Why a Retained Search Firm Cannot do
Contingency
By Alan Davis
“East is East, and West is West –
And Never the Twain Shall Meet”
(Rudyard Kipling)
One of the consequences of having a professional website is that we receive an
increasing number of inquiries from companies who are impressed by the description
of our recruiting process. However, many of them are only familiar with the
contingency fee model, and expect us to offer it. Whilst contingency recruiting has
its place, it is incompatible with the modus operandi of a professional retained search
firm. Here’s why:
CONTINGENCY R ECRUITING M ODEL
The compelling allure of the cont ingency fee model is that the Client only pays when
the hire is made. In addition, the Client can give the mandate to multiple recruiting
firms, thus maximizing the coverage in the hope that it will increase the probability of
a successful hire.
Under the contingency model, the recruiter’s compensation is typically (at least in
part) commission-based. This arrangement drives the recruiter’s behavior in the
following ways:
§
§
They must concentrate their efforts on those mandates that they can fill with a
minimum of effort. The more difficult mandates tend to get much less, if any,
attention because the probability of filling them is slim.
They must try to collect as many Client assignments as possible in order to
have a sufficient pool of mandates against which they can promote their
candidates.
§
§
§
They must try to collect multiple mandates of a similar nature from different
Clients in order to maximize their chances of placing a candidate in whom they
have invested time.
The more Clients that show interest in a candidate, the better (especially if a
bidding war starts, as this will serve to drive up the starting salary, and hence
the placement fee).
It becomes very difficult for the recruiting firm to be loyal to any one Client.
A relevant analogy is the one tha t states that the more mud you throw against the
wall, the more will stick. Same thing applies to candidates; the recruiter has to play
the numbers game in order to make enough placements to make a living.
The consequences of these behaviors become very apparent to the Clients and
manifest themselves in the following ways:
•
•
•
•
•
The recruiter has a temptation to submit candidates regardless of their suitability
in the hope of making placements.
There can be pressure on the Client to interview and hire.
Bidding wars can break out between competing Clients for the same candidate.
Candidates may be lost to competitor organizations.
Clients are constantly bombarded with requests for new mandates.
Under the contingency model, the relationship between effort and reward is out of
balance.
In order of priority, the beneficiaries of the contingency recruiting model are:
•
•
•
The Candidate: Gets a choice of jobs - a better job at the highest possible salary.
The Contingency Recruiter: Makes the placement, and generates income.
The Client (almost a by-product of the process): Gets the bill, and once in a
while a hire…that is if the position wasn’t too difficult to fill.
The contingency recruiting model typically lacks rigor in its processes. Orders are
typically taken ove r the phone and take up no more than three lines in the order book.
The contingency firms generally consider the idea of visiting a Client in person to
obtain a full briefing on the requirement revolutionary!
The contingency model makes it impossible for the recruiting firm to focus effort on
an individual Client, or an individual mandate, because there is no guarantee of being
paid for their efforts. It is the economic impact of the relationship that drives the
recruiter’s behavior.
2
RETAINED SEARCH MODEL
Retained search firms employ a rigorous process and typically apply a great deal
more due diligence into the definition and execution of the mandate than under the
contingency model. The retained search model targets the best available talent, not
only the active job seekers, who do not necessarily possess the best profile.
Under the retained search model, the recruiting process is highly structured and well
defined. The basic information- gathering tool, the Job Requirement Checklist, is a
15-page document, which is completed collaboratively between the Client and the
search firm. It is complimented by a Client-produced job specification and at least
one, and depending upon the complexity of the mandate, multiple, face-to-face
briefing meetings.
The perceived disadvantage of retained search is that the Client has to pay, regardless
of outcome. However, this obligation to pay, by the Client, is repaid by an obligation
to perform by the recruiting firm.
“The principal differentiator between contingency and
search is that under the contingency scenario, the
recruiter has an incentive to fill a position, whereas under
the retained model, it is more than an incentive to
perform, it is an obligation.”
So why can’t recruiting firms offer both models of payment? The principal
differentiator between contingency and search is that under the contingency scenario
the recruiter has an incentive to fill a position: under the retained model, the recruiter
has an obligation. If we tried to do contingency mandates alongside the retained
mandates, we would have to give priority to the retained Clients, and the contingency
Clients would receive little or no attention.
T HE DECISION TO GO EAST OR W EST
Contingency recruiting can be very effective for high- volume, low skill, or low
impact positions. In these circumstances, there is no compelling argument to employ
the stringent practices of a retained targeted search firm.
3
However, for high- impact positions, it makes more sense to pay a qualified
professional firm to commit trained, experienced and motivated resources to a process
designed to identify and attract the best candidates in the business.
This is why we’re in the search business, and why we don’t do any contingency
recruiting. We recognize how seductive the prospect of contingency recruiting can be
to a Client. There is no commitment to pay until the hire is made. However, that
same lack of commitment by the Client not to invest in the recruiting effort is
reflected by a lack of commitment by the contingency recruiter in not devoting the
required level of effort to get the job done.
If the Client has the luxury of time to fill a position, they can always try the
contingency route first. However, the nearer the hiring date approaches, the more
compelling the reason becomes to employ a search firm with committed resources to
get the position filled. (Under this scenario, all we ask is that if you want due search
process done, give us time to do it!)
By having the Clients’ confidence and commitment under the retained search model,
we have been able to satisfy our customers and maintain the high standards of
professionalism that are expected of us. It is a great way to build enduring Client
relationships.
the Author:
Alan Davis is founder and President of Alan Davis & Associates Inc., a specialized
recruiting practice based in Quebec, Canada. He has 29 years experience in
recruiting and has managed many recruiting campaigns, both in Canada and
overseas. Alan was the Program Manager of the 1992 Canadian Astronaut
Recruitment Campaign. His company provides specialized services in executive
search, strategic recruitment & selection, succession management, and interview
training. Alan is a regular conference speaker and a frequently published author on
recruiting and selection topics.
Hudson, QC: 450-458-3535
www.alandavis.com
4