How are Contingency and Retained Executive Search Firms Different?
Contingency and Retained Search
Two executive search firm types dominate the recruiting industry: contingency and retained. Consequently, if you have an important executive to hire, you will have to decide what kind of search firm to use. In leadership talent acquisition, the contingency and retained search firm models could not be more different.
Different Search Types
For example, contingency and retained firms target different kinds of candidates. Indeed, contingency search firms focus primarily on active candidates. Conversely, retained search firms focus on passive candidates who are not actively seeking their next job opportunity.
Another striking difference is the target candidate level. For example, retained search firms focus on senior-level executive roles, while contingency firms primarily focus on non-executive positions.
Different Pricing Models
Additionally, the pricing models are quite different. Contingency firms do not charge for the work that they do; they only get paid for actual placements. For comparison, retained search firms charge a retainer to do the work of executive recruiting, regardless of the outcome. Moreover, companies pay a retainer upfront to secure the services of retained search firms. Typically, retained firms charge a third of their total fee at the launch of the engagement. Clearly, retained search, which is a form of management consulting, is a premium service, while contingency firms appeal to the budget-minded.
Next Generation Retained Search
The Good Search is a retained executive search firm and a next-generation alternative to traditional retained search firms. First, our investigative approach makes search smarter. Better yet, we give you more: dream candidates others miss, pricing you can trust, and all the candidate research that you can use to make additional hires at no additional cost.
To be clear, whether you use retained or contingency search services, you will likely pay tens of thousands of dollars to find the executive you need. In other words, an executive search done well never is free, despite what some contingency firms may claim. So the question becomes, is it worth the price? We’ve listed the differences below to help you understand the value of each model.
Search Firm Selection
In order to select the right executive search firm, executive search buyers must wrap their minds around the differences between the contingency and retained search business models. Yet each of these traditional business models has shortcomings. Those shortcomings make an argument for an approach to executive search that is more evolved. With that caveat, what follows are the general differences between the traditional contingency and retained search firm models:
TRADITIONAL CONTINGENCY FIRMS
TYPES OF POSITIONS
Senior executive positions that are rarely posted on job boards
VP and below positions and individual contributor roles
A proactive method of recruiting top performers who are not actively looking. Dated research techniques miss top candidates and strategic intelligence.
Reactive method of recruiting active candidates through job postings and resume searches. Candidates are missed with no due diligence as to why.
Conducts searches on an exclusive basis only. Paid to do the work of search. Percentage retainers are common in the industry and a conflict of interest because they reward firms that inflate compensation.
Conducts searches often on a non-exclusive basis. Only paid for a candidate placement so successful searches are never free. Not paid to do the work of search so effectively owes the client nothing.
SEARCH FIRM RELATIONSHIP
Recruiting process is consultative as a recruitment partner.
Recruiting process is transactional and placement-oriented.
Conducts original research aimed at identifying top-performing passive candidates, typically those who are not actively searching.
Rarely conducts original research. Presents active candidates in a race against other firms, often without thoroughly ensuring that they’re the right fit.
Calibrates, screens, and conducts in-depth interviews, eliminating weaker candidates. Develops a slate of 3-to-5 top finalist candidates.
Submits a high number of candidates to increase the probability of a contingency placement fee. The focus is less on quality and more on high volume.
Retained firms attempt to mitigate risk by investing by getting to know the client organization, position requirements, and the knowledge skills, and abilities that would be ideal.
With no guarantee of payment for services performed and no budget for research, some contingency firms abandon difficult searches without telling the client.
Of course, companies don’t need to settle for traditional retained or contingency search firms. Instead of traditional retained search, The Good Search offers next-generation retained search that is more evolved. Instead of contingency search firms, our executive recruiting research practice Intellerati offers employers the opportunity to save and superior results.
For employers that would rather not go “out to search”, our executive search research practice Intellerati offers month-at-a-time support for internal executive recruiting and talent acquisition teams. For more on retained search fees, check out our Guide to Executive Search Pricing.
Got Questions? Let’s talk.
No search firm is the right firm for every search every time. Yet we make it a practice to listen to what you’re trying to accomplish and we try to help, regardless.