Retained vs Contingency Recruiting

All organizations need to recruit outside management talent from time to time. In doing so, there are 2 alternatives for them to consider. First, they can manage the hiring the process themselves or, second, they can use outside recruiting consultants to help the process.

In the do-it-yourself option, the hiring manager has the advantage of controlling the entire recruiting process: placing advertisements, screening applicants, interviewing candidates, salary negotiations, reference checking and so on.

The disadvantage, of course, is that recruiting managers is time consuming and requires specialized skills. The most desirable candidates are happy in their jobs and do not actively seek new employment through job postings, career fairs and contingency employment agencies. Such people usually also have concerns about sending their confidential information to an unsolicited source or directly to a competitor in their industry.

For these reasons, it is common for organizations to use independent recruiters to fill management positions. The question then becomes whether to use a contingency recruiter or a retained executive search consultant?

Different Services, Different Needs

Most people would recognize that recruiting a General Manager or a CFO is much different from hiring applicants for clerical or menial jobs. As a result of these differences, 2 types of recruiting services have developed over time to cater to each requirement.

Virtually all junior and entry level positions are filled using the contingency recruiting model. Common names for the service include: employment agency, staffing & manpower firm, personnel recruitment and placement agency. Contingency Recruiting means their fee is conditional (or contingent) on a placement begin made.

Most senior management roles are filled using the retained executive search model. Retained Search is provided in a similar manner to professional services such as doctors, accountants and architects. They are retained for their specialized skills and work exclusively on behalf of the client. Common names for the service are executive search and retailed search.

Important Note: In many emerging countries in Asia, general personnel agencies can also call themselves "executive search" since the differences between of management and general recruiting are not well understood.

Contingent recruiters are most used for individual contributor and some junior manager positions. Retained (executive) search is most used for management and especially executive level roles. The way to determine the difference is ask the provider whether their fees are �retained only� or �contingent on success.�

The manner of payment has a profound effect on the service provided.

Contingency Recruiters

These people receive payment only if a placement is made and cannot afford to invest a great deal of time on any one assignment. Theirs is a high volume business and they often serve direct competitors for the same positions. They source as many resumes as possible from sources like databases, job postings and the like, and then send them as quickly as possible to multiple clients to assess suitability. They usually don�t have time to interview candidates (or clients) personally to evaluate suitability.

These people are paid in the manner of other skilled professions such as tax accountants, doctors and engineers, and are able to expend significant time on filling individual positions. They typical source Passive Candidates who are are not seeking current employment and are successful and stable in their jobs. They will personally interview and assess each candidate for suitability.

Most Retained Recruiters either have many years of management recruiting experience or are themselves former senior managers.

When to Use?

Contingency Recruiting
Use when positions are low level and not critical to the organization
Use when many people are likely to be qualified for the roles
Use when filling large numbers of positions
Use when speed is greater priority over quality
Use when the hiring manager wants to control processes of screening, interviewing and negotiating with candidates.

Retained executive search
Use when positions are senior and critical to the organization
Use when confidentiality of clients and candidates is important
Use when quality is more important than quantity and speed

Use when a long history of employment stability is required
Use when professional assistance of recruiting process is required

Another difference has to do with exclusivity. Retained search consultants spend a lot of time sourcing candidates who are happy and stable with their employers and not actively seeking other employment. They evaluate candidates for a particular client and will never present candidates to more than one client at a time. Therefore, the client will almost never find himself in a bidding competition for a desirable candidate.

The nature of contingency recruiting is such that exclusivity is not possible. A contingency recruiter is in a race against others to present candidates. When desirable candidates are found, they must present them to as many clients as possible to have the greatest chance of making a placement.

Neither contingency nor retained executive search consultants should accept fees of any nature from candidates. However, contingency firms
have incentive to proactively "push" candidates to employers. Retained consultants do not assertively push candidates; they are paid for the process and are expected to be impartial judges of suitability.

The contingency recruiting process is straightforward and fast. Recruiters get some basic facts of the job, scan for candidates from resume databases and internet sources, and send the raw resumes as quickly as possible.

The retained search process is more involved and takes longer..

CONTINGENCY	RETAINED
1. Contingency recruiter frequently represents candidates seeking placement.	1. Retained recruiter works for the client only.
2. Contingency recruiter works in competition with other recruiting agencies for the placement.	2. Retained recruiter conducts search assignments on an exclusive basis.
3. Contingency recruiter seeks to fill lower level and some middle management roles and handles many job openings.at once.	3. Retained recruiter usually works with a small number of senior management and middle management roles.
4. Contingency recruiter does not need to meet clients or candidates in person and spend less time on initial research and specifications;	4. Retained recruiter must understand the client organization and position details thoroughly. Personal meetings with clients and candidates are usually required.
5. Contingency recruiter mainly seeks applicants who are highly motivated to change jobs and may be unhappy or unstable in their careers.	5. Retained recruiter focuses on acquiring candidates who are happy and successful in their jobs and not actively seeking new employment.
6. Contingency recruiter works concurrently with a multitude of open job orders and clients from the same industry.	6. Retained recruiter works on only 3 to 5 assignments at any time and is personally accountable for success of each.
7. Contingency recruiter has no guarantee of payment for services performed and cannot afford to invest much time in a search beyond basic recruiting and submission of resumes.	7. Retained recruiter invests considerable time for each assignment in screening, interviewing, evaluation and client interaction.
8. Contingency recruiter will present most candidates within 1-2 weeks after obtaining a job order; often submitting less desirable candidates to increase probability of a placement.	8. Retained recruiter usually recommends only 3-8 highly qualified candidates to a client company within 4-6 weeks.
9. Contingency model requires considerable involvement of the hiring manager in screening, interviewing and evaluating candidates.	9. Retained model requires minimal time investment of the hiring manager until interview process.
10. Contingency fees range from 10-20% of annual compensation and are paid after placement is made.	10. Retained fees range from 20-30% of annual compensation plus expenses with part of fee paid up-front.
11. Decision to choose Contingency recruiter is usually made by Human Resources department.	11. Decision to engage Retained Recruiter is typically made by executive management.

Media organizations throughout the world call upon the Principals of Chalre Associates for thought leadership. Below are some examples of published material written by our consultants or international journalists who refer to them. For a complete list of published work, Click Here.

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