Precise Strategies is a four-employee O'Fallon, Illinois, executive search firm that staffs positions for large financial companies. The firm is in a strange situation--a growing number of its customers require secrecy. Precise Strategies isn't allowed to mention these customers in its marketing materials, on its website or in the media. Founder Glenn Smith, 37, estimates 5 percent of the company's customers now require hush-hush around deals.
The trend toward silence clauses in vendor contracts is driven by competitive threats and a desire to protect intellectual property. Big companies are also clamping down on vendors who exaggerate. "The big company doesn't want the appearance of giving the seal of approval to a vendor," says Trey Cox, a partner at Lynn Tillotson & Pinker LLP in Dallas.
Such clauses can hurt young companies that can't accurately describe their contributions to the business world without touting their big-name clients, argues Darrel Rhea, CEO of 80-employee Cheskin, a Redwood Shores, California, innovation and branding firm. At least 35 percent of Cheskin's clients brandish silence clauses. "Many of our most notable and influential contributions to these companies can't be talked about," says Rhea.
Smith got creative by persuading certain clients to mention Precise Strategies in their hiring announcements. "They include my name and my company name as the source of the referral," he says. Ultimately, you'll have to decide whether silence is golden to your bottom line. "If you're going to make the deal," says Cox, "you have to be very realistic."
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