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As a recruiter with years of experience, I’ve seen the pros and cons of contingency and retained search methods firsthand. Whenever a client comes to me with a challenging role, I have to decide which approach will work best.
When I first started, I thought contingency could be a great strategic recruitment option. The idea of only getting paid when I placed a candidate seemed fair. However, later in my career, I realized that retained search had its unique benefits.
In this blog post, I’ll discuss the differences between contingency and retained search. We’ll explore which method might be better for your hiring needs and requirements.
What is the Contingency Hiring Strategy?
Contingency search is a recruitment strategy where a company enlists multiple recruitment agencies to fill positions. These agencies compete against each other to find the best candidate and only the agency that successfully places the candidate gets paid.
How Does Contingency Search Work?
In a contingency search, recruitment agencies search for candidates without an upfront fee. They present their shortlisted candidates to the hiring company, and the first agency to place a candidate who accepts an offer gets the commission. This fee is typically a percentage of the candidate’s first-year salary.
Advantages of Contingency Search
- Cost-Effective: Contingency search offers a significant advantage as it is highly cost-effective. Unlike other recruitment methods, there are no upfront fees involved. This means the hiring company only incurs costs if a successful hire is made. Also, this pay-for-performance model ensures that the company does not waste money on unproductive recruitment efforts and only pays for results.
- Broad Candidate Pool: Contingency search allows multiple recruitment agencies to work on filling the same role simultaneously. This approach results in a broad and diverse pool of candidates being sourced for the position. With several agencies casting their nets wide, the likelihood of finding a candidate who fits the role increases.
- Fast Process: The model of contingency search creates a competitive environment among the agencies involved. Each agency is motivated to fill the position quickly to secure their fee before their competitors do. This sense of urgency often leads to a faster hiring process.
Disadvantages of Contingency Search
- Lack of Commitment: A notable downside of contingency search is the potential lack of commitment from the recruitment agencies. Since these agencies only get paid upon successful placement, they might invest less time or resources into the search process compared to a retained search scenario where payment is assured.
- Quality Concerns: The emphasis on speed in contingency searches can sometimes compromise candidate quality. Agencies, driven by the need to fill positions quickly to earn their fees, might need to spend more time vetting candidates thoroughly. Rushing can lead to the submission of candidates who may not fully meet the company’s requirements.
- Multiple Points of Contact: A company engaging multiple agencies for a contingency search can result in a complex and time-consuming process. Managing relationships and communications with several agencies can be challenging for the hiring company. It requires significant coordination and can lead to inefficiencies, as the company must sift through numerous candidate submissions from different sources.
What is the Retained Hiring Strategy?
Retained search is a recruitment strategy where a company hires a single recruitment firm exclusively to fill a position. This method involves an upfront fee and a commitment to work closely with the firm throughout the hiring process.
How Retained Search Works
In a retained search, the company pays the recruitment firm an upfront fee, which dedicates significant time and resources to finding the ideal candidate. The firm works exclusively on the search and usually follows a more thorough and strategic approach.
Advantages of Retained Search
- High Commitment: One of the primary advantages of retained search is its high commitment level. Because the recruitment firm works exclusively, they are fully dedicated to the search process.
- Higher Quality Candidates: Retained search firms have the luxury of time and resources to conduct an in-depth search and vetting process. They can thoroughly screen and evaluate candidates, ensuring that only those who meet the highest standards are presented to the client.
- Strong Partnership: The retained search model enables a close working relationship between the hiring and recruitment firms. Through regular communication and collaboration throughout the search process, the firm can customize its search strategy to align perfectly with the company’s requirements.
Disadvantages of Retained Search
- Upfront Cost: One of the main drawbacks of retained search is the initial fee that companies must pay regardless of the search outcome. This upfront investment can be substantial and may be a significant financial commitment for some companies. The cost is justified by the thoroughness and quality of the search process, but it can be a barrier for smaller organizations or those with limited recruitment budgets.
- Longer Process: Retained search firms’ thorough and meticulous approach often results in a longer hiring process. While this detailed process ensures high-quality candidates, it can also mean that filling the position takes more time. For companies with urgent hiring needs, this extended timeline can be a disadvantage.
- Limited Candidate Pool: Since a retained search involves working exclusively with one recruitment firm, the candidate pool may be smaller than a contingency search. While the retained firm is dedicated and thorough, its reach is limited to its networks and resources. This limitation can sometimes result in fewer candidates being considered for the role.
Key Differences Between Contingency and Retained Search
Finding the right talent can be crucial for your company’s success. However, deciding which one to use can be tricky with two main recruiting approaches – contingency and retained search. Here’s a breakdown of the key differences between them:
Fees and Payment Structure:
- Contingency Search: Recruiters only get paid if they successfully place a candidate. This typically translates to a fee as a percentage of the hired candidate’s salary.
- Retained Search: Recruiters are paid a retainer upfront, regardless of whether they fill the position. This fee often covers the entire search process.
Focus and Exclusivity:
- Contingency Search: Recruiters often work on multiple searches simultaneously and cast a wider net to find candidates, including those actively looking for work.
- Retained Search: Recruiters are typically assigned one search at a time and focus on a more targeted approach. They may approach passive candidates who aren’t actively seeking new opportunities.
Level of Involvement and Time:
- Contingency Search: The company shoulders more responsibility in the hiring process, including interview scheduling, selection, and offer negotiation. Searches can be completed quickly.
- Retained Search: Recruiters take a more consultative approach, handling a larger portion of the hiring process. This can involve in-depth candidate evaluation, interview coordination, and negotiation support. Retained searches often take longer due to the personalized approach.
Target Roles:
- Contingency Search: Often used for mid-level to entry-level roles where speed and cost-efficiency are priorities.
- Retained Search: Ideal for high-level executive positions where finding the perfect candidate with the right fit is critical.
When You Should Choose Contingency Search?
Best suited for:
- Fast hiring needs: When a company needs to fill multiple positions quickly, contingency search can be a valuable tool. This approach leverages the recruiter’s network and access to job boards to quickly generate a high volume of qualified candidates. This can be especially helpful for companies experiencing rapid growth or sudden staffing shortages.
- Mid-level to entry-level roles: For non-executive positions where a strong cultural fit and baseline qualifications are essential but specific niche expertise may not be required, contingency search can offer a cost-effective and speed-oriented solution. The recruiter’s focus on efficiently sourcing and screening candidates allows for a quicker hiring process than a retained search.
- Budget constraints: Companies with limited recruitment budgets may find the “no upfront cost” contingency search model a great option. Payment is only triggered upon successful placement, minimizing the financial risk associated with the hiring process. This can benefit startups or smaller organizations that are carefully managing their resources.
Ideal roles:
- Entry-level positions: Jobs requiring less specialized skills and experience, such as administrative assistants or junior marketing associates, can be effectively filled through contingency searches. The high volume of candidates generated by this approach allows for efficient screening to find individuals with the necessary baseline qualifications.
- Mid-level positions: For important but non-critical roles, such as project managers or team leads, contingency search offers a balance of speed and cost. The process can identify qualified candidates within a reasonable timeframe without requiring the extensive investment associated with retained search.
- High-turnover roles: Quick replacement is essential to maintain operational efficiency in positions with high turnover rates, such as customer service representatives or cashiers. Contingency search’s ability to expedite the hiring process by delivering a pool of pre-screened candidates can be advantageous in these situations.
When You Should Choose Retained Search?
Best suited for:
- Executive and senior-level hiring: When a company is filling a high-stakes executive or senior management position, a thorough and meticulous vetting process is crucial. Retained search firms offer a deep understanding of the executive landscape and the ability to identify passive candidates needing opportunities. This ensures a wider pool of qualified talent is considered for the critical role.
- Confidential searches: When a company needs to replace an executive discreetly, retained search firms can handle the search process with the utmost confidentiality. Their established networks and targeted approach allow them to identify suitable candidates without attracting unwanted attention from competitors or within the company.
- Specialized roles: Roles requiring niche skills or extensive experience in a particular industry benefit from the detailed retained search approach. Recruiters can leverage their in-depth knowledge of the specific field to identify a select pool of highly qualified candidates with the unique qualifications needed for the position.
Ideal roles:
- C-suite executives: Positions such as CEO, CFO, and COO require a comprehensive search process to identify exceptional leaders. Retained search firms offer the in-depth research, candidate evaluation, and negotiation support necessary to fill these critical roles.
- Senior management: For senior management positions like VPs and directors, a thorough search process is essential to ensure the hiring of
Frequently Asked Questions (FAQs)
What is the main difference between contingency and retained search?
The main difference lies in the payment structure and commitment level. Contingency search firms are paid only if they successfully place a candidate, leading to a competitive and often speed-focused approach. Retained search firms receive an upfront fee and work exclusively with the hiring company, providing a more thorough and dedicated search process.
How do I know which search method is right for my company?
Consider factors such as the level and importance of the role, budget, time constraints, and the quality of candidates needed. Contingency search is suitable for entry to mid-level positions and fast placements, while retained search is ideal for executive and specialized roles where quality and fit are crucial.
Can a company use both methods simultaneously?
Yes, some companies adopt a hybrid approach, using contingency search for less critical, high-volume roles and retained search for key positions that require a more detailed and dedicated search process. This strategy allows for flexibility and optimization of resources.
What are the risks involved in each method?
Contingency search risks include potential quality compromises and managing multiple agency relationships. Retained search risks involve higher upfront costs and longer time-to-fill metrics. However, the thorough vetting process in retained search often mitigates these risks by providing higher-quality hires.
How do the fees compare?
Contingency search fees are typically a percentage (15-25%) of the candidate’s first-year salary and are paid only upon successful placement. Retained search fees are higher (30-35%) and are usually divided into instalments, starting with an upfront fee. While contingency search can be more cost-effective initially, retained search often provides a higher return on investment for critical roles due to better candidate quality and fit.
Conclusion
Choosing the right recruitment strategy is crucial for any organization aiming to build a strong, effective team. Both contingency and retained search offer unique advantages and are suited to different hiring needs. Contingency search can be an excellent choice for companies seeking cost-effective, quick hires with access to a broad candidate pool. On the other hand, retained search provides a more dedicated, thorough approach, ensuring high-quality candidates and fostering a strong partnership between the hiring company and the recruitment firm.
If you’re looking for an agency that can help you hire the best tech talents on the market, then Supersourcing is just what you need. Our expertise in both contingency and retained search ensures that we can tailor our approach to meet your specific hiring needs, delivering top-tier candidates who can drive your business forward.
