When you need to fill a leadership position, who can help find the right candidate for the role?
Recruiting companies fall into one of two camps, either retained search or contingent search firms. Understanding how these approaches differ is key in determining which is a better fit for your hiring needs.
Over the last 15 years, we have worked with more than 2,000 consulting and search clients, placing CFOs at companies spanning a wide variety of industries. In that time, we have evaluated innumerable recruitment prospects, giving us unique perspective into the types of questions, misconceptions, and concerns that arise during the hiring process. The most common questions we hear are regarding the nature of retained search as prospective clients try to determine what kind of recruiting firm is going to be best for their open role.
Let’s look at how retained search and contingent search differ to help you understand which methodology to choose:
Retained Search: An executive search firm offering a retained search model will have an exclusive agreement with you to manage the entire recruiting process from start to finish. The fees for retained search are paid in advance (or at least partially in advance) and cover finding, evaluating, and hiring a candidate. Additionally, the focus is on finding the best candidate for your role instead of good candidates for your role. As a result, the retained search method is typically longer than the contingent search method because it is a more engaged process. Hiring-related activities like putting together a competitive compensation package and managing hiring negotiations add more steps to complete.
Contingent Search: Contingency recruiters only get paid when they find a candidate that you hire. If a contingent search does not yield a match for the role, you do not have to pay for the service, which is why it is sometimes referred to a “no-fee” search model. The fee, however, typically only covers finding and evaluating candidates, not hiring the selected candidate. The low initial investment typically means the hiring process goes faster than a retained search engagement.
Retained Search: Retained search is an agreement whereby an employer contracts exclusively with one recruiter to find a highly qualified candidate to fill an open management role.
Contingent Search: Contingency recruiting is not an exclusive agreement. A contingent recruiter will work quickly to fill an open role on behalf of an employer to earn their fee. During the recruitment process they can be competing against other recruiters, the client’s internal HR team, job posting advertisements, and direct applicants.
Retained Search: The fees for retained search are higher than the fees for contingent search because of the scope of work included in the agreement. While retained search fees can vary in format and timing, they often follow an installment model. Fees are typically paid incrementally at the start of the engagement when the contract is signed, in the middle as milestones are met, and at conclusion of the process when a candidate is hired and starts in the role. These fees can be fixed or a percentage of the first-year base salary or total first year compensation (salary and targeted bonus) of the role.
Contingent Search: With contingency recruitment no fees are paid upfront. The recruiting fee is only paid when a candidate is hired. Again, fees can vary from fixed fee models to salary-based models.
Both retained search and contingent search can be done confidentially to protect your interests. What many companies don’t realize is all contingent searches start out confidential because the contingent recruiter does not want candidates to initially know who the client is and then apply directly to their client otherwise there is no fee to be earned.
Retained search recruiting firms typically spend more time with candidates not actively seeking a new position and thus the candidates are very concerned about their name being kept confidential. A good retained recruiter has built confidentiality trust with candidates, thus when the recruiter needs to keep a client name confidential for a good part of the process, candidates trust the recruiter and are willing to spend time with the recruiter without knowing the client’s name for a good part of the search process.
Regardless, both types of recruiting models can offer the level of confidentiality that your role requires.
Retained search firms and contingent recruiters both draw on extensive experience to find placements for their clients.
While there is typically a preconception that retained search employs more experienced recruiters, personnel with significant expertise can also be found in contingency recruitment firms. And while mid-level management positions are less likely to utilize a retained search model than senior or executive-level positions, the difference between them is not in the caliber of recruiters, but rather the scope of the work being performed and the nature of the relationship when doing so.
Retained Search: Our firm describes their retained search recruitment in this way, “We don’t interview candidates for a job; we build relationships. Our network allows us access to candidates not available by more traditional channels. Quality candidates that would not respond to routine advertisements because they are busy working, seek us out because of our reputation.” This is the nature of retained search on both the employer and candidate sides. Retained search firms build genuine relationships to match the right candidates with the right roles. Deep relationship building is the cornerstone that makes retained search successful.
Contingent Search: Contingency recruitment is more transactional in nature. Employers with open roles will utilize contingent search firms to fill roles quickly to get employees into key roles sooner than in-house recruitment can typically deliver. This is not to say that contingency recruitment will not deliver excellent customer service or result in meaningful business relationships, but the aim with this approach is to find an acceptable candidate as efficiently as possible. As a result, the shorter duration of the engagement inherently lends itself to more of a transactional relationship.
Retained Search: The focus with retained search is to find the perfect candidate for the role, not just a good candidate for the role. As a result, the process is more arduous on the part of the recruiter, requiring more time to complete. As our recruiting team explains about their methodology,
“Our retained search process is designed to provide the best group of three to five candidates from our process of finding and evaluating candidates, not the first three to five individuals we find that we think could be a match for our client. It takes time to conduct multiple interviews, especially when reaching out to strong performers who are busy providing finance and accounting work to their current employer.”
While there is no set timeframe, in our experience the average search for a finance executive using a retained search model takes about 8-12 weeks to find, evaluate, and hire a candidate.
Contingent Search: The contingent search process goes more quickly than a retained search process because it does not include the same level of involvement. A contingency recruiter will conduct interviews and check references for promising candidates, but the engagement will likely end there. The recruiter will hand over extensive information on top candidates and then the employer will be responsible for conducting final interviews, making an offer, and negotiating salary. As a result, the part of the process where a recruiter is involved is only a portion of the overall process, not the entire process itself.
Whether you are using a retained search firm or a contingent search firm, the quality of your hire will depend on the experience and reputation of the firm. Experienced recruiters can find the right candidate for a role regardless of the needs and wants of their client.
If you need to hire a CFO, reach out to our executive search team. Utilizing a retained search approach, we will partner with you to find the best candidate for the role!