When companies seek to hire management and professional talent from outside their organization, they have several options. They can decide to manage the process themselves, using advertising, the Internet, and/or a contracted researcher to identify potential candidates; use contingency recruiters; or use a retained executive search consultant.
Choice of Internal or External Resource
Using the first option, the hiring executive or a human-resources executive makes an effort to find qualified applicants, typically by advertising the position in the print media or on the Internet, and then screens responses, interviews candidates and selects the person to be hired. The advantage here is that the company retains full control of the process.
The disadvantages are that many qualified candidates (including some of those most qualified) may not see or respond to an ad or post their resumes on the Internet; many unqualified candidates must be evaluated in order to discover those who are qualified; and, once qualified candidates have been identified, hiring authorities face complex, time-consuming and sensitive issues of negotiation and reference checking without the benefit of a third-party professional.
Therefore, many organizations prefer to use independent recruiters. But how do they decide whether to use a contingency recruiter or a retained executive search consultant
Should I use a contingency or retained search firm?
There are two main differences between contingency and retained search firms: how they look for job candidates and how they get paid.
Contingency firms are transaction oriented — they get paid only if you hire a job candidate that they present to you. Typically, contingency firms maintain relationships with dozens of companies. When they find a top-notch job candidate, they present the hot prospect to as many firms as possible.
If your company is looking to fill a position quickly or to fill a midlevel position, using a contingency firm could be a good move. Contingency firms have a great “deal flow” of candidates, which means that they can meet short-term staffing needs. On the other hand, contingency firms rarely take the time to really get to know your company’s needs. Your hiring manager may get contacted many times with a hard sell about a prospective candidate who may or may not be a great fit.
Retained search firms are consulting oriented — they get the same fees no matter how long it takes to find the right job candidate. Retained search firms fill your company’s vacancies by getting to know your company’s needs and finding the person with the exact skills. They are generally best for senior-level management positions where there are fewer qualified candidates and the challenge is recruiting the talent from a competitor. Contingency firms typically charge less than retained firms do — but both can charge anywhere from 20 percent to 33 percent of the prospective employee’s first-year salary range.
What is the value proposition?
Nothing is more expensive for a company than hiring the wrong candidate. An excellent retained search firm will help minimize the risk of making costly mistakes such as assuming a successful big-company executive will automatically be successful leading a small startup, or giving in to a sense of urgency and making quick, expedient hires rather than strategic hires that will prove successful over time.
By retaining an executive search professional, a company will have access to the right professionals while maintaining control over the hiring process. Almost all executive searches come with a guarantee that if the chosen hire leaves within a certain time period, a new search will be initiated at no cost or at a nominal fee. Thus it is in everyone’s best interest to take the time and effort to make the best hire possible the first time around.