the referral fee if any recommendation proceeds.
Reasoning:
- The consultant lacks ERP selection competence. Offering a recommendation in an area outside competence, to a client who says 'I'll go with whoever you recommend,' converts a casual favor into professional advice the client will rely on.
- The undisclosed 5% fee is a direct conflict of interest. A $75k payment tied to the client signing is exactly the kind of interest that must be disclosed before, not after, a recommendation.
- The client's deference ('whoever you recommend') raises the stakes: the consultant's word may substitute for the client's own diligence.
Actions: (1) Tell the client plainly that ERP selection is outside the consultant's expertise and that a structured selection process is warranted. (2) Disclose the friend relationship and the offered fee before any name is mentioned. (3) Offer either to help the client run a proper selection (if competent) or to help them find an independent selection advisor. (4) If the client still wants the friend considered, ensure it is one candidate in a competitive process with the fee disclosed and, preferably, declined.
2. The client says: 'I don't care about the fee, just tell me your friend is good.' What is the appropriate response?
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Give an honest, bounded answer and keep the disclosure on the record.
Reasoning:
- The client is entitled to the consultant's honest personal view, clearly labeled as such, not as a professional selection recommendation.
- 'My friend is good' is not the same as 'my friend is the right integrator for your ERP project.' The consultant can say what they know (the friend's firm has done work the consultant has seen) and what they do not know (fit for this client's scale, industry, budget, and requirements).
- The fee disclosure stays in writing regardless of the client's indifference, because the conflict exists whether or not the client minds.
A sound response: 'I can tell you what I personally know about them, but I can't vouch for fit on a $1.5M ERP project - that needs a real selection. And you should know they've offered me a referral fee; I'd rather you evaluate them on the merits.' Then put that in an email so the record is clear.