Retained Executive Search vs. Contingency Recruiting: Whats the Difference?

When companies seek to hire management and professional talent from outside their organization, they have several options. They can decide to manage the process themselves, using advertising, the Internet, and/or a contracted researcher to identify potential candidates; use contingency recruiters; or use a retained executive search consultant. Choice of Internal or External Resource Using the first option, the hiring executive or a human-resources executive makes an effort to find qualified applicants, typically by advertising the position in the print media or on the Internet, and then screens responses, interviews candidates and selects the person to be hired. The advantage here is that the company retains full control of the process. The disadvantages are that many qualified candidates (including some of those most qualified) may not see or respond to an ad or post their resumes on the Internet; many unqualified candidates must be evaluated in order to discover those who are qualified; and, once qualified candidates have been identified, hiring authorities face complex, time-consuming and sensitive issues of negotiation and reference-checkingwithout the benefit of a third-party professional. Therefore, many organizations prefer to use independent recruiters. But how do they decide whether to use a contingency recruiter or a retained executive search consultant? Fee Comparison On the surface, it appears to be simply an issue of ho w the recruiter gets paid. A contingency recruiter earns a fee only when the organization hires someone. A retained search consultant, on the other hand, is paid in advance to conduct a search that usually results in a hiringbut not always. The way the fee is paid has a great deal to do with how the work is carried out, and what kind of result can be expected. When a company retains an executive search firm to fill a particular job, it is paying for the process of conducting a search. Without being paid in advance, a contingency recruiter has no assurance of being paid at all. Therefore, a contingency recruiter cannot afford to invest a great deal of time working on any particular engagement, because a successful outcome may depend on factors beyond the recruiters control. Contingency recruiters typically work with a large number of job openings, and, using a

database of known candidates, look for matches on paper and send those candidates resumesas many as possibleto clients for possible interviews. Level of Service As such, the contingency search process is geared to identifying qualified candidatesbut not necessarily the most qualified candidates that could be found if significant research and in-person interviewing were to be applied to the hiring organizations particular need. Contingency recruiting is appropriate in the following situations:

When the salary level of the position is less than $100,000; When many people are likely to be qualified for the position; When multiple vacancies with the same job description are being filled; When the hiring organization wants to take more responsibility for screening, interviewing and negotiating with candidates.

Retained executive search consulting is appropriate when the salary level of the position is above $100,000 and when it is critical to hire not just any qualified person, but the most qualified person available. The hiring organization will also want:

A recruiter who will make a dedicated effort on its behalf to filling the position, and who will take into account nuances of the hiring organizations culture and other critical issues related to the job vacancy. An independent third party to thoroughly screen candidates, through inperson interviews, before finalists are presented. Evaluation of internal candidates against an external shortlist. A go-between to help persuade an executive to leave a desirable position for a better opportunity, and to help negotiate the terms of the move. A high degree of confidentiality in the recruitment process.

Differences in Approach There are several key differences between retained and contingency recruiting in the way the process is carried out. A retained consultant is typically working exclusively on the search and is expected to evaluate all candidates being considered for the position. As a result, a retained consultant will never present a candidate to more than one client at a time. A contingency recruiter usually does not have an exclusive assignment, but instead is in a race against other sources to present a winning candidate, and often present attractive candidates to as many clients as possible. Contingency recruiters tend to be more specialized by industry and function. Retained search consultants also specialize but, because they are driven by

original research for each engagement, are willing and able to apply that process across industries and functionsespecially when circumstances indicate the possibility of recruiting from outside the clients industry. Fees for the two kinds of service are similartypically 30-35% of guaranteed first-year compensation for the hired candidate. Retained recruiters make an estimate of the fee and bill for a portion of the fee to initiate the engagement, with several subsequent invoices leading to a final bill that makes an adjustment based on the actual compensation package awarded to the hired candidate. As an alternative, most retained consultants will also accept a fee fixed at the outset based on the expected compensation level and billed in three or four monthly installments during the search. Contingency recruiters, on the other hand, receive one lump sum on hiring. In addition to the fee, retained consultants ask clients to reimburse them for outof-pocket expensesmainly travel expenses for candidate interviews. This often adds 10% to 15% to the fee. Contingency recruiters typically dont incur these expenses. Neither contingency nor retained executive search consultants accept fees from individuals for the purpose of helping them find a job. However, contingency firms are motivated to "market" highly attractive candidates to several potential employers at once. Retained consultants are not motivated to sell candidates in the same way; they are being paid for the process of selecting the best candidate, so can be more objective about whether a particular individual is the right choice. Search Process The contingency recruiting process is quite simple. Recruiters learn the basic facts about the job vacancy, scan known candidates and submit their resumes as quickly as possible. The retained search process has many more steps. If a firm decides to hire a retained executive search consulting firm, here is what they can expect:

The consultant will conduct detailed interviews with the client organizations management team to develop a full understanding of the position to be filled and the qualifications of the executive to be recruited. A summary of this understanding, including a detailed profile of the qualifications and experience of the desired candidate, will be communicated to the hiring executive at the outset of the engagement. This engagement letter will also include a complete description of how the search will be conducted and will outline the firms policies on fees, expenses, guarantees and assurances against recruiting executives away from the client organization in the future.

The consultant will conduct original research, targeting organizations identified as likely employers of potential candidates, and accessing proprietary and commercially available databases for sources of potential candidates. Through this research, the consultant develops a "long list" of potentially qualified candidates, then conducts telephone interviews to develop candidates for possible in-person interviews. During one or more in-person interviews the consultant conducts a thorough evaluation of each candidates suitability for, and interest in, the position. The consultant presents several qualified candidates to the client for interviews, and throughout this process acts as a mediator to assure that all issues relevant to filling the position are being addressed. Once the client has selected one or more candidates it would like to hire, the consultant conducts final reference checks to confirm the accuracy of judgments about the candidates suitability and to assure that all relevant information about the candidate has been gathered. The consultant will help the client develop the job offer and will help the candidate prepare to accept it. After the hiring, the consultant will stay in touch with both the client and the successful candidate to assure an orderly transition. Finally, the hiring organization can expect two assurances from the search firm: first, the firm will pledge that, during a given period of time, if the hired candidate does not work out for reasons the search consultant should have foreseen, the firm will repeat the search at no extra charge (out-of-pocket expenses only); second, the search firm will pledge not to recruit from the hiring organization for a stated period of time following the engagement.

The Association of Executive Search Consultants (AESC) is the professional association representing retained executive search consulting firms worldwide. Retained search firms that are members of the AESC are bound by a Code of Ethics and Professional Practice Guidelines. Sr. Executives: Identify and establish contact with leading search firms in all industries, functions and regions of the world . Enter your profile and resume in a confidential and exclusive global data base at http://www.bluesteps.com/.