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Contingency vs. Retained Search: A Client’s Perspective


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Search for talent

Why do most external recruiters work on a contingency basis? And why does most retained work happen at the executive level?

As a client, I receive better focus and (typically) better results from retained partners. And the client-agency relationship feels more like, well, a relationship. I also assume that most contingency recruiters would rather work on a retained basis knowing they are going to get paid for their work.

Following that line of thought I’ve wondered why there isn’t more retained work at the mid-management level. As a client I get better focus because the recruiter knows I have some skin in the game, and the recruiter is happy because, well, she knows she’s going to get paid. Perhaps top tier executive retained search firms don’t want to work on these roles because they are less lucrative. However, I tend to think that mid-level retained work would happen if there was a more robust client need.

Why Retained Search?

Let me say this: I believe in the value of a retained search model, especially when it is backed with a performance guarantee. If the retained firm isn’t delivering the quality of candidates, or over-promised their ability to fill a certain role, then I should get my money back. In general, though, I’ve received better candidates more quickly when utilizing the services of a retained recruiter. Since they know I’m a serious buyer, they put the necessary resources toward my opening. Conversely, contingency recruiters work where their efforts yield the most likelihood of financial success. So they end up being in the game of balancing easy-to-fill requisitions against hard. And if my position is a “purple squirrel” in a list of much easier fills, then I’m going to get less attention. And honestly, I can’t blame them. I would do the same. However, when looking at a partner who can seriously add value to my efforts, I want the focus of a recruiter who has limited distractions.

Why Not Retained Search?

Why, then, are so many more recruiters in the contingency search business? I think the answer lies both with clients and recruiters. Frankly, it’s an easier sell to be in the “pay for performance” game. It’s a much more difficult sell for a recruiter to get paid before they present candidates. And ultimately, some clients simply don’t/won’t/can’t see the value. Additionally, with so many agencies on the market, it’s difficult to figure out who is good and who is not, so it’s much lower risk to give searches to contingency partners. As clients (and most of us are guilty of this), we seem to like the idea of engaging several agencies so we get competition for our business. And at some surface level this mentality makes sense. So, the commitment level is lower from both parties in the contingency model,  which ultimately hurts the client. I also realize that clients like working with contingency recruiters because they could ’get lucky’ and fill the position through other or internal channels, and not have to pay a fee at all.

External search (contingency or retained) should only be engaged when internal alternatives have already been exhausted, so both parties have the affirmation that there’s a serious need and likelihood of a fill.

For corporate recruiters and recruiting managers, selling retained search can be a tough order internally. So I will concede that the limited utilization of retained search is, to some degree, a function of hiring manager comfort. In most situations, recruiting expenses hit individual hiring manager budgets, so they typically don’t want to cut a check up front for recruiting fees. I’ve certainly been engaged in a number of these conversations over the years. However, I would encourage corporate recruiters to present a pro and con list to their managers. Hopefully they can get them on board.

Not a Magic Bullet

I don’t want to paint a picture that retained search is the magic bullet for filling all mid-level positions within an organization. There’s a balance that exists between getting the added focus of a retained search partner and financial viability. That being said, retained search should be a more frequently utilized tool when filling challenging roles. In the end, the placement fee will be close to the same and will likely yield a higher rate of success.

Matt Lowney is currently EVP of Talent & Operations at The Buntin Group, Tennessee?s largest advertising agency. Previously he was director of recruiting for HealthSpring and recruiting manager at DaVita. Connect with him at http://www.linkedin.com/in/mattlowney
  • http://www.verticalelevation.com/ Carol Schultz

    Matt: Great article and a very pertinent topic!

    I regularly have this conversation with candidates and prospective clients. I have frequently asked my VPs of Sales and CXOs, “If you were offered a job and the condition was that you’d be paid at the successful completion of each project, would you take the job?” Do I even need to dignify this with what the answer ALWAYS is? Well, why should I?

    Moreover, I can’t tell you the number of complaints I’ve heard from hiring managers that contingent recruiters mostly sling spaghetti against the wall to see what sticks, send 2 or 3 candidates sitting on their desk and then they never hear from them again, and push paper.

    Just yesterday I spoke with a VP of Sales who told me his company wanted to save money hiring so he had hired all the sales folks himself over the last 4 years. He then told me he’d eventually fired each and every one. Although he said he knew this had cost them a huge sum of money, he never calculated the exact numbers (that’s where I come in). He also knows the opportunity costs are well into the millions. They just brought in a new CEO who is very pro “you get what you pay for”, so we’ll see what happens moving forward.

    I will also say that I know some contingent recruiters who wouldn’t accept a retainer if a client begged them. Why? They don’t have to work on it if they don’t want to. I say only take retainers you’re committed to completing successfully. I wouldn’t dream of accepting a retainer if I felt there was an issue with management that didn’t align with their goals and objectives.

    One final comment…Retained searches are not just for executive and mid level work. Many of the conversations I’m in with prospects right now are for individual contributer and inside sales organizations. The bottom line is that if it’s a key hire companies need to assess the pros and cons of retaining a firm. I disagree with your premise of exhausting all inside search before going to a firm. Have you calculated the costs of the months without a hire as is often the case with companies employing low level inside recruiters…But this is another article alltogether.

  • druedeangelis

    Couldn’t agree more! Contingency search is fraught with unintended consequences that add risk to the client. I’ve blogged about this often.

    http://druedeangelis.wordpress.com/2011/12/05/never-hire-a-contingency-recruiter/

  • Bill

    I’ve been wondering what % of search is contingent and what % is retained?

  • Suzanne Levison

    We engage in both. There is a process to determine if our client is better served with retained or contingent.