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Contingency vs. Retained Search – Which Is Right For You?

Once you’ve decided to use a search firm to fill an open position, you have another important choice to make - should you go the route of retained or contingency search? The answer is unequivocal: It depends. Both methods can be successful in securing the right candidate, and there are a number of factors to consider before deciding which path to pursue.

What’s The Difference?

With both retained and contingency, the person is being hired into a permanent position in the company as opposed to a temporary role. In a contingency search, there are no upfront costs and you pay the agency only if you hire one of their candidates and he or she remains with your company for an agreed-upon time. You can engage multiple agencies at the same time. With retained search, you enter into an exclusive arrangement with one firm. At the beginning of the search, you pay a deposit and make a commitment to pay the full fee.

Here are some considerations to help you decide which one is best for your search.

Position Level

Contingency is normally used for staff-level positions and lower-level management roles. In most cases, retained is utilized for more senior-level positions such as director or above.

Position Importance

The more critical the position, the more you should gravitate toward a retained search. The number of resumes produced drives the contingency model, and the service level devoted to obtaining those resumes can vary from firm to firm. Under this model, you are only giving the firm an opportunity to fill the position, which you may have given to other agencies as well. If, on the other hand, you are committing to one firm and paying a deposit for a retained search, the agency will allocate more resources to the effort – including dedicated research and recruiting teams – and may produce more and better candidates.

There also may be situations where the position you are looking to fill is high profile and has attracted the attention of senior managers or even the board of directors. You may need to assure them you are doing everything possible to secure the right candidate. In those cases, many hiring managers choose retained search with a name brand, national firm.

Position Characteristics

Contingency will always work best for roles that are within the mainstream of what the agency does. If a firm focuses on filling accounting positions, and you are looking for a senior accountant, chances are a contingency arrangement would be successful. Looking to fill a more obscure role? If you give it to a firm not specifically focused in that area, contingency may not be effective. With cases like this, engaging with a specialized boutique firm will give you a better chance for success. For more options, innovative firms are experimenting with different models, for example, a small fee, like $1,000, for each qualified resume presented. 

Company Profile

If you’re working with a contingency firm, they likely have other clients looking for candidates with similar skills to the ones you need. If your company is attractive in your market sector, candidates will likely choose your job over the agency’s others. If your company doesn’t have the same high profile or reputation as others in your market, connect with your recruitment firm to talk about different ways to drive quality candidates to your role, for example, playing up the culture, the technology or the benefits if they are remarkable.

Your Message in the Marketplace

How you conduct your search for talent – especially at the senior executive level – says a great deal about your company. Candidates often equate contingency with more junior-level roles and retained with more senior roles.  

Every organization is looking for the best candidates. If multiple agencies contact an attractive candidate about your job opening, the perceived message may be the role is too junior for them. If, on the other hand, a recruiter contacts the candidate as a retained agent of your company, the level and importance of the position is elevated in the eyes of the candidate, and he or she is more likely to respond. So, using five agencies on a contingency basis may be counterproductive. If you decide to use the contingency model, strongly consider making an exclusive arrangement with one agency to help preserve your position in the market.

Cost

Contingency arrangements typically are less expensive averaging 20 to 25 percent of the first year’s base salary. At one end of the retained model, the fee can be 33 percent of total compensation including bonuses. A boutique firm could be somewhere between the two. If you can ultimately get the candidate you need with a contingency model you will likely spend less money and have less risk. But, if you’re looking to fill a more senior-level role, you may not get the candidate you need. In that case, the retained model with a much more focused, dedicated approach and attention to your particular need may make more sense. 

A Hybrid Alternative

The business of search continues to evolve, and many firms are starting to offer options that are a combination of contingency and retained. This hybrid model offers a different mix of costs, risks and the ability to deliver candidates quickly. The cost may be 20 percent higher than a straight contingency arrangement, but you will also get a longer guarantee. You should take the time to understand each firm’s model to clearly consider the differences.

The arrangement you choose is largely determined by the specific circumstances of your organization and the role you are seeking to fill. Ultimately, you should work with a reputable search firm and a strong recruiter who will spend the time to understand your needs and help you select the best options. 

Photo Credit: Life Script Doctor