Contingent Search vs. Retained Search
By Tony Bianchi
What is the difference between the relationship you have with a ride-share service driver, a mechanic, or your doctor?
The quality and the trust of the relationship.
All three are important and much-needed business relationships, but comparatively one will supersede the others in quality and trust. The same can be said of the quality of your relationship when you are hiring through a recruitment firm.
There are three types of recruiting models a client can engage in with a recruitment firm: contingent non-exclusive search, contingent exclusive search, or retained search.
What do these relationships entail and how do they compare?
Let us look.
Contingent non-exclusive relationship
A contingent non-exclusive recruitment relationship is a relationship whereby a client has two or more recruitment firms working on the same open position. For brevity, I will identify an open position as a "req" (short for requisition) from here on out. Typically, the type of positions recruited for in this recruitment model are professional, trades, and specialized roles who are individual contributors and up to director level roles. These roles will usually take 30 to 90 plus days to fill depending on the role difficulty and the available candidate pool. In this model, the recruitment firm that fills the client's req first - wins! Does the client win? Does the candidate win? Maybe? A downside for this type of relationship is that the firm receives zero payment until the conclusion of the process when the req is filled - hence the term contingent.
Why is this a problem?
If you had eight recruiters on your in-house talent acquisition team, would you have all of them working on the same req knowing that the first one to fill the req would be the only one to get paid the commission? Of course not. Just like your internal recruiters, the external recruiters are less motivated because they realize they and their competitors who are recruiting on the same req are dipping into the same pool of active candidates. Furthermore, this can possibly result in firms submitting subpar candidates because they know time is of the essence. Since the firm does not see a dime until the req is filled, quality is not the focus - quantity is. Resumes are scanned and submitted as fast as a Gen Zer rifles through Tik-Tok. Another thing to consider with a non-exclusive relationship is that you may find that some firms "recycle" the same candidates and submit them to multiple clients - even to the client's direct competitor. As they say in the industry, "Fillin reqs and cashin checks is the name of the game!"
To be fair, there are some contingent recruitment firms that will never compromise on quality and are recognized as the leaders in the recruiting industry. To have a non-exclusive contingent relationship between client and firm is akin to the relationship you have with your rideshare driver. It is a business relationship that is cooperative with limited interaction and trust.
Contingent exclusive relationship
What I would consider a step up on the recruiting relationship scale from contingent non-exclusive recruiting, is the obvious contingent exclusive model whereby the client has given a recruitment firm exclusivity to recruit on their open req. Usually, exclusive reqs will consist of higher-level positions which require a higher caliber candidate typically manager-level and above or a specialized skillset. Since the cadence in this relationship is of a slower pace than non-exclusive recruiting, it could take anywhere from 45 to 120 plus days to fill depending on the scope of the role. Though the firm has exclusivity they still do not receive any payment until the position is filled. This relationship is better than a non-exclusive contingency relationship in that it will produce better-qualified candidates since speed is not as much of a factor, sort of, however, the fact remains no payment until the req is filled. Keep this in mind, recruiters are human and like all humans, we take the path of least resistance. Recruiters, if they are paid on commission, will always focus on the easier-to-fill req first in order to get paid the quickest; I know, I did it myself.
This relationship is better than non-exclusive in that it is akin to the relationship you have with your mechanic. It is a regular ongoing relationship, but it is just a business/customer relationship with casual pleasantries.
Retained Search relationship
A retained search relationship is an exclusive retained recruiting arrangement between the client and the firm. It is a service-focused relationship that culminates into a common goal via a trusted partnership. In a retained relationship, a firm is getting paid for the consultative service and value they are providing during the entire search process which results in a premium hire. Furthermore, the candidates sourced are typically passive candidates who are remarkably successful in their industry. The retained search process is very measured and methodical. It is a trusted consultative partnership that operates as an extended piece of the client's talent acquisition team. However, when it comes to the retained exclusivity of the specific open req, the search firm has complete ownership of the process and candidates. This model is used by clients that have a role that is a leadership role from a director to C-level, highly confidential, or a specialized niche role. The sourcing of candidates and vetting process are very rigid and precise resulting in 3 to 5 very qualified finalists.
A retained recruiter will conduct a thorough deep-dive in-take session with the client, specifically the hiring manager, to kick start the search. During the intake session, the search firm learns and understands the company, the culture, and the scope of the role. In a typical retained search, the client pays the agreed-upon fee in three installments. The first installment (one-third) which I call the "Engagement Fee" is paid to initiate the search and it is usually non-refundable. The brilliancy of the non-refundable engagement fee is that it ties the client and firm together shoulder to shoulder. It holds the client accountable for who may change their mind on the req for a plethora of reasons mid-stream after the firm has already invested its valuable resources into the search. It holds the recruiting firm accountable to the client in providing qualifiable and quantifiable services in providing premier candidates.
The second installment of the fee agreement is usually paid at the 60-day mark of the search or when the final candidates are identified; depending on the specific agreement. The third and final installment is paid once the selected candidate signs their offer letter or their start date, again depending on the agreement. At Way Recruiting Group we only have two installments: the initial engagement fee and the second (final) installment is paid once the selected candidate signs their offer letter. Additionally, retained search firms provide a money-back or replacement guarantee with each placement. The replacement guarantee is usually 120 to 180 days; for CEO hires it can be as much as a full year. A solid retained search should yield 3 to 5 final premier candidates with the full process taking anywhere from 60 to 180 days; on some rare occasions, it may take longer depending on the complexity of the role. Retained search is becoming more and more popular due to its customizable recruiting process, stronger ROI, and quality of hire.
Okay, I have probably shown my hand already, but a retained search is the best relationship between the client and the recruitment firm. The reason is, that it is a relationship that eventually bears commitment, trust, and strategic value. In my nearly 25 years of recruiting, having done both contingent and retained, a retained search relationship is the purest form of a recruiting relationship.
I personally enjoy retained search much more than contingent search because it allows me to have a strong long-term partnership with my clients. I can also limit the number of searches I take on at a time so I can focus on quality rather than quantity. It is important to remember that a retained exclusive relationship does not necessarily cost more than a paralleled contingent exclusive agreement. Retained search allows for the recruiter to establish a relationship as they create trust while providing great value. At Way Recruiting our mission statement cradles these principles of building relationships, creating trust, and providing value.
About the Author:
Tony Bianchi is the founder and Principal of Way Recruiting Group, LLC. He has nearly 25 years of recruiting experience in agency staffing, corporate talent acquisition, consultative niche recruiting and retained executive search. Tony is a Certified Internet Recruiter (CIR). Prior to recruiting, Tony provided vocational placement and job coaching services for people with disabilities in the community workforce for 15 years. Eventually, Tony became a certified vocational service provider for people with disabilities in the State of Illinois.
For information regarding Way Recruiting services please go to: www.wayrecruiting.com