Contingency or Retained?


What should a company consider when choosing between a retained search firm and a contingency firm? Why should a company pay a portion of a fee ahead of time when there are plenty of agencies willing to take the risk of a search on for free?

Having transitioned to retained search over the past few years, I often find the first line of resistance is to do with cost. Cost is a component for consideration in any search process, but the differential is the value.

When you put a contingency agency to work on a search, it’s wait and hope with no commitment or skin in the game on either side. Often there will be an initial flurry of activity and the best and most easily accessible resumes within reach land in your Inbox. Agency recruiters often have Attention Deficit Disorder and quickly distract for the next seemingly good thing. And heaven forbid you give the job to multiple agencies! Your Inbox will see plenty of resumes, many unqualified, often duplicates – and if you really want drama, watch two recruiting firms duke it out over fee ownership – and a replication of the ADD behavior in short order.

This is not to say the job won’t get filled and with luck, maybe it will. And in the meanwhile everyone in your space knows that you have a hole in your organization (and why, and what you’re paying and who’s interviewing, accepting or turning down the job), that multiple agencies have the job, and everyone knows that Contingency Inc., doesn’t necessarily send the best qualified candidates, but they will send the most available. Additionally, employed candidates know that the chances of keeping their employment status confidential if they apply are diminished, and worst of all, the mystery is gone. Your company is just another project on an agency recruiter’s desk. Ultimately, your most coveted prospects are never even an option.

Is this the best and most cost effective way to fill critical roles? Particularly for essential senior management roles at the director level and above? Or for hard to fill positions that are in high demand?

Companies must ask themselves what they want to accomplish with their choice of search method and how quickly they can expect results.

So here’s the value proposition. Or at least the value I offer my clients on a retained basis.

  • Exclusivity. Recruited candidates love being one of a select few. My candidates know that when I bring them an opportunity, it’s unique, exclusive and special. They’re only competing with a select few candidates, equally as qualified. It becomes a viable competition and great candidates love to compete (for your job!).
  • Discretion. Both clients and candidates benefit from a low profile search. Confidentiality, particularly in a specialty discipline and in a market sector where everyone knows one another (or is on each other’s board) is crucial for candidates to feel comfortable about even starting the process. Candidates prefer retained searches. They know that the less competition, the better for them to shine their light. Hence they’re more willing to take the risk to interview. Clients benefit by receiving the best and most targeted talent, not just the most available. In addition, the company is not bombarded by time wasting resumes and inquiries.
  • Targeted Results. When a company has skin in the game, both the client and the search firm are actively contracted and engaged to get the best possible results. The value of the process is recognized and the commitment from the client is solidified. The recruiter is now in a position of leverage in the candidate employment market. He or she has leverage, a dangling carrot, a mystery!
  • Trust. High value candidates are loathe to share their resume or interest with multiple and contingency agencies. We’ve all heard the horror stories of resumes that are submitted without the candidate’s permission or knowledge. My candidates know that when I call on them, they can be assured that they are not only in good hands but that they can trust in the process and that their confidentiality is protected. They trust because they know the companies I represent have committed to hiring, and hiring the best. They feel safe.
  • Influence. Candidates in today’s market are well informed. They do their own research and come to their own conclusions. They require honesty, guidance, professionalism, experience and integrity. They will run from overbearing sales pitches, misinformation, hard closing techniques and no ingenuity.
  • Quality vs. Quantity. The client sees a small, select group of handpicked candidates, all of whom are qualified. The question is who do you like best for the job, not who else do you have? There’s no wasted time meeting a parade of candidates, who may or may not be qualified to do the job.

Contingency agencies have to close the deal. It’s all or nothing or they don’t make money. That’s their foremost reality when working on an assignment. Not receiving compensation for work done compromises the recruiting process. It’s a sale rather than a balanced partnership between recruiter, client and candidates.

A retained search recruiter is the expert in his/her market segment and discipline. She knows the market, the industry sector, the movements of the candidate population and what the competition is up to. These advantages are what get companies the best talent. Anyone can run an ad.

When a potential client company tells me that they don’t want to invest in a retainer and prefer a contingency search for a key hire, I immediately question their commitment to the search process. If they are truly committed to locating the best candidates through a search firm resource, quickly and efficiently, then logic tells me they have budgeted for and anticipate paying a fee. By engaging in the something for nothing route, is it lack of commitment or lack of confidence in their choice of agencies?

If you are committed to paying a fee, what difference overall does it make if you pay/budget the fee on the front end vs. the back end? It’s a proactive reward system, rather than reactive. From the pragmatic viewpoint, what sense does it make to spend valuable time and corporate resources to use a resource with a wait and see outlook. Successful retained firms are successful for a reason. They have a track record of completed searches and their clients reward them with business – on the front end of the search!