Puncturing the ‘Myths’ About Contingent Search

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.

Image: Stuart Miles / FreeDigitalPhotos.net

Mike Hard is the CEO of BountyJobs, the enterprise agency management company. Companies use BountyJobs to consolidate their existing recruiting agencies into one cloud-based system, centralize spending and administration, and improve their agency performance. BountyJobs is the contingent search solution for more than one third of the Fortune 500, and has a private marketplace featuring more than 10,000 approved third party recruiting agencies. Prior to BountyJobs, he was an executive with Microsoft for 17 years. He received his BA from Yale, his MBA from Harvard, and was a member of the US national rowing team. He lives with his wife and family in New York City. Visit www.bountyjobs.com for more information on BountyJobs.

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2 Comments on “Puncturing the ‘Myths’ About Contingent Search

  1. Mike: You make two points about interviews:

    1. “They found that engaging multiple agencies on a role increased their chances of getting candidate interviews by 40%.”

    2. “…the three companies that more frequently engaged competition got more in-person interviews than the three employers that depended more on an exclusive approach.”

    Here’s what you neglect to mention and I can’t imagine I’m the only one to notice it. What is the percentage of “quality” candidates companies are interviewing? Who cares if employers increased their chances of getting interviews it 80% of the candidates are rejected? In retained search my clients pay for my ability to do the first round of interviews such that the 3 or 4 candidates I produce are all the right fit. I just finished a search for an east coast Series A start up and they had trouble deciding among the three candidates I presented. They ended up hiring two of them.

    This is just one of the benefits of retained search. Contingent recruiters just don’t have the time (since they only close a small percentage of their deals) to spend truly interviewing candidates.

  2. I do both. Guess who gets better service and 73% submission to hire rate vs our 23% ( still industry leading) on contingency. Retained gets reports, data, comp analysis, leadership assesment,etc. Contingency – you get what you get and don’t throw a fit….oh, you have multiple recruiters, want me to send a resume of a recruited, top candidate through a 3rd party system and give up ownership after 6 months and also a % of the fee. Let me drop everything and work on it. You just did a report that 70% of hiring managers werent happy with candidate profiling and 52% of recruiters weren’t happy with communication? See a pattern. Closest to the dollar!! Sales 101.

  3. I’ve already had six retained searches so far this year, so I am seeing plenty of retained business, but I also made an extremely difficult contingency placement in the $200K range of a PhD EE, which was a very fast hire, well worth doing. I’ve done retained search since my first year in the business, but my largest fee is still a contingency placement of a perfect candidate with 350+ patents, a billion-dollar industry impact, and a million-dollar sign-on bonus.

    People who say categorically that one type of search is “best” are simply foolish. Both exist for excellent reasons.

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