If you are an HR Manager or Hiring Manager at a large real estate investment company who requires assistance with hard-to-fill employment openings, it may make sense to hire an outside recruiting firm to help you target and attract “passive job applicants” – those who are happily employed, and not actively seeking new jobs. Many recruiters or search firms have deep networks around functional job categories or within specific industry verticals, which means you can leverage their subject-matter expertise to find your ideal candidate.  The question is, “Which type of search firm should your company engage:  contingency or retained?”

Many managers will opt to work with contingency firms, because the fee structure is such that payment is only made to the search firm if a hire is made.  No hire, no fee.   Retained search firms, on the other hand, will require one-third payment upfront, the second third after the submission of 3 qualified candidates, and the last installment after a hire is made.   Thus, it is possible to spend thousands of dollars and not ever hire a candidate through such a search firm.  Why then, would anyone want to use a retained search firm, or hire a recruiter on retainer?

Listen to these retained recruiters explain the difference in their own words to the Columbia Business School (starting at 2:11).  Below are the two main reasons it may make sense for your organization:

1.  Commitment

While on the surface, contingency agencies may seem to be an ideal option with very little risk, there is also very little incentive for the agency to prioritize your open position.   Remember, the search firm, just like your hiring organization, is focused on their bottom line.  They will spend their energy and resources where they feel they have the best chance of making a return on their investment.  If you have a hard to fill position that requires lots of work and little chance of finding the right person, the contingency recruiter will likely prioritize searches from other companies with a higher chance of success.  In other words, the contingency agency is not a stakeholder.    A retained search firm, on the other hand, is committed to your project, and the risk is shared equally between both parties.  Initial payment is received, allowing the retained firm to expend time & resources toward the initial search and research.  Also, there is the additional incentive for them to find three qualified candidates,  so they can receive the second payment installment. They also feel committed and connected to making the right hire, because they have received money up front, and feel the pressure to produce. For these companies, reputation is their only guarantee for future business, so there is little risk the retained firm will take your money and “not produce.”

2.  Competition

Because a contingency agency only gets paid when a hire is made, they will usually engage multiple companies to ensure they have several opportunities to place the “right candidate.”  Unfortunately for you, this means that when a contingency recruiter presents you with a qualified candidate, you can be sure that they have usually presented this same candidate to other employers as well.  Not only this, the candidate himself, may or may not be represented by  multiple contingency recruiting agencies.  And if this were not intricate enough, the candidate himself may be searching for openings on his own.  That’s a significant amount of competition!   A retained search firm will not only ask for commitment from the hiring company, but will usually ask for exclusivity with the candidate as well.  Such a firm, because they are guaranteed payment upon producing certain deliverables, can fully commit to your search.

To learn how TalentWoo’s executive search hiring consultants and recruiting process outsourcing service can offer you the same advantages of retained search firms, in some cases at substantially reduced cost, please contact us today!