Contingency vs. Retained Search: A Client’s Perspective

bigstock-Job-Employee-Man-Candidate-Sea-8608360Why 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.

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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.

Image courtesy of BigStockPhoto.com

Matt Lowney is the CEO of Practice Recruiters and The Recruiting Call Center. He was previously the EVP of talent & operations at The Buntin Group, Tennessee’s largest advertising agency. Prior, he was director of recruiting for HealthSpring and recruiting manager at DaVita. Connect with him at http://www.linkedin.com/in/mattlowney

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2 Comments on “Contingency vs. Retained Search: A Client’s Perspective

  1. This is a very well written position on the retained search model versus contingency. I have been meaning to write a post on this same subject for my blog , but never get around to it. Fro the last ten years I have worked almost entirely at a retained basis for mid to senior positions. I would add that one of the reasons there are more contingency recruiters is due to the nature of business development for new clients. The traditional method taught contingency recruiters to get new searches is to ‘market’ a hot candidate to hiring managers in the hope of getting a hit and an ‘in’ to the new company. However this method is not conducive to retained search as it immediately tells a hiring manager that you are a contingency recruiter. It is a hard circle to break. I moved over to the retained model after I worked many searches for some loyal clients and they trusted my firm enough to give me money up front. Like you say many clients do not want to give a complete stranger money up front. My husband is a contractor and laughs at the contingency model. He would never start a job without a deposit.

  2. I think it also has a lot to do with the market you are in. I think all recruiters will agree in principle to what Matt and Ellen have said about retained vs contingent and believe me we use the above arguments when on the phone with the client (at least I do). But, I think in certain markets they only use contingent because that is what they were trained to do and what they have always done. A lot of the HR Directors I talk to don’t really have any power to change it. You will always be able to find the forward thinkers in your market that will do it different, and maybe you should only work with them. But then you are leaving a lot business on the table. We just recently went to retained for 2 of our biggest clients in the last 2 months after filling contingent searches for them for about 18 months. I guess, now they know they can trust us, we will get it done and they can save some money. This also allows us to know we are going to get paid for good work.

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