One of the more popular weapons in the arsenal of industrial espionage has been the personnel-scouting report, which sizes up the competition's staff, much as a market survey might size up the competition's product line. Traditionally, these reports have been prepared by management consultants, but -- about two years ago -- Gilbert Tweed Associates Inc., a New York City-based executive search firm, got into the act. Calling its personnel reports "human-resource audits," the firm began offering them to clients at a nominal fee. The idea was not so much to make money as to provide customers with an additional service, a kind of bonus for signing up with Gilbert Tweed.

At the time, the whole thing seemed like a stroke of genius. After all, Gilbert Tweed was already gathering much of the information needed for the human-resource audits. "When we were looking for a senior executive or middle manager for a client, we often generated a huge amount of surplus data," says Lynn Tendler Gilbert, who co-founded the firm with Janet Tweed. "Things like the pedigree of individuals in a competitor's upper management, length of time spent with a company, previous employment. The audit simply evolved from this process." In effect, it offered a nifty way to build the company using information that, by and large, Gilbert Tweed had to collect anyway.

And the audits have proven quite popular. "In any industry that views itself as competitive -- and what industry doesn't these days -- there is concern about strategic position," says Gilbert. "Say our client is number two in the industry. He wants to know what makes his competitor number one. Maybe our client is spending money on engineers and using them in sales, while the competition is spending money on top salespeople who understand technology. There's no difference between the companies' products. So people could be making the difference."

Yet, as straightforward as all this seems, Gilbert Tweed now finds itself in the midst of a controversy over ethics. Apparently, some of its colleagues think that it is a bad idea to mix headhunting with competitive analysis. Janet Jones-Parker, executive director of the Association of Executive Search Consultants in Greenwich, Conn., calls such investigations "very questionable" and asserts that none of her association's members are involved in such activities.

Part of the problem seems to be the somewhat shady reputation of personnel-scouting reports. Critics say that, in the past, personnel investigators have used dubious methods to obtain confidential data for their clients. Gilbert counters that all of the data in the human-resource audits come from public documents.

But even if a headhunting firm is scrupulous about its methods, ethical conflicts are bound to arise, say the critics. For example, what happens when one client requires information on another client of the search firm? Gilbert says her firm avoids this dilemma by refusing to investigate companies that have been clients within the past two years. On the other hand, Gilbert concedes that if the audits became too popular, they could threaten the firm's basic recruiting business. "The audit was not, and still is not, a product that we sell," she says. "We are not in two businesses, human-resource audits and executive search."