Retained Executive Search Process vs. Contingency: Which One is Better?
Can you hire talented performers yourself? Aren’t they all on the Internet? When should you an executive search firm — and which kind?
This series of articles will help you choose.
PART 2 OF 4 – WHEN TO USE WHICH PROCESS
In the first article, we reviewed the basis differences between retained executive search and contingency executive search.
Retained search is generally viewed by most experts as delivering the best result. But in order to do so, it also is usually the more expensive — (at least, in terms of initial outlay. A strong case can be made for retained search delivering the best return on the investment over time).
That said, there are times when one process makes more sense than the other. Let’s take a look.
The contingency search process is geared to identifying qualified candidates—but not necessarily the most qualified candidates. Contingency recruiting is appropriate in the following situations:
- When the salary level of the position is less than $100,000;
- When many people are likely to be qualified for the position;
- When multiple vacancies with the same job description are being filled;
- When the hiring organization wants to take more responsibility for screening, interviewing and negotiating with candidates.
Retained executive search consulting will in most cases identify the most qualified candidate thanks to the lengthy process of searching and interviewing.
There is also a critical difference here. The contingency process will identify candidates with the appropriate skill sets and experience. The retained search process will also probe for the best fit. Most failure in hiring comes from incompatibility on cultural and personal grounds, not from workplace inadequacy. The retained search firm applies advanced psychometric assessment to profile not just the candidate but the firm.
Retained search recruiting therefore is appropriate:
- When the salary level of the position is above $100,000 and when it is critical to hire not just any qualified person, but the most qualified person available.
- When you need a recruiter who will make a dedicated effort to filling the position, and who will take into account nuances of your organization’s culture and other critical issues.
- When you need an independent third party to thoroughly screen candidates, through in-person interviews, before finalists are presented.
- When you want an objective evaluation of internal candidates against an external shortlist.
- When the situation requires a go-between to help persuade an executive to leave a desirable position for a better opportunity, and to help negotiate the terms of the move.
- When a high degree of confidentiality is required in the recruitment process.
Differences in Approach
In the first article, we looked at general differences in approach between contingency and retained. We need to look at this in more detail in order to make an informed decision on which way to go.
A retained consultant is typically working exclusively on the search and is expected to evaluate all candidates being considered for the position. As a result, a retained consultant will never present a candidate to more than one client at a time.
A contingency recruiter usually does not have an exclusive assignment, but instead is in a race against other sources to present a winning candidate, and often present attractive candidates to as many clients as possible.
Contingency recruiters tend to be more specialized by industry and function. Retained search consultants also specialize but, because they are driven by original research for each engagement, are able to apply that process across industries and functions. This is important when you may want to recruit from outside your industry.
Differences in Fees
Fees for the two kinds of service are similar—typically 30-35% of guaranteed first-year compensation for the hired candidate.
Retained recruiters make an estimate of the fee and bill for a portion of the fee to initiate the engagement, with subsequent invoices leading to a final bill based on the actual compensation package awarded to the hired candidate. As an alternative, most retained consultants will also accept a fee fixed at the outset based on the expected compensation level and billed in three or four monthly installments during the search.
Contingency recruiters, on the other hand, receive one lump sum on hiring.
In addition to the fee, retained consultants ask clients to reimburse them for out-of-pocket expenses—mainly travel expenses for candidate interviews. This often adds 10% to 15% to the fee.
Contingency recruiters typically don’t incur these expenses.
Neither contingency nor retained executive search consultants accept fees from individuals for the purpose of helping them find a job. However, contingency firms are motivated to “market” highly attractive candidates to several potential employers at once.
Retained consultants are not motivated to sell candidates in the same way; they are being paid for the process of selecting the best candidate, so can be more objective about whether a particular individual is the right choice.
This four-part series first appeared on the Cornerstone Kansas City website and includes material originated by The Association of Executive Search Consultants.
The AESC is the professional association representing retained executive search consulting firms worldwide bound by a Code of Ethics and Professional Practice Guidelines.
Interested in starting a conversation with our executive search consultants? Get in touch with us here.