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Contingency vs. Retained Search: A time when I was a Client

Today I want to talk with you about my experience when my place was on the other side of the fence.

As Commercial director, I was involved in normal turnover and I had to find solutions to replace those were leaving, while managing my normal duties related with my role. Challenging. Even having had in the past experience -I would say long experience- as recruiter and head-hunter I found quite hard to dedicate time to perform search of candidates, while I had to stay tuned o budget, sales and clients.

So I had to use external recruiters, obviously I used some of my contacts to get in touch with recruiting companies I know from the market and also tries some new, just to have also possibility to compare their ability. One rule: for each recruiting company one search project on exclusive base. Again, when I was a recruiter I found hard to manage contingency contract with not exclusive (even temporary) assignment.

So from the point of view of client, I asked to myself: why do most external recruiters work on a contingency basis? In addition, why does most retained work happen at the executive level?

 

As a client, my experience is that I received better focus and better results from retained partners. Moreover, the Client-Agency relationship feels more like, well, a business relationship. I am sure that most contingency recruiters would rather work on a retained basis knowing they are going to be paid for their work.

Please take a minute and think about the fee for a recruitment agency: a recruitment agent’s fee is comprised of two separate charges; a charge for the time, expertise and effort put into the role, and a charge for the risk the agent assumes under a contingency model. Because there is a very high likelihood that the time and effort a recruiter puts into a role will not result in a fee and placement, then it makes sense that a recruiter has to charge a higher fee for a successful placement – simply because most of their work will not result in a fee. If engaged to work on a job, most types of agency are paid for their work regardless of the outcome. For example, if you engage a digital agency to design a website, then they will be paid for that work even if you do not end up using that website (for whatever reason). If you engage a business consultancy to advise your firm on strategy or a Business plan, and you fail to use their advice, you still have to pay them for it. However, if a recruitment agency finds three superb candidates for a role that they are engaged to work on (finally), and the client decides not to hire any of them (it happen sometimes), the agency cannot present the client with a bill for time, cost out of pocket services rendered and engagement.

 

Following that line of thought, I have wondered why there is not more retained work at the mid-management level. I think because there is very high competition on the market, so clients mainly (not all of course) want to minimalize the risk of investing in a recruitment company, especially if they intend to work with 5-6 agency or freelance, to have the higher pool of candidates….pity that more than often those agencies they try to present the same candidates, and the same candidates have 5 times interview for the same position and same company. Sounds familiar?

As a client, I get better focus because the recruiter knows I have some expertise in the game, and the recruiter is, happy because, well, he/she knows is going to be paid. Perhaps top tier executive retained search firms do not want to work on these roles because they are less lucrative. However, I tend to think that mid-level retained work would happen if there were a more robust client need.

As a Client I believe in the value of a retained search model, in general, though, I have received better candidates more quickly when utilizing the services of a retained recruiter. Since they know I am a serious buyer, they put the necessary resources toward my opening. Conversely, contingency recruiters work where their efforts yield the most likelihood of financial success. Therefore, they end up being in the game of balancing easy-to-fill requisitions against hard. In addition, if my position is a “purple squirrel” in a list of much easier fills, then I am going to get less attention, so they will not put my search on the top of pipeline…it means if I am looking for professional Sales rep in a strategic area, time to find a good fit (that is not priority for the search company) is directly connected to shrinking of sales in such area. Do you consider this cost? Well, rarely, for my experience.

However, what I can do if I pay contingency?  Honestly, I cannot blame them. I would do the same. However, when looking at a partner who can seriously add value to my efforts, I want the focus of a recruiter who has limited distractions. Sounds reasonable?

Simply clever yes? Well nor really, as still I have a big head hake when I am thinking why, then, are so many more recruiters in the contingency search business? I think the answer lies with both clients and recruiters... It is a much more difficult sell for a recruiter to be paid before they present candidates. Ultimately, some clients simply don’t/won’t/can’t see the value. Additionally, with so many agencies on the market, it is difficult to figure out who is good and who is not, so it is much lower risk to give searches to contingency partners.

As clients -and most of us are guilty of this- we seem to like the idea of engaging several agencies so we get competition for our business. Moreover, at some surface level this mentality makes sense. Therefore, the commitment level is lower from both parties in the contingency model, which ultimately hurts the client. I also realize that clients like working with contingency recruiters because they could ’get lucky’ and fill the position through other or internal channels, and not have to pay a fee at all….so recruiters work on the project for nothing, sometime having good candidate already checked and ready for the challenge but having received answer from client like: well very good candidate, but at present he should not fit properly in our organization (too much skilled, not able to integrate in company climate, not enough aggressive for our business….why, dear client how did you verify all those skills just with 1 hour meeting with the candidate never perform a a group member in your organization?). So now….refuse candidate, no payment for the effort, frustration of recruiter and on the top, need to inform the candidate he is too brilliant for such company so client say no (of course recruiter has to be politically correct in giving such bad news about outstanding competencies….)

 

 For corporate recruiters and recruiting managers, selling retained search can be a tough order internally. Therefore, I will concede that the limited utilization of retained search is, to some degree, a function of hiring manager comfort. In most situations, recruiting expenses hit individual hiring manager budgets, so they typically do not want to cut a check up front for recruiting fees. I have certainly been engaged in a number of these conversations over the years. However, I would encourage corporate recruiters to present a pro and con list to their managers. I hope that they can get them on board, for instance using my previous post about the cost of bad hire. Make it sense?

Finally, I would like you to consider this point: there is a balance that exists between getting the added focus of a retained search partner and financial/budget viability. That being said, retained search should be a more frequently utilized tool when filling challenging roles. In the end, the placement fee will be close to the same and will likely yield a higher rate of success, guarantee also the full engagement of the professional recruiter on your vacancy.

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