They are a relic of the past. There are still a few industries which prominently feature finders fees as a way to incentivize business referrals, but there has been a marked move away from these in the past decade.

The reason? it began with the corporate malfeasance early in the millennium at companies like Enron and Tyco (I was in Sr Management at Tyco when the CEO and CFO were indicted, and know the culture first hand). Out of these debacles came new standards of corporate governance, including the widely adopted Sarbanes Oxley – which by the way isn’t law in Canada, but is a de facto standard for corporate governance.

Governance guidelines like these were designed to eliminate kickbacks, and ensure supplier selection fairness. Interestingly these were more of a problem for public sector suppliers, but that irony went largely unnoticed. Kickbacks and finders fees had way too much in common to eliminate one, and not the other. The very thought of finders fees raised eyebrows in corporate accounting, and the concept soon was banished from most major organizations.

This has eventually trickled down to Small-Medium Enterprises, to the point where asking about finders fees is generally considered distasteful or insulting. There are a few industries where they still are common, interestingly including human resources and recruiting – folks you might think would be early adopters of new governance standards.

So what’s the alternative? The generally accepted one is mutual referrals. This is actually a great alternative, because as the bonds between referrers grow into a strategic alliance, accountability increases – which can help assure customer satisfaction on both sides. This is clearly aligned with the aims of referrals.

The hurdle is one of inequity. If you expect the value of referrals to be equally matched, you are destined to be disappointed. Instead, look at any of this business in either direction as “found” – work for which you did not have to do the business development. And rely on that increased accountability – it can end up being more lucrative to have reliable partners than reliable volumes of referrals. Because the goodwill that they generate is transferable to you, and builds your own credibility. And in these days of good governance, the subtraction of finders fees allows mutual referrals to become self governing.