When you’re a hiring manager and you’ve made the decision to entrust a third-party recruiting company to provide search services for you, which way do you go? Do you work with a retained firm or contingent? Which one is right for you? If you’ve not gone down this path before, the data below should help you zero in on what model suits your needs best.
First off, aren’t they all the same anyway? Is there even a difference? The answer is yes and no. Yes, they both take on the responsibility of finding you talent to hire. They are quite different otherwise, which I will attempt to explain in more detail below.
Let’s start off looking at internal workings of both. The Retained world is typically staffed with seasoned recruiters, those that have made their career in recruiting. They also may be staffed with subject matter expert senior executives that come from within industries the firm serves. Firms in the retained world will often begin a search process by visiting their client, whether that’s a local drive or a cross country flight. They’ll build a client dossier by way of researching and interviewing all the client team members in order to make sure the entire hiring eco-system is on the same page. Once the requirements are clear across the board, a retained firm will then pursue candidates. They’ll perform research, identify company competitors, network, find out who the key players are, perform references, followed by rigorous candidate vetting. Once fully vetted, candidates will be submitted.
In contingent, leadership is often made-up of seasoned contingent-search executives. The employee base is a mix of recruiters with experience or those without that instead have some level of strong KPI based sales experience. Those without prior recruiting experience, once hired, are rigorously trained to be effective contingent recruiters. The front-end discovery process in contingency is quick and succinct. Contingent recruiters are well trained on how to get to the point fast and will quickly narrow down the need to only the most key requirements of the job. That communication will result in a handful of data to both script up a job order and provide keywords used to create a job posting. The role will then be posted to online job boards. When candidates apply to these postings, they’ll be directed to fill out questionnaires as part of the process, questions that are designed specifically to uncover the candidate’s true qualifications for the role, as well as to expedite the recruiters process. Then, through their ATS (Applicant Tracking System), they’ll be electronically sorted and ranked (usually by keyword) for the recruiter. Recruiters will either call the candidate to discuss or if the application looks strong enough they’ll immediately forward the application to the client. It’s all about speed and volume.
Are Retained Firms and Contingent Firms fees drastically different? No, not really. Aside from a few outliers, most companies all work in same fee percentage range. Retained firms can and will, however, incur additional costs for client travel and candidate interviews (when applicable).
Now, let’s talk about the role you are looking to fill and the candidates you want to attract. This will be a key factor to your decision on which model of search firm to use. As noted, contingent firms are all about speed and volume. Contingent firms are trained to cover as much ground as possible, as fast as possible, using the largest possible “net” to bring in potential candidates. This means, a contingent recruiter will uncover your need, immediately post the role to job boards and then rely heavily on candidate ad response. Confidential searches are difficult to execute within this model of search simply because it’s hard to post a role and keep it confidential at the same time. Retained firms, on the other hand, tend to rely on executive level search techniques that don’t involve posting a position online. Retained recruiters will perform in-depth research, identify competitors and identify comparable candidates using advanced AI technologies. Retained firms will work proactively within their networks, relying on human-to-human interaction as their main means of gathering information and connection. They are not limited to only those actively seeking opportunity on job boards and, because their search methods don’t involve posting a position online, they are a good choice for confidential hires or replacement hires. Retained firms tend to fill higher level, strategic-oriented roles, such as those in the C suite and VP level whereas contingent firms tend to focus on more mid-market talent.
Why do contingent firms rely on speed and volume so much? In the contingent model, a fee is due when a placement is made. Due to this - and this is a phenomenon unique to the contingent model- clients will often choose to work with several contingent firms on the same search at the same time. Contingent firms know this. They live and breathe a highly competitive environment and speed of candidate turnaround is a critical factor in the process. They know the second they get a role, the race is on. And since the competing firms are all posting to the same (or competing) job boards in the same markets, the winner (the firm that makes the placement) tends to be the fastest recruiter to post a role and the fastest to turn around candidates. The hiring manager that chooses this recruitment strategy understands, or should understand, that this strategy will result in a lot of resumes (volume). This speed-to-hire process can be very effective, but there are two issues that I experienced, again, both unique to the contingent process. The first is that the hiring manager will manage a much larger workload when dealing with multiple agencies. And second, the company using this tactic should be prepared for a distinctly larger falloff rate (that is the rate at which candidates leave their job within a 90-day-guarantee time) as the candidate vetting process tends be more surface when moving at such a rapid pace.
Clients that use Retained firms pay an upfront retainer to one Search Firm and rely solely on that firm to make a placement, creating a space where speed and volume don’t cloud the process. Retained firms won’t bury a client in resumes because they don’t have to “win the race” to the finish line. Instead, they spend time performing research, identifying company competitors, networking, finding out who the key players are, performing initial references, followed by rigorous candidate vetting. Once fully vetted, a candidate will be submitted. Retained recruiters will then act as a go-between with client and candidate further vetting, further researching and further qualifying until no questions are left. At which time an in-depth professional reference process will take place and then an offer is extended. The workload on the hiring manager is significantly less and due to the time spent deeply vetting candidates throughout the process, the falloff rate is significantly lower. The downside to retaining a firm is not knowing if they can get the job done. Putting all your eggs in one basket, if you will. Retain the wrong firm and you may find yourself several months down the line without any real results. Choosing a reputable retained firm is extremely important should you go this route. Any reputable retained firm will be able to provide a deep list of client references. Do your homework on these firms before signing any agreements, it will be well worth your time.
One last thing: There are many retained firms that offer contingent services and contingent firms that provide retained services. The examples above are purposely black and white to address general differences between the two most basic fee structures/models of search.
The take-away? Both models work, both cost about the same and both will get the job done. As you’ve read, however, they can be significantly different in how they approach the recruitment process. It’s really a matter of knowing your candidate audience and choosing the model that is best positioned to approach them.
About the Author:
Chip Cossitt is a Senior Partner with Warren & Morris, Ltd., executive search and has been providing executive search services for more than 25 years.