Contingency Recruiters vs Retained Executive Recruiters: Explained

The stakes are high in executive talent acquisition, and the job absolutely must be done right. This is why many businesses opt to bring in professional executive recruiters to identify, qualify, encourage, and ultimately hire the best talent for the position.

There are two basic types of executive search consultants these firms can go with: those who work on a one-off basis, known as contingency recruiters, and those who work on an ongoing model, or retained recruiters. As with anything else, there are pros and cons for both types of recruiting partnerships. This article discusses both and will help you identify which type of executive recruiter is best for your executive search needs.

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Types of Executive Recruiting Firms

As stated, there are two basic types of executive search firms: contingent recruiting firms and retained recruiters. Both types of talent acquisition aim to provide you with the right candidate for the role in question.

However, the recruitment process is different for a retained executive search firm than for a contingency recruiting firm. Let’s take a look.

What are Contingency Recruiting Firms?

Contingency executive recruiters are used on an “as-needed” basis. In this model, the headhunter doesn’t get paid until they fill your role. The basic process looks like this:

1. You contact a contingency recruitment agency.
2. You provide information about the role being filled, the job description, and what you need in a potential candidate.
3. The recruiting firm finds candidates who likely fit the role. They may put in more effort to identify passive candidates who aren’t actively seeking, but in many cases, they simply post on job boards and sort through the active job seekers who apply.
4. The contingency firm will conduct interviews, sometimes on their own, other times bringing your team in.
5. When they find a new hire who fits the bill, they collect their fee for their part in the hiring process.
6. You may pay additional fees for à la carte services, such as compensation analysis for salary negotiation, assessments, or social media searches.

Undoubtedly, this search model can produce good candidates. However, as with any commission-based model, there’s a chance the hiring process will be rushed or lacking in attention, with the agency focusing instead on simply filling roles in order to collect their cut.

That’s why so many organizations choose retained firms to fill senior-level positions.

What are Retained Executive Search Firms?

In contrast to contingency executive recruiters, retained firms charge a monthly fee to maintain their search services–and for good reason. Retained search firms manage long-term, ongoing searches for highly successful executives … the type who aren’t typically job-hunting, and who therefore take a bit more digging to uncover.

Here’s what a relationship with a retained firm typically looks like:

1. You contact the firm that you’d like to partner with, long-term, for assistance in filling upper-level management and executive positions.
2. You pay a set monthly fee based on the firm’s level of involvement in the recruitment process, how many candidates you’re looking for, and how frequently you’ll use them.
3. The retained firm conducts ongoing searches for promising candidates who may meet your needs. Even if you’re not actively hiring for a position, the firm will continue flagging qualified candidates based on your organization’s needs, establish a basic level of rapport, and will keep their resumes and contact information on hand for future reference.
4. When positions do open, retained executive recruiters will reach out to the most well-qualified candidates they’ve already discovered, introduce them to the opportunity, complete final qualification interviews, and encourage candidates to pursue the opportunity.
5. Throughout the search process, retained recruiters maintain a transparent database of all candidates being considered that hiring managers and the extended C-Suite can access at any time.
6. Retained executive recruiters will coordinate final interviews between candidates and leadership within your organization, keeping the hiring process moving smoothly and ensuring a great candidate experience.
7. Once a lead candidate is identified, your retained recruiter will assist in salary and benefits negotiations and coordinating offer acceptance. Many times, retained recruitment firms will also assist in onboarding, providing process documentation, key organizational knowledge, and other details that will assist in the transition. 

Clearly, retained executive search processes are much more in-depth than those offered by contingency agencies. However, as mentioned, there are still pros and cons on both sides.

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Contingency vs Retained Executive Search Firms: Pros and Cons

While retained executive search does offer a more comprehensive experience for your organization, there are valid reasons why some businesses opt for contingency agencies. Here are the pros and cons of both types of search firm.

Contingency Firms

Businesses who use contingency recruitment firms often need to find talent and fill roles quickly. This is perfect for staffing entry level teams, but doesn’t translate well when applied in executive recruitment situations. Here are the the pros and cons of using contingency recruiters for executive search:

Pros

• No (or low) upfront fee: Contingency search firms typically don’t charge an upfront fee, or if they do, it’s a fraction of the ultimate cost.
• No long-term contract: Since contingency firms work on a one-off basis, you won’t maintain any ongoing expenses.
• Quick kickoff: Contingency firms are eager to get started, so they’ll help you through the beginning steps of the recruiting process quickly. While this initially provides a feel-good experience, some contingency firms end up rushing the entire process.

Cons

• Pressure to produce qualified candidates: Contingency recruiters don’t have as much time to find the best candidate for each role, and they’re essentially forced by their model to fill positions as quickly as possible. This can sometimes result in candidates who aren’t fully vetted, or who technically meet qualifications but just don’t jive with your organization’s culture.
• Long search times to identify ideal candidates: Due to their one-off contracts, contingency recruiters don’t spend as much time building relationships and industry connections on your behalf. When it comes to executive search—a process that requires a great deal of established trust and personal referrals—they just don’t have the resources to do the job quickly.
• Less than ideal candidate experience: Executive-level candidates are usually already gainfully employed. When a recruiter reaches out, these candidates require timely communication and a streamlined and efficient process, or you risk losing their interest in the opportunity. Unfortunately, contingency recruiters sometimes make the mistake of treating an executive search the same as a lower-level search—leaving candidates in the dark throughout much of the process, and providing an overall bad experience.
• Possible misrepresentation of your brand: By nature, contingency recruiters aren’t invested in your business. They don’t know the ins and outs of your industry. So when they’re representing your brand and they unknowingly use the wrong lingo or misspeak about a product, service, or process, the candidate will instantly lose faith in that recruiter, the opportunity, and your brand.

While it’s tempting to choose the approach where you don’t pay until you have a candidate in hand and then move on, there are clear risks to using contingency search recruiters for executive placements.

Retained Firms

Using executive search firms on a retained basis is a long game, but can easily be viewed as the more valuable approach.

Pros

• Expert, low-cost search team: Rather than maintaining a full in-house talent acquisition team—and all of the salaries and benefits they require—keeping a professional executive search team on retainer provides expert service when you need it at a very reasonable rate.
• Intense qualification processes: By the time a candidate reaches your desk for an interview, he or she will have already been fully vetted by your executive search team. This may include rounds of preliminary interviews, confirming work histories and experience, and even speaking with professional references to fully confirm that he or she is an excellent fit for your role.
• Comprehensive brand knowledge: Keeping your recruiters on retainer allows them time to fully understand your organization, its mission, and any special intricacies. It allows your recruiters to properly represent your brand and accurately describe the position and opportunity when speaking to candidates.
• Complete brand protection: (On the same note, retained executive recruiters are in the best possible position to act as an extension of your team, providing an enjoyable candidate experience and maintaining compliance throughout with any and all human resource/hiring laws that apply.
• Candidate follow-ups post-placement: Retained recruiters have the time to follow up with candidates after they’ve been in the role for a short time, ensuring that candidates are settling in well, that they have the tools needed to be do their jobs, and providing any final assistance or resources to ensure a seamless and successful placement.

Cons

• Ongoing monthy retainer fee: One supposed drawback of retained search is the requirement to pay small monthly fees to keep search services on retainer. Companies who opt for retained search services often justify this small monthly cost by considering all of the ongoing search efforts that take place and the on-demand talent acquisition services that they have access to.

Overall, with retained executive search, it pays to remember that recruitment services will be available at your convenience, and your recruitment partners will be able to source high-quality candidates to fill your executive positions quickly.