JUNE 2023
Contingent vs. Retained Executive Search: What’s the Key Difference?
Selecting the right executive search firm to fill an open leadership role in your organization can feel like a daunting task. To ensure a smooth experience and successful partnership, it is critical to understand the services provided by a search firm. The two main types of firms are contingent and retained executive search firms.
What’s the key difference? To sum it up, a retained search firm will provide you with more time, focus, and expert processes that will help guarantee finding a candidate who matches your requirements to a “T.” A contingent search doesn’t require an up-front fee and may deliver candidates quickly, but lacks the in-depth research, assessment, help throughout the hiring process. and guarantee of finding the best executive.
Following is a quick look at both, and what they offer.
What is a Contingent Search Firm?
A contingent search firm is a type of recruitment agency that works on a “no-win, no-fee” basis. For executive search, this firm is engaged by an organization to help find top candidates for a specific role. Contingent search firms only receive payment if they successfully place a candidate with the client company.
Some key characteristics of contingent search firms:
- Payment on a contingency basis: They operate on a performance-based model, paid a fee only when a candidate they present is hired by the client. If they don’t find a suitable candidate, the firm doesn’t receive payment.
- Multiple firms may be involved: Since contingent search firms are non-exclusive, multiple firms may be competing to fill the same job opening. In fact, companies often engage several firms simultaneously to increase their chances of finding the right candidate.
- Narrow focus: Contingent search firms may have expertise in specific industries, job functions, or levels of seniority, and a network of candidates and contacts within their niche.
- Fast-paced and reactive: Due to their fee structure, contingent search firms are motivated to work quickly to identify and present candidates to clients. They typically have access to a database of potential candidates, utilize job boards, and actively search for candidates through various channels.
- Limited involvement in hiring: Contingent firms typically focus on the initial stages, such as sourcing and screening candidates, conducting interviews, and presenting a shortlist. The final hiring decision and negotiation of employment terms usually rest with the client company.
- Emphasis on quantity: Contingent search firms may prioritize presenting multiple candidates to increase the likelihood of making a successful placement. This can lead to less candidate vetting compared to retained search firms.
Contingent search firms may offer a flexible and cost-effective solution for organizations in need of external expertise in finding candidates. Keep in mind that contingency firms offer less commitment to finding the right candidate, and thus more risk (note that making a bad hire can cost a company 30% of an employee’s salary plus the cost of replacement, as well as impacting productivity and morale).
Summary of Contingency Search
Pros:
- Budget approach: Fee is only paid with a placement.
- Speed: Typically move quickly to find candidates, in order to earn fee.
- Non-exclusive: Companies may engage multiple firms.
Cons:
- Lower priority to your search: “No win, no fee” means less commitment; to make their fee, contingency firms must limit their focus, not engaging in a larger recruiting strategy
- Less involvement: Focus mainly on initial recruiting stages (not for those seeking an advisory partner throughout the search).
- Lack of exclusivity: Multiple firms can mean overlapping candidates, less confidentiality.
- Narrower expertise or industry savvy.
- Limited candidate pools or ability to tap top-tier “passive” candidates.
What is a Retained Search Firm?
A retained executive search firm assists organizations in senior leader and C-suite executive search, finding top-level professionals for key leadership positions. Unlike contingent search firms, retained firms are engaged through a formal agreement and receive a retainer fee upfront to conduct the search.
Here are key characteristics of a retained search firm:
- Exclusive engagement: When a company engages a retained search firm, they usually enter into an exclusive agreement. The firm has the sole responsibility for conducting the search and filling the position. The exclusivity enables a dedicated focus on finding the best possible candidate for the client.
- Retainer payment structure: Retained search firms are paid a retainer fee at the beginning of the engagement, regardless of the search outcome. This fee covers initial costs associated with the search process, such as research, market analysis, candidate identification, and assessment. In addition to the retainer fee, there is usually a fee paid upon successful placement of a candidate.
- Extensive research and network: Retained search firms invest significant time and effort in conducting research and mapping the talent market. They have access to extensive networks, databases, and resources to identify and approach suitable candidates. These firms often also have industry-specific expertise and a deep understanding of the market dynamics and competitive landscape.
- In-depth candidate assessment: Retained search firms typically engage in a comprehensive evaluation process to ensure that the presented candidates meet the client’s specific requirements. This process may include interviews, reference checks, skills assessments, and behavioral evaluations. The firm aims to provide the client with a shortlist of highly qualified and well-vetted candidates.
- Advisory role: Retained search firms often also take on HR advisory, providing consultation and guidance to the client throughout the search process. They help define the position specifications, conduct market research, advise on compensation packages, and offer insights into industry trends and talent acquisition strategies.
- Confidentiality and discretion: Retained search firms understand the sensitivity of executive-level searches and maintain a high level of confidentiality. They ensure that the client’s identity and the details of the search remain confidential until the client approves the release of information to candidates.
- Involvement in the entire hiring process: Retained search firms are typically involved in the entire hiring process, from initial candidate identification to final negotiations and offer acceptance. They assist in coordinating interviews, facilitating communication between the client and the candidates, and providing support throughout the selection and onboarding process.
Retained search firms are especially effective when companies need to fill critical leadership roles or require special expertise. They provide a consultative and tailored approach to executive recruitment, leveraging their industry knowledge, networks, and assessments to identify and secure the best talent for their clients.
Summary of Retained Search
Pros:
- Special expertise: Deep knowledge of market, talent landscape and industry.
- Extensive research and network: Significant prep time and pool of top-caliber candidates.
- Deep candidate assessment: Thorough evaluation to assure a slate of only highest qualified contenders.
- Advisory role/partnership: Consultation throughout the search as strategic partners.
- Exclusive: Dedication to finding the very best candidate.
Cons:
- Longer process: May take more time due to detailed nature of the search process.
- Upfront retainer and cost: Typically higher due to retainer fee and the services provided.
- Less flexibility to work with multiple vendors: Formal agreement usually foregoes other vendors.
- Requires good communication: It’s critical to clarify the client’s unique requirements.
Summary Comparison
See the diagram below for a side-by-side comparison of contingent and retained executive search firms.
Frederickson Partners: A Best Choice for Retained Search
While executive search firms include the “Big 5” largest players — also referred to acronymically as “Shreks“– with established practices, there are significant advantages to working with smaller executive search firms that provides a dedicated, boutique approach to meeting an organization’s unique requirements. As a top provider of retained executive search for 28 years, Frederickson offers proven expertise and experience, with a long track record in successfully placing executives in leadership roles. Specializing in Human Resources search, Frederickson also recruits Finance, Legal, Sales, Marketing and other leadership roles, providing a rigorous and confidential executive recruiting process, expertly developed interview and assessment guidelines, an emphasis on client satisfaction and a reputation as a strategic partner and trusted advisor.
If you are in search for a partner to help you find top executive talent that aligns with your company’s values and unique culture, look no further than Frederickson Partners. With a commitment to diversity, equity and inclusion (DEI), industry-leading expertise, and a client-focused approach, Frederickson Partners is the clear choice.
Related Links
Contact Us
