What are contingent and retained searches?
Most recruiters work with their clients on either what’s called a “retained” basis, or a “contingency” basis. In both cases, the recruiting firm delivers recruiting services to the client, but the payment structure for those services is different.
Here’s how the terms work:
- Retained: The client pays a recruiting firm a fee up-front and guaranteed amounts at certain milestones in the process, and the firm conducts a search for the candidate.
- Contingency: The firm agrees to find the client a candidate, and is only paid once the candidate is hired (typically a percentage of their salary).
Does it make a difference?
Short answer: Yes. The difference in payment terms influences how recruiting firms operate.
When a client hires a recruiting firm to conduct a retained search, the recruiting firm has exclusivity to fill the role and is basically pre-paid for their time. Therefore, they can conduct a longer, more thorough search, sometimes on a national scale, to ensure they find the best possible candidate. Generally, clients operate under these terms for high-level positions such as C-level or VP searches and the companies are typically larger. These searches are long, generate lots of paper, and can be 2-3 times more expensive. The retained firm gets paid all or most of their fee regardless if they successfully fill the role, so there is an outside chance that a large chunk of money is paid with no results.
A client hiring a recruiting firm on a contingency basis can expect faster results at a lower cost. In contrast to retained recruiting firms, contingency firms may be one of several firms working on the role, and thus are highly motivated to find the best candidate as quickly as possible as they will not be paid unless the position is filled. This is a common option for companies that need to fill positions quickly. Keep in mind, though, that high-level executive searches have an element of complexity for which many contingency firms do not have the requisite level of comfort or experience. If you consider a traditional contingency firm for a C-level search, you should vet their level of experience with similar searches.
Does a contingency agreement deliver less-qualified candidates?
It may surprise you, but the answer is actually no. It depends on the quality of the firm and they can vary drastically. Contingency firms can provide exceptional candidates for executive positions with small to mid-sized businesses. The reason is that the firms can build an extensive network of local expertise when conducting searches for executive hiring manager clients. In other words, the company executives they work with to fill positions become candidates for other executive positions in the future.
This approach makes sense on so many levels. It’s essentially a no-risk option for the business because they don’t have to pay if they aren’t presented a candidate worth the fee. Candidates are drawn from locally generated databases that takes years to develop, making the process extremely fast in comparison to retained services. Most importantly, contingency firms know these candidates, and that the existing foundation of trust is so important in making fast and sound decisions.
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