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 executive recruiting 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 recruiters charge a third of their total fee at the launch of the engagement. Retained search is a form of management consulting and 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 you can use to make additional hires at no additional cost.
To be clear, whether you use retained or contingent recruiting services, you will likely pay tens of thousands of dollars to find the executive you need. In other words, an executive search done well is never 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
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 executive search that is more evolved. With that caveat, what follows are the general differences between the traditional contingency and retained search firm models:
SEARCH FIRM
TYPE
TRADITIONAL RETAINED SEARCH FIRMS
TRADITIONAL CONTINGENCY SEARCH FIRMS
TYPES OF POSITIONS
Retained search firms specialize in senior executive positions that are rarely posted on job boards
Contingency search firms specialize in VP and below positions and individual contributor roles
METHODOLOGY
The traditional retained search model proactively recruits ideal candidates who are not actively looking. Yet outdated research techniques miss potential candidates and fail to gather strategic intelligence.
A traditional contingency search firm model reactively recruits active candidates through job postings and resume searches — both resources offer lower-quality talent pools.
ENGAGEMENT CONTRACT
Retained firms search on an exclusive basis only. They are paid to do the work of the search. Percentage retainers are common in the industry and a conflict of interest because they reward firms that inflate compensation.
Often, contingency firms search on a non-exclusive basis. They are only paid for a candidate placement, so successful searches are never free. Since they’re not paid to search, they owe the client nothing.
SEARCH FIRM RELATIONSHIP
The retained recruiting process is consultative and partners deal with the CEO and board members as they recruit senior executives to the leadership team.
The contingency search recruiting process is more transactional and placement-oriented. They focus more on non-executive positions.
THE RESEARCH
Retained firms conduct original research to identify top-performing executives who are not actively looking for a new job.
Contingency firms rarely conduct original research. They present active candidates in a race against other contingency firms.
THE VETTING
Retained search consultants calibrate executives to recruit qualified candidates who are top performers. They produce a slate of 3-to-5 top finalist candidates.
Contingency firms submit 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.
THE RISK
Retained recruiters mitigate risk by investing by getting to know the client organization, position requirements, and the knowledge, skills, and abilities that would be ideal. They assess candidates to select the best-of-the-best contenders.
Contingency firms often abandon difficult searches without telling the client. After all, they’re not paid to search for candidates: they’re only paid if they make a placement. As a result, positions often languish unfilled.
Of course, companies don’t need to settle for traditional retained or contingency search firms. The Good Search offers a more evolved next-generation retained search. As an alternative to contingency search firms, our executive recruiting research practice, Intellerati, offers employers the opportunity to save and superior results. Intellerati provides 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 right 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.