Last fall, on BountyJobs, we blogged about macro trends in third party recruiting. Since the end of the recession, fees spent on contingent search agencies have been steadily growing while retained fees have stalled.(Editor’s note: See this for some updated numbers.)
Our post delved into the reasons a surprising number of employers have been turning to contingent (direct hire) agencies.
In our opinion, there’s clearly a place for both business models. In one instance, a company may decide that retaining an agency on an exclusive search is best, while in another they may decide that engaging a number of firms on a contingent basis is the better course. The answer is that there is not one answer. Smart companies decide what’s best for them given the information available.
In that spirit, we thought it would be a good time to correct some common misconceptions about contingent agencies, especially as they relate to retained search.
Myth #1: Retained agencies get the most, and the best, job orders.
Reality: Not only have contingent agencies been placing the lion’s share of candidates since the end of the recession, they consistently fill some of the most strategic positions. On the BountyJobs marketplace alone, the average salary of positions filled is well over $100K. Among the jobs filled in the first two weeks of 2015 alone: Senior Medical Director ($275K); Expert Scientist, Translational Medicine Leader – Oncology ($275K); and Senior Audit Director ($225K). The roles being worked by contingent agencies are broad in volume, diverse in scope, and critical to employers.
Myth #2:Contingent agencies work for discounted rates.
Reality: In reality, the best agencies (of any type) work for market rates, and according to research on BountyJobs, market rates in the contingent space have been rising constantly over the past five years. In our blog post last fall, we showed that average rates had risen to 21.5% in Q3 of last year, and that “premium fees” (25% or higher) were more than a third of all fees earned in 2014, the highest since the recession.
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Myth #3: Clients are better served by working exclusively with one agency at a time.
Reality: The power of having a handful of agencies working on a search is clear, as long as you have the tools and time to manage the process. BountyJobs did research for one F500 employer, who noticed that competition drove stronger agency performance, usually through faster time to interview and fill. Sometimes the agency they expected filled the job, but results often came from unexpected places. They found that engaging multiple agencies on a role increased their chances of getting candidate interviews by 40%.
Myth #4: Retained = Confidential; Contingent = Public
Reality: Like most companies, we open job searches of our own where a level of confidentiality is needed. High level jobs, or unannounced expansions, often mean it’s too soon to broadcast the search to the world. However, we exclusively utilize contingent search even for our most confidential roles. Contingent agencies have the same abilities, and the same motivation, to manage a search just as confidentially as retained firms.
Myth # 5: A smaller candidate pool means the search should go retained.
Reality: Our customers have often found just the opposite to be true. For example, some job searches in the energy industry mean finding one of a very few number of qualified candidates that even exist. Yet a case study of six energy industry employers on BountyJobs found that the three companies that more frequently engaged competition got more in-person interviews (in both the short and long term) than the three employers that depended more on an exclusive approach.
Which model is better for you? Make your decision based on whatever factors are the right mix for you, but make your decisions based on the right information.