In today’s ever-changing and unpredictable world, the importance of hiring and developing strong upper-level managers and resilient C-suite executives has never been greater. Organizations have witnessed a rising need for leadership teams to face tough challenges head-on. But finding, assessing, and recruiting top-performing talent at this high level can be a challenge.
If your organization is interested in outsourcing your leadership hiring needs to an executive search provider, do you understand the difference between contingent and retained executive search? If not, allow me to explain each search model to help you determine the type that best aligns with your organizational hiring needs and budget.
What is contingent search?
The contingent search model is primarily used to fill niche, hard-to-fill individual contributor roles up to mid-tier management positions typically below the Director or VP level. It is common for an organization to engage with several contingent search firms, each of which will submit multiple candidate resumes for client consideration in an attempt to fill the position as quickly as possible. In addition, since contingent firms engage in a non-exclusive relationship with clients, their recruiters often promote the same candidate to multiple clients—some of whom may be your direct competitors. Clients who respond with interest and make a quick decision often end up with the best candidates.
Benefits of using a contingent search firm:
- The goal of each contingent recruiting firm is to rapidly generate multiple prospects that meet the minimum qualifications for each role. They focus on vetting to ensure that the candidate’s skills, experience, and compensation match while relying heavily on job postings to attract candidates that are currently active in the job market.
- These firms tend to charge a lesser fee than the retained search model. They also often don’t have time to target specific employers to engage with passive job candidates, nor do they have the resources to vet them at length. Therefore, the employer assumes more of the responsibility, along with the workload, for assessing a candidate’s skill level and organizational alignment.
- As its name suggests, contingent search firms are only compensated upon a candidate’s successful placement/hire, and most offer a limited replacement guarantee ranging from 30 days to six months. Therefore, your organization is not required to pay any upfront fees.
What is retained search?
The retained search model is best utilized when organizations need to fill highly specialized, confidential, or critical leadership talent—typically at the Director to C-Level. In this higher-end service, companies work in close partnership with one retained search firm on an exclusive basis for the duration of the search, or an agreed-upon minimum “exclusivity” period. When looking to source and recruit new candidates, retained search firms will primarily target “passive” prospective candidates—or those who are happily employed at specific target companies—not actively seeking a new employment opportunity. Furthermore, a typical retained search can take anywhere from 90-180 days to complete. The timeline can be longer—when compared to targeting only candidates who are actively engaged in a job search—because the firm must identify and engage prospective passive candidates to consider the opportunity.
The benefits of using a retained search firm:
- Rather than leaning on pools of currently active job seekers, retained executive search firms leverage their databases of highly qualified, passive candidates and focus heavily on referral networking as a primary strategy
- By leaning on their expert knowledge of the marketplace, these firms are experts at targeting and engaging with top-performing leadership talent employed by key competitors.
- The firm will assign a dedicated team committed to fulfilling the client’s hiring needs. This team will conduct top-performing hire and regular—usually weekly—search progress status update calls with the client’s hiring manager to ensure mutual accountability for completing the search promptly.
- Retained recruiters perform a deeper, more in-depth vetting of the candidate’s qualifications and skill set to gauge how this individual would align within an organization and/or a specific team. This will ensure that the three to five qualified candidates presented for consideration meet—and sometimes exceed—the position’s requirements. Most retained search firms will provide hiring managers with sophisticated written candidate executive summary reports that explain a candidate’s behavioral profile and provide evidence of past performance. In many cases, a retained firm supplements its expert candidate assessment with formal online assessment tools to deepen their insight into a candidate’s innate strengths and potential developmental areas when evaluating the overall potential alignment for the role.
- To ensure the process is continually refined throughout the search, retained recruiters strive to remain connected to your organization through weekly or bi-weekly check-ins and status calls. These discussions are designed to provide information and recent market intel that may shed light on below-market compensation or resistance to some aspect of the employment opportunity presented.
- Retained firms act as an authorized extension of the organization’s HR or in-house recruiting team by representing the company’s employment brand and value proposition messaging in the market. Therefore, much thought and consideration is given to candidate messaging and how to best highlight the client organization’s unique value proposition. Ultimately, retained firms handle more of the search process’s heavy lifting and technical aspects, allowing the client to focus on the candidate’s team and cultural alignment during the interview process.
When would I use contingent search?
As a rule of thumb, contingent search firms should be engaged when searching for an individual contributor or first-level manager up to the Director or VP level that typically earns up to $150,000 in total annual compensation. You should consider using a contingent search firm if:
- Your internal talent acquisition or HR team is ill-equipped to handle an executive search for a difficult-to-fill, niche job in high demand.
- Your organization is motivated by budget constraints or battling an urgent hiring timeline. Leveraging one or more contingent search firms working in competition to provide you with potential candidates quickly may be best for you.
Depending upon the contingent firm’s policies, you can expect fees to amount to about 20-25% of total annual compensation.
When would I use retained search?
When filling a critical senior leadership hiring need at the Director, VP, and above level, you should consider using a retained search firm to ensure the greatest return on investment if:
- The search is confidential, or is a revenue-impacting critical leadership role in which you want to minimize the risk of a hiring mistake
- You need a dedicated recruitment partner that is accountable and focused on filling the search within a specific timeline.
A retained search firm will usually offer a 12-month replacement guarantee. You can expect to pay between 30% – 35% of the total first-year annual base and incentive compensation, including any sign-on bonus paid upfront. This longer guarantee period provides an added sense of security, one that is crucial when either a new role has been created or when unknown hurdles to success begin to impact the candidate’s on-the-job performance. When engaging a retained firm, be prepared to pay upfront for their services—typically 1/3 of fees are due upon start of the search, 1/3 are paid within 45-60 days, and the remainder of the balance is compensated between 90-180 days or upon successful hire.
While there are pros and cons to each of these recruitment models, the decision ultimately depends on the uniqueness of your organization’s situation.
If you are seeking a non-exclusive recruiting partnership with a firm to fill a role in an accelerated timeframe, engaging with a contingent search provider—like our sister companies below—can be perfect for your needs:
Conversely, a retained search firm like TalentRise will be better suited to help you fill your most critical, senior leadership roles with dedicated accountability and a prioritized focus on quality over quantity. Our in-depth candidate screenings are tailored to align with your organization’s values, reducing the risk of making a bad hire. TalentRise even includes a 90-day “Fast Start” executive onboarding coach to ensure the new hire ramps up quickly and is set up for success in their new role.
Related: What is the Cost of a Bad Hire?
Looking to chat with Carl about the type of search provider that is best for your company? Connect with him on LinkedIn or send him an email at firstname.lastname@example.org.
For more information about TalentRise’s FlexSearch executive search practice, check out our website.