By John Casey
CEOs have had good and bad experiences with retained and contingent recruiters and often wonder when they should use a recruiter and how to get the best value. Recruiters are best used when it is: a critical position, important to hire the best candidate, an unusual (a purple squirrel) job, or necessary to include passive (employed) candidates. Companies have had success in finding key team members from both retained and contingent search firms but they operate very differently.
A Retained Search
Retained firms will only do exclusive searches and typically charge 30-35 percent of base and bonus with one-third up front, one-third on presentation of candidates and the final payment when the candidate is hired. They also have minimum fees and seldom work on searches for positions with a base below $150-200K. Retained search firms employ researchers to seek out employed executives who match the needs of the employer defined profile created with the recruiter. You can expect regular reports during the search and an excellent pool of four to six hard to find candidates at the end of a 60-120 day search.
Retained searches work best when there is a strong chemistry with management and the partner, and a demonstrated functional and industry expertise. The risk is when a retained firm doesn’t listen carefully and take the time to understand the culture, pushing their ideas and candidates. Avoid recruiters with a high sense of their worth. They do not know what is best for the client.
A Contingent Search
Contingent firms typically work on a non-exclusive basis, charge 20-25 percent of base pay and only get paid when a candidate is hired. They often work in competition with other contingent firms so they must work quickly to make their financial model work. They also tend to be used to recruit for lower level positions. Typically the recruiter will work with both clients and candidates.
Contingent searches are best when there is functional expertise. Chemistry is also important. The risk is working with a “spray and pray” recruiter who sprays resumes without understanding needs, praying that one of them sticks. If time is spent filtering resumes to find the best candidates then there’s no need to pay a recruiter.
The Exclusive Contingent Model
A new model, incorporating the best elements of the retained and exclusive models, is an “exclusive contingent” agreement where the company agrees to give the recruiter exclusivity for a limited period of time and doesn’t pay anything until a candidate is hired. This gives the recruiter the incentive to research to find the best candidates while providing the client a pay-for-performance agreement. This way both the company and the recruiter have a vested interest and the recruiter is committed to an in-depth search.
CEOs who see their recruiters as trusted business partners, committed to the success of their companies, will derive the greatest value from their assignments. Both parties need to be engaged. CEOs need access to the best talent with the necessary skills who are aligned with their corporate culture.
John Casey is founder of John Casey & Associates, a Dallas specialty search firm matching candidates with clients’ cultures and providing human resource consultants and coaches. John was CEO and CFO for 19 years and earned his MBA from Harvard Business School. www.jcaseyassociates.com