Finding the right talent isn’t easy. When the demand exceeds the internal capabilities of a company, the talent acquisition manager often solicits outside assistance from a search firm. There are generally two types of search firms, contingent and retained.We are sometimes asked which is better. The short answer is it depends. If you’re looking for a lower-level position in an area where higher turnover can be tolerated, contingent search may be the way to go. Contingent search is a model where the search firm is not paid until the candidate is placed. Thus, there is no upfront cost to the hiring company. It is essentially an all or nothing approach that puts all risk on the search firm. Retained search on the other hand is more of a consultancy model where an upfront fee is charged by the search firm. Furthermore, this initial fee is usually not returned to the company regardless of the outcome of the search. The company thus shares the risk with the search firm. However, retained firms generally continue to search for the “right employee” as long as it takes to satisfy the hiring manager.
Contingency search firms operate on volume and speed. Companies often “engage” multiple firms so the first firm to present a candidate who is ultimately hired gets the fee. In the pursuit of speed, contingent firms will normally do minimal vetting of the candidate – if they are vetted at all, beyond having the basic paper requirements specified by the client company. The working theory is thus to submit a high volume of candidates as quickly as possible in the hopes that one of the firm’s candidates will get hired.
If the responsibilities of the role are general enough that no specific industry experience is required by the recruiter, contingent search could be attractive. The contingent business model one-size-fits-all approach can work well if the role is a lower-level administrative role or a functional role at a level like a marketing manager. Positions like these and others where the supply exceeds the demand will often elicit a strong response when advertised online.
Conversely however, if the search specifications are more demanding and harder to fill, retained search may be the way to go. These demanding search specifications are often in play as roles are more senior. Niche roles that mandate unique skill sets usually require very specific background experiences. Contingent firms will generally not approach passive (not overtly looking for a job) candidates because it takes much more time and recruiter expertise to get these candidates to respond. Unfortunately, these passive candidates are exactly the candidates that companies usually want to consider for more critical roles, be it a CFO or CCO or other senior leadership position.
Perhaps the most important difference is that retained firms will take more time to vet each candidate to ensure the cultural, behavioral, and motivational fit is consistent with what the company is looking for. This is critical to ensure that the new hire has the best chance to be a successful long-term employee, and one that will embrace the culture when he/she hires other employees for their teams. The retained search firm will generally take a more proactive approach than the contingent search firm. The retained firm will be in contact with the company and candidates throughout the search and provide regular updates. Sometimes the firm will even provide onboarding assistance.
Finding talented people is always a challenge. When you look for help with talent acquisition, the two main options, contingent search and retained search all depend on your specific hiring needs.