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    Retainer vs Contingency Recruiting: How much of a difference is there?

    The hidden risks of using contingency recruiting as a resource for hiring.


    At first blush, when presented with the various options available when looking to engage a recruiter or search firm, the benefits of using a contingency recruiter over a retained search firm seem boldly obvious—with a contingency recruiter, you don’t have to pay them until the job is done, in this case until the hire is made. For retained firms, as the term indicates, you have to pay money up front before the search even begins, and (gulp) depending upon how long the search takes, you might end up paying the full fee for service before you’ve found a candidate you like enough to extend an offer, get them to accept it, and spin up the new hire to start adding value in their new position.

    So, why does retained search exist as a service offering and business model? What do some know about its benefits that others don’t? Said differently, what don’t some know about the risks and pitfalls to using contingency recruiting services when going out to the talent marketplace to find your next team addition?

    Here’s a short primer on the 13 biggest differences between the two, and which to use in what circumstances when you’re considering a third party recruiting resource to help you in your next hire or to build out your executive team.


    Recruiting and search features



    “The skinny” or back story




    Facilitation & co-ownership of robust and accurate position definition (position description, competencies determination, org design validation, etc.



    Contingency recruiters expect the company to determine what they need, write the job description, and deliver that plan to the recruiter. Using home building as a metaphor, think of a contingency recruiter as a builder, and you as the architect. With a retained search firm, they function more as architect and master builder combined. And you are the designer/visionary for the building, with the architect stress testing the vision and reality checking its feasibility as a catalyst to ensure that the vision is going to solve the problem or need for which it is intended.   Contingency recruiters will try to build whatever you architect, whether it will serve the purpose or not.   That’s your responsibility. Retained search firms during the kick off and discovery phase of the search will always determine “What are the details inside of the 7 must-have facets critical to success in this role?” Those 7 are:

    ·      Functional skills

    ·      Industry experience

    ·      Management and/or leadership experience

    ·      attitude

    ·      aptitude

    ·      culture fit

    ·      chemistry fit


    Candidates are exclusive to a single hiring company



    Contingency recruiting economics structure creates often a perverse incentive… if a great candidate is found that the recruiter knows is in high demand in the market, a best practice is to turn around and market the candidate to multiple companies in an effort to create an informal auction process.   So a recruiter really becomes a “sell-side talent agent” even though the fee is ultimately paid by the company.   There is no candidate exclusivity when working with a contingency recruiter. With a retained firm, there is explicit exclusivity of candidates, only introduced to other client hiring needs if/when a company for which they were recruited decides not to move them forward in the hiring process.




    Candidate assessment & “fit” is a key part of search process,” including “visual” candidate interviewing as part of the assessment process



    Contingent recruiters will send a resume, often after one screening phone call. Some may even send a resume prior to having talked with a candidate, and only if a client exhibits interest in a particular candidate profile does the contingency recruiter then call and do a perfunctory phone screen.   Retained firms meet candidates face-to-face and often in person when feasible after having already logged several telephone screening calls with a candidate. The retained search firm’s face-to-face interview lasts from 1 hour to several hours before determining whether to introduce the prospect into the client pipeline as fully vetted and recommended for client stage interviewing.



    Use of supplemental assessment tools during the recruiter’s candidate interviewing   process to dig deeper than what a resume will share



    Contingency recruiters are incented to do the minimum required to generate the maximum number of “shots on the hiring goal.”   Retained search firms often deploy supplemental assessment instruments including psychometric assessment, and professional PhD educated clinical psychologists to delve deeper into a prospective candidate’ suitability for a client’s need


    Commitment to present a slate of multiple candidates from which a client can compare, contrast and select



    In fact, there is a perverse incentive for contingency recruiters to introduce as few candidates as possible, and push for a hiring decision as early as possible, because no payment is earned until a hire is made. It has been called “pushing for the close.” Conversely, retained firms are committed to finding a balanced slate of candidates that represent “good, better & best” from which a client can calibrate which is the best fit for their needs


    Commitment to dedicate consistent recruiting effort until the hire is made



    Contingency recruiters have no written commitment to continue working on a company’s position.




    Single point of contact/single delegation of responsibility



    When working with contingency recruiters, because there is no contractual commitment that obligates a recruiter to invest time, energy and resources on a company’s behalf in the search for candidates for a particular role, it’s a best-practice that a company put out the recruiting need and job description to several contingency recruiters, “multi-sourcing” vs. “sole-sourcing” to ensure sufficient candidate flow.   Putting all your eggs in one contingent recruiting basket is often a high risk approach to successful hiring.


    A limitation on number of client company assignments the recruiter has underway at any given time



    Retained firms know that they can’t manage more than a certain numbers of client searches at one time. Depending upon the types of searches, often retained firms have principals working on a maximum of 4 to 8 clients needs.   Contingent recruiters are smart if they work on as many as possible, often 10, 15, 20 or more, as there are no guarantees any one projects will “pay off.”



    No poach clause



    Working with companies, a recruiter often gets to know many employees within a client company. For retained firms, there is a “no poach” clause typically found in the engagement agreement. This means that the search firm can’t “take out from where they put in.” Contingency firms rarely if ever have this stipulation included in their fee agreement.


    Doing background checks



    One very important final step in any hire is a background check. This can be completed by the hiring company, but more often is commissioned and completed by the retained search firm. Background checks include the verification of education, credentials, work history, good credit standing, criminal record, and prior compensation verification



    Doing reference checks



    Most contingent recruiters leave referencing checking up to the company. If the company chooses to check references, they’re welcome to do so. However, rarely is reference checking taken as a responsibility of the contingency recruiter



    Offering a post-hire health monitoring tools/process focused on success acceleration for the new hire often referred to as the pre-boarding and onboarding periods



    Many retained search firms, and ours in particular, bundle services that stretch beyond the recruiting phase, and into what’s referred to as the onboarding phase, often covering the first 6 months of a new hire’s tenure to help integrate and accelerate the new hire’s success and impact


    Warranty on a hire long enough to fully assess the post-hire quality of the new employee

    No (90 days)

    Yes (usually 6 months for VP level, and up to a year for C-level)

    Contingency recruiters typically offer a 90-day warranty. And it’s often structured as a “declining cash-back” refund. Retained search firms typically offer to step back in and redo the search, with full understanding that the goal is to “solve the client’s problem” and find a suitable candidate, not just refund cash and leave a client company often in worse condition than they were in before the search even began.

    OK, so now that we’ve shone more light on some of the lesser understood but important differences between these two recruiting structures, when does contingency make sense to use as recruiting alternative? Here are 5—

    • If a hire into a position has low impact if failure occurs. In other words, very little is lost trying contingency first, even if it fails.
    • If it’s a “commodity hire,” where qualified candidates are plentiful with the skills and experience you’re looking for and are readily available and abundant in the marketplace.
    • If a junior level hire. If hiring out of college, trade school, or other advanced degree program, you’re likely hiring for non-managerial traits, an individual contributor profile vs. managerial or leadership and contingency is a good potential solution here
    • If the position is lower in compensation. Typically retained search firms work on positions with minimum cash compensation of $175,000 on up.
    • When unsure a hire is actually going to take place. In other words, If you’re looking to assess the talent market, and benchmark talent to compare against who you currently have in the role doing the job now. Here it makes sense to use contingency because it’s quite possible you’ll end up deciding to stick with the employee you have in a “devil I know is likely better than the new one I don’t.”

    And herein ends our primer on contingency recruiting versus retained search. We encourage you with this additional information to weigh which is ultimately the best solution for you and your organization.

    -by Clark Waterfall on May 3, 2021 8:08:54 PM


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