Retained Vs Contingent Recruitment: What’s the Difference?

In this FAQ, we look at retained Vs contingency solutions; how they work and where they differ. It’ a question our consultants field a lot. While Hiring Managers and HR are well aware of recruitment agencies and executive search firms, few understand the subtle differences in their business models and how this can impact a search. Quite simply, choosing between contingent and retained recruitment solution can be the difference between placing a candidate, and not. Here we explore the difference in fees structure, methodology, service quality, exclusivity and relationships, starting with fees.

Fees

Retained search solutions require an upfront fee. This fee — typically 25-50-percent of the total fee — reflects the initial work undertaken to market map and shortlist candidates. (See Methodology). On successful placement of a candidate — usually at contract sign — the client is billed the remaining fee.

In the unlikely event that a suitable candidate cannot found, the client only pays the initial upfront fee. This covers the cost of market mapping and shortlisting. Though the client must shoulder some financial risk, the trade-off is a closer working relationship between client and recruiter/executive search firm (see Relationship) and a superior search targeting both active and passive candidates (See Methodology).

Likewise, contingent-based “success only” solutions charge no upfront fee. The fee is only awarded on the successful placement of a candidate. With the exception of time spent briefing the agency/firm, this no-win, no-fee model presents a low financial risk. However, the working relationship between client and agency remains loose, often to the detriment of quality (See Quality and Relationship). What’s more, the search techniques deployed typically only target active job seekers (See Methodology).

Methodology

Agencies of firms working on a contingent basis utilise reactive search methodologies. They target active job seekers — candidates who are either unemployed or are actively searching for a new role — which account for approximately 30% of the talent pool. As many of the best candidates are full-time employed or “tiptoeing” — networking but not actively job searching — this reduces the scope of the search.

Firms or agencies working on a retained basis deploy a proactive search methodology. They leave no stone unturned, targeting passive – full-time employed – candidates, active candidates and “tiptoers”. The approach ensures the best candidates are engaged irrespective of whether they actively job seeking.

For more on methodologies, see our FAQ: Executive Search Vs Recruitment: What’s the difference?

Quality

Quality infers “the degree of excellence of something” (Oxford Dictionary, 2018). In the staffing industry, quality refers to fit for the job advertised and the team/function/organisation the role sits in. By their very nature, candidates vary in quality based on experience, skills, education, values and demeanour.

While both proactive and reactive search methodologies can unearth top performers, the more thorough nature of proactive search techniques employed in retained search solutions means the likelihood of discovering high-calibre talent is higher. Proactive search techniques, by their very nature, leave no stone unturned.

Agencies of firms employing a contingent model must focus on quantity over quality. They receive no payment for their efforts until a candidate is placed. As such, to increase their chance of success, their consultants might be engaged in multiple different roles across different industries and clients at any one time. Here, the candidate is the bargaining chip; the agency or firm working on the basis that they are competing directly with other agencies – as well as the clients’ internal HR and Talent Aqusition teams – to place talent. It’s a speed and numbers game; he who places the candidate first, wins.

In contrast, retained search solutions focus on quality. Not only are the majority of these agencies or firms specialists – focusing on a particular industry or niche – but they dedicate substantial resources to the timely completion of a search. (This is why they charge an initial fee). Typically, a specialist team who understands the function will be assigned to headhunt and qualify talent. Because they work on an exclusive basis (see Exclusivity), they can focus their efforts; the team might only be working one or two roles at any given time, all within their specialist remit. They seek to find the best candidate for the position irrespective of timeframe.

Exclusivity

A contingent search is non-exclusive. A client may engage with multiple agencies to fill a vacancy, all of whom will be in direct competition with one another to submit candidates to interview and, ultimately, place the role first. As discussed earlier, contingent search favours quantity over quality. While this approach might not be an issue in a candidate-rich market, it becomes problematic in a skill-short market.

In comparison, a retained search is exclusive. A client engages with a single firm, and both work hand-in-hand to fill the position. It’s this collaboration which is essential to a successful hiring process (see Partnership), especially where there is a skills shortage or high competition for talent.

Relationship

With retained search, partnership is vital. Search firms operating a retained model function as an extension of a client’s in-hours talent acquisition or HR teams. They take the time to understand the client’s business model, its values and challenges, alongside the particulars of the hire. Not only does this ensure shortlisted candidates are a good fit for the role and the organisation’s culture – essential for retention – but it ensures consultants can paint an organisation in the best possible light when pitching to high-calibre candidates.

Contingent search solutions, however, must sacrifice a close working relationship in favour of a quick time-to-hire. Their business model means they don’t have the luxury of time and must dedicate their efforts to finding candidates before the competition. This time pressure also influences their search methodology, with less time spent on searches than their retained counterparts (see Methodology).

So there you have it; two contrasting approaches to recruitment. Which one you choose will depend upon the seniority of the hire, whether the desired skill set is readily available, the location of the role (global roles favour contingent search solutions) and search timeframe.

For more hiring advice tailored to hiring managers in the life science industry…

• Read Executive Search Vs Recruitment: What’s The Difference?.
• View our executive search solutions to see how we can help you grow your team and your business.

* Fraser Dove International is a specialist executive search firm operating exclusively in the Life Science industry. Passionate about people, we take pride in helping exceptional life science organisations source the talent they need to design, manufacture and distribute life-changing drugs, treatments and devices which transform and save patient lives.