Cornerstone Kansas City provides insights to help business leaders decide if they should outsource hiring of a key position to an executive search recruiter, and if so, is it best to use a Retained or Contingency firm?
This series of articles will help you decide whether your company should outsource the recruiting and hiring of your new leader.
Written by the top rated Executive Search specialist in Kansas City, Dan Heiman, this article in the 4:4 series: Executive Search Recruiting – Retained Vs. Contingency, answers the challenging questions that hiring managers and companies face when needing to recruit and hire senior level and C-suite executives.
Article 2 of 4 – When To Hire an Executive Search Firm
And Which Kind – Retained or Contingency?
In the first article of our series, we reviewed the basic differences between retained executive search and contingency recruiting methods.
Retained search is generally viewed by most experts as delivering the best result. But in order to do so, it also is usually the more expensive — (at least, in terms of initial outlay. A strong case can be made for retained search delivering the best return on the investment over time).
That said, there are times when one process makes more sense than the other. Let’s take a look
The contingency search process is geared to identifying qualified candidates—but not necessarily the most qualified candidates. Contingency recruiting is appropriate in the following situations:
- When the salary level of the position is less than $100,000;
- When many people are likely to be qualified for the position;
- When multiple vacancies with the same job description are being filled;
- When the hiring organization wants to take more responsibility for screening, interviewing and negotiating with candidates.
Retained executive search consulting will in most cases identify the most qualified candidate thanks to the lengthy process of searching and interviewing.
There is also a critical difference here. The contingency process will identify candidates with the appropriate skill sets and experience. The retained search process will also probe for the best fit. Most failure in hiring comes from incompatibility on cultural and personal grounds, not from workplace inadequacy. The retained search firm applies advanced psychometric assessment to profile not just the candidate but the firm.
Retained search recruiting, therefore, is appropriate:
- When the salary level of the position is above $100,000 and when it is critical to hire not just any qualified person, but the most qualified person available.
- When you need a recruiter who will make a dedicated effort to filling the position, and who will take into account nuances of your organization’s culture and other critical issues.
- When you need an independent third party to thoroughly screen candidates, through in-person interviews, before finalists are presented.
- When you want an objective evaluation of internal candidates against an external shortlist.
- When the situation requires a go-between to help persuade an executive to leave a desirable position for a better opportunity, and to help negotiate the terms of the move.
- When a high degree of confidentiality is required in the recruitment process.
The Approach of Executive Search
In the first article, we looked at general differences in approach between contingency and retained. You need to look at this in more detail in order to make an informed decision on which way to go, Retained Executive Recruiting or Contingency methods.
A retained consultant is typically working exclusively on the search and is expected to evaluate all candidates being considered for the position. As a result, a retained consultant will never present a candidate to more than one client at a time.
A contingency recruiter usually does not have an exclusive assignment, but instead is in a race against other sources to present a winning candidate, and often present attractive candidates to as many clients as possible.
Contingency recruiters tend to be more specialized by industry and function. Retained search consultants also specialize but, because they are driven by original research for each engagement, are able to apply that process across industries and functions. This is important when you may want to recruit from outside your industry.
The Fees Associated with Executive Search
Fees for the two kinds of service, Retained vs. Contingency, are similar—typically 30-35% of guaranteed first-year compensation for the hired candidate.
Retained recruiters make an estimate of the fee and bill for a portion of the fee to initiate the engagement, with subsequent invoices leading to a final bill based on the actual compensation package awarded to the hired candidate. As an alternative, most retained consultants will also accept a fee fixed at the outset based on the expected compensation level and billed in three or four monthly installments during the search.
If you’re still not certain when to use a Retained Executive Search firm or Contingency firm and want to know more, read our next article in the 4:4 series on Executive Search Recruiting – Retained Vs. Contingency “Advantages of Using an Executive Search Firm” to help you determine the best way to hire your next senior level or C-Suite executive