By Carl Kutsmode, Senior Vice President
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. Despite the ongoing pandemic, organizations have witnessed a rising need for leadership teams to face tough challenges head-on. But sourcing and recruiting this high-level talent can be a challenge, especially due to the high unemployment market we currently find ourselves in.
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 the difference between these search models to help you determine the type that best aligns with your organizational hiring needs.
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 multiple 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. However, as its name suggests, contingent search firms are only compensated upon the successful placement/hire of a candidate, and most offer a limited replacement guarantee ranging from 30 days to six months. These firms tend to charge a lesser fee than the retained search model. However, they 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. As a result, they instead 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.
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 that respond with interest and make a quick decision often end up with the best quality candidates. Because the goal of each contingent recruiting firm is to rapidly generate multiple prospects that meet minimum qualifications for each role, more of the responsibility for assessing a candidate’s skill-level and organizational fit is assumed by the employer.
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 will work exclusively with one retained search firm on an exclusive basis. The firm will assign a dedicated team committed to fulfilling their client’s hiring needs with a proven top-performing hire. When looking to source and recruit new candidates, retained search firms will target only “passive” prospective candidates, or those who are happily employed at specific target companies and not actively looking for a new employment opportunity. Retained recruiters also perform a deeper, more in-depth vetting of the candidate’s qualifications and skill set to gauge how this individual would fit within an organization and/or a specific team. This will ensure that the 3-5 qualified candidates presented for consideration meet—and sometimes exceed—the requirements that are required of the position.
Furthermore, a typical retained search can take anywhere from 90 – 180 days to complete. 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. Ultimately, retained firms handle more of the technical aspects of the search, allowing the organization to focus primarily on the candidate’s cultural fit during the interview process. 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 either between 90 – 180 days or upon successful hire.
When would I use contingent search?
Let’s face it: there are many times when your internal talent acquisition or HR team may be ill-equipped to handle an executive search for a difficult-to-fill, niche job that is in high demand. If 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. 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 can expect fees to amount to about 20-25% of total annual compensation, depending upon the contingent firm’s policies.
When would I use retained search?
If your organization is looking for a dedicated recruitment partner but faced with timeline expectations when filling a critical senior leadership hiring need at the Director or VP and above, choosing a retained search provider may generate the greatest return on investment. Rather than leaning on pools of currently active jobseekers, retained executive search firms leverage their databases of highly-qualified, passive candidates. Moreover, 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.
Another key differentiator of retained search firms is that most conduct comprehensive assessments and generate sophisticated written candidate 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 fit for the role. To ensure that both 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. In most cases, a retained search firm will offer a 12-month replacement guarantee, and you can expect to pay between 30% – 35% of 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.
While there are pros and cons to each of these recruitment models, the decision ultimately depends on the uniqueness of the situation that your organization finds itself in. If you are seeking a non-exclusive recruiting partnership with a firm to fill a role on an accelerated timeframe, engaging with a contingent search provider like our sister company, Acara Solutions, can be perfect for your needs. Conversely, a retained search firm is best if you are looking to exclusively engage a recruiting firm that will dedicate a team to work in close collaboration with your in-house HR and executive team to fill a confidential or business-critical leadership role. Be sure to keep in mind that retained recruiting firms like TalentRise prioritize quality over quantity when conducting a search. Our in-depth candidate screenings are tailor-made to align with your organization’s values, thereby reducing the risk of making a bad hire.
For more information about TalentRise’s FlexSearch executive search practice, check out our website.