The Recruiting Rodeo 🐎: RETAINED VS. CONTINGENCY SEARCH

Vol. 3: The Differences Between The Two Types of Search Companies Turn To ⇻ When They Can't Find Talent

Howdy, partners — and welcome back to The Recruiting Rodeo 🐎. It’s time for Volume 3 where I explain the differences between the two types of Search Firms Companies often turn to — when they’re having a hard time finding talent. I’m chomping at the bit to get started on this one!

You may be wondering: why would a company hire or work with an outside (aka., “external”) Search Firm or Recruiter to find and hire talent if it already has recruiters and/or someone in charge of Talent Acquisition on its payroll? That’s a great question, and even if that’s not what you were wondering at all, it’s the perfect way to start this Rodeo!

The simple answer is: because the company cannot find the talent it needs or wants on its own through its own resources. We’ll get into the specifics as to why that could be the case — the gritty details — in the next Rodeo. But let’s not get too far ahead of ourselves.

When a Company’s own recruiters, who typically sit under HR or Talent Acquisition, which we learned in The Recruiting Rodeo 🐎Volume 2: A Glossary of Talent Acquisition Terms, are not producing the results that Hiring Managers want and need, the Company often makes a decision to hire a Retained Search Firm or work with a Contingency Search Firm — and sometimes, even uses a combo of both. It all depends on how long searches have been open (meaning how long the Company’s internal recruiters and/or HR team have been searching for candidates and turning up limited results), how many positions need to be filled in total in a given year, and the levels and special skills and experience desired, for the open position(s).

I have to share, it has been slim pickings for search firms of any stripe in 2024, and even most of 2023. The internal recruiters at many companies have been laid off (in truth, they’re the first to go if positions aren’t being backfilled and new ones aren’t being created) and Company boot ties (or “belts,” if you prefer) are increasingly getting tighter as companies divert investment to other areas like new technologies (AI) including software that company leaders hope will make the Talent Acquisition process, more efficient, less costly. The number of searches that companies are giving out to external search firms overall is far fewer than that in years past.

Why is that? Because working with external search firms is EXPENSIVE and we’re living in the “age of cost cutting.” Despite all of the (arguably toxic) positivity coming from the federal government’s press room and the deluges of press releases, I am simply not seeing the sort of job growth and hiring that matches what we’re being told. What I am seeing are many senior-level executives who have had phenomenal career runs up until now lose their jobs and enter the job market — which is, ironically, not a bad thing… for the lucky companies in a position to snap up this talent.

For me, perhaps the biggest indicator of how the job market and all of us are doing is the cost of a dozen eggs is slowly inching back up towards 2023’s high of $4.82. And we’re not talking free range, people. 🥚

But back to the matter at hand. What is Retained Search? What is Contingency Search? How do they work? Why would a Hiring Manager or Talent Acquisition or HR leader — who you now know (thanks to Volume 2) are the key decision makers in positions of power and influence at a Company when hiring needs to happen or get mapped out — choose a Retained Search Firm vs. a Contingency one? Let’s dig in!

The main difference between Retained Search and Contingency Search boils down to just two things:

1) How the firms get paid by their clients, and

2) How the firms search for, find, interview and present candidates — a.k.a., talent — to their clients and contribute to and/or manage the company’s search process overall

To clarify, in this context, “clients” are the companies who hire or work with the search firms. I’m using the words “hire or work” intentionally, because the business and operating model of a Retained Search Firm is COMPLETELY different from that of a Contingency Search Firm. I hope to clarify the important distinctions between the two in this Rodeo so that company founders, HR, Talent Acquisition Heads, Chief People Officers, and Hiring Managers — frankly, anyone in a position to hire an outside or external search firm or an internal recruiter — can make the right decision on which type of search firm to hire and why, with confidence.

For job seekers and candidates, it is also very helpful to understand the type of Recruiter or Search Firm you are working with when you are being recruited by or trying to build a relationship with one. Why? Because not only can you apply to jobs online, but you can actually be “found” by a Recruiter, based on the strength of your social media profile. More about that in future Rodeos. The good news is that even if you had no idea prior to this Rodeo that Retained and Contingency Search even existed, you are are far from alone.

Every day, 5-10 people reach out to me for resume, career, and job search advice. Some are strangers who have stumbled upon my posts or been referred to me by friends, colleagues and past clients. Some are past candidates whom I have recruited or hired. Some are clients, wanting my intel about the job market because they are thinking about hiring for a new position and don’t know much about what’s out there. And others are executives I have tried to recruit through the years who never bothered to answer my messages previously but now suddenly find themselves unemployed (💡ignoring or ghosting a recruiter until the last minute is not the best strategy for relationship building).

The one thing almost all of these folks have in common is: none understand retained search. Even if I worked closely with them for months and helped hire them into a great role, even if they’re coming to me to talk about hiring me to help with an open, senior-level position — the vast majority have no idea how I work or how Retained Search works. And if you’re in a similar boat, that’s okay. Because The Recruiting Rodeo 🐎, especially this one, Volume 3, is here to help. Knowledge is power, for candidates and hiring leaders alike!

On a related note, it’s well worth remembering that search firms and recruiters are neither private executive coaches nor career counselors nor professional resume writers. In my case, I could bill myself as a professional coach or resume writer…  if I wanted to make that my career. It is part of the “service” I intuitively offer, when recruiting a senior executive and guiding him or her through the often-lengthy interviewing process with one of my client companies. But my career is Retained executive search — and has been for 25 years.

Alright, I think we’re ready to mosey up to the rodeo chute — but before we mount the ornery beast inside, let’s fully understand what I do as a Retained Search Firm/Recruiter and how it is different from Contingency Search/Recruiters.

RETAINED SEARCH

Companies — whether a seed startup with < 10 employees in expansion mode or a multinational CPG with 10,000 employees spread over five continents — use Retained Search when they need to fill highly-specialized, sometimes confidential, and/or senior-level and leadership roles — typically those that carry the titles Director, Senior Director, Vice President, Senior Vice President, Executive Vice President Head of, and C-Level. From my experience, I will share that titles and compensation vary greatly from Company to Company, even within the same industries. The compensation for a West Coast-based, Big Tech Company Senior Director may be less or on par with what an East Coast Large Tech Company pays its Directors. More about “leveling” — title and comp — in another Rodeo.

In this unique partnership, Retained Search, Companies work closely with one Retained Search Firm on an exclusive basis for the entire duration of the Search. The Search is the open, senior-level position or positions, that the Company needs to fill. Similar to the RFP process in the advertising and PR agency world, a Company’s Hiring Manager or someone on its Talent Acquisition or HR team, will often interview multiple Retained Search Firms, to figure out which one it wants to work with exclusively. The Retained Search firms are “competing for” or “pitching” the Company’s business, to secure the Search.

In Retained Search, only one Search firm gets chosen to work with the Company to identify, interview, evaluate, and present candidates, for the open position(s). Retained Search Firms leverage their own databases (which do not serve the same purpose as a Company’s applicant tracking system — search firms don’t use ATS’) and extensive networks of candidates in various industries as well as specific job functions — which have been developed and nurtured over decades of recruiting. Retained Search Firms also use a variety of AI-fueled paid, subscription software databases and products, to target primarily “passive” potential candidates. A passive potential candidate is an executive who is working at a Company and not actively looking for a new job.

Monthly subscriptions to some of these paid, online software products or databases, that most Retained Recruiters rely on, can easily average $499/per user. The companies that offer these software products charge based on the total number of users at a Company or Search Firm.

A Retained Search takes an average of three to six months to be completed. I’ve had clients who have contracted with Retained Search Firms that have taken more than a year to fill C-level and senior-level positions. I’ve worked with Hiring Managers who have hired not one, but up to three different Retained Search Firms, and have often used Contingency ones, too — to find the right candidates. 😱 I know, because I have been hired afterwards, to clean up their Searches.

I have worked at two different Retained, NYC-based executive Search Firms and currently operate my own eponymous Retained Search Firm. I have also worked internally within the executive Talent Acquisition function of a major, Fortune 20 corporation — but that is not Retained Search. That is working “in house” or “internally” for the Company itself, as one of multiple recruiters on the Company’s Executive Talent Acquisition team.

The Search, the open position that needs to be filled, is clearly defined in terms of title and an estimated compensation range, in the Retained Search Firm’s Fee Agreement that is signed by both the Retained Search Firm and the Company, upon commencement of the Search. A Retained Search Firm gets paid a set percentage, industry standard is anywhere from 20-30 percent, of the new hire’s total, annualized compensation. Total annualized compensation is defined by most Retained Search Firms as base salary plus bonus. It can include sign-on and retention bonuses and other forms of compensation like commissions for direct, revenue-generating roles like sales and business development positions. How the total compensation for the Search, the person to be hired, is defined, varies from Company to Company, Retained Search Firm to Retained Search Firm.

Retained Search Firms are typically paid by or invoice the Company in three intervals: 1) when the Search begins (upon signing of the Fee Agreement) 2) 30 days later or after the Search began and 3) when the candidate the Retained Search Firm identified, officially starts working in his/her new position at the Company. So one third, one third, and one third. Do payments actually take place according to that schedule? Definitely not.

Some Retained Search Firms divide up their fee payments into two payments and some Companies negotiate “flat fees” where instead of paying a Retained Search Firm’s fee of 25 or 30 percent, the Company and Retained Search Firm may agree on a more amenable “flat” fee that does not correspond to one of the usual and customary percentages, maybe because the Company wants the Search Firm to work on a few searches at once (or spread over a defined time period) and negotiates a lower fee for doing both or all.

Retained Search Firms always include a “replacement guarantee” in their Fee Agreements, typically six months to one year. This is the period of time the Retained Search Firm is obligated to try to replace the candidate it presented who was hired by the Company — if the new hire leaves her/his job at the Company for certain specified reasons, within a specified time period.

I love giving examples because they are often easier to understand than all of this gibberish. So let’s say a global snacks and beverages CPG needs to hire a Director of Global Crisis Communications to oversee it’s North America operations. The Director of Global Crisis Communications is the “Search.” The CPG selects one retained search firm to help it hire this very special person. It is a critical role for the Company which has been under fire in the media and with activist groups and unions in recent years, for “incidents” that have taken place in its warehouses after its introduction of robotic technology. 9 out of 10 times, I am hired directly by the senior-most functional job expert at the Company — not HR or Talent Acquisition, to work exclusively with him/her, on the Search. They hire me (or another Retained Recruiter or Retained Search Firm) because I speak their language, I understand the industry and job function, business in general, and they trust I will get it done, timely and with high-quality execution and results.

In this case, the Hiring Manager, my partner at the Company for the duration of the Search, would most likely be the Chief Communications Officer (CCO) or SVP Communications. Let’s say it is the CCO. As the Retained Search Firm working with this CPG, my client, all I do, every day, is go on my paid subscription software products and leverage my extensive network of thousands of communications professionals whom I have recruited and/or hired through the years, to search for and find, every single possible candidate who might be a strong fit for this position, a.k.a., the Search. I’m looking for communications professionals who have experience not just in crisis communications, that would be too easy! But those who have worked specifically with a front-line workforce like warehouse employees AND a union AND in an ideal world, a crisis comms exec who has been exposed to newer technologies companies are using in their warehouses and other facilities, like robotics and AI-fueled logistics. 💡 Oh, and ideally, this person came up in politics/government earlier in his/her career because that is always fantastic experience for a career in crisis communications.

The CCO and I, along with input from the CCO’s HR team, agree on the position’s compensation range, title and many other factors — like a hybrid or on-site work schedule and possible relocation assistance, well before the Fee Agreement is inked and the Search commences. I’m searching for someone very special ❤️ — proactively. I’m not looking at nor relying on resumes that come into an online portal, to help me. I’m not posting jobs online nor relying on the Company to provide me with resumes it has received through its ATS. The Company, my client, in Retained Search, is contractually obligated to share any viable resumes, with the Retained Search Firm for evaluation, however. Internal candidates for open positions, too.

As I identify and continue to identify only the most highly-qualified and interested candidates, I start moving the ones who most closely match the Director of Global Crisis Communications position forward at regular intervals to the CCO and whomever s/he anoints to participate in our weekly video conference calls, commonly referred to as “search status updates.“ This could be the Company’s head of Strategy and Chief People Officer, if my client is a small, founder-led Company; it could be a HRBP (human resources business partner - please go back and study Vol. 2 if this term seems unfamiliar) and the Director of Internal Communications — who sits on the CCO’s team and will most likely, be working super closely with this new hire, the Director of Global Crisis Communications.

To drill down a bit more, I am the person, a Retained Recruiter or Search Firm, who the Company, really, the CCO, the functional job expert at the highest levels of the Company, is relying on to make the initial decision — the “call” — on which candidates to move forward in the Search and hence, begin, the Company’s portion of the interviewing process. I’ve already interviewed the candidates, extensively.

When I present highly-qualified and interested candidates to the Hiring Manager, let’s say the CCO in this example, I come prepared with the candidate’s resume, social media profile, anything else which I deem relevant to support his/her candidacy, and create/draft a concise summary that outlines the candidates’ specific strengths and weaknesses for the position — that “aligns” with the Hiring Manager’s wish list, and often, my deep experience in the market, outside the Company, in the job function and/or industry.

As an example of my candidate summary, a strength could be the candidate worked as a communications director for a congressperson earlier in his/her career. S/he also worked in crisis communications at not one but two companies with a frontline workforce that is unionized, and those companies use and have used robotics in their facilities. A potential weakness could be that the Hiring team wants the person-to-be-hired to be based in Manhattan, at its corporate HQ, on site four days per week, and the candidate lives more than 60-90 minutes away by rail/bus and subway (a standard, one-way commute for many of us into Manhattan who live in New Jersey, Brooklyn, Queens, New York State and Connecticut) and despite being highly qualified and super interested in the position, the candidate is only willing to commit to working in the corporate HQ three days per week, on site. Is this “hybrid” schedule good enough for the CCO and his/her Hiring Team? That’s not for me to decide. But if this candidate, has almost everything else the CCO wants and needs, I’m moving him/her forward with that important caveat.

Working directly with the Hiring Manager and his/her team, I “manage” the entire Search, the interviewing and hiring process, from start to finish — for both the candidates and my clients— the hiring team. I am essentially, functioning as an extension of the Company’s Talent Acquisition or HR team. As I have significant experience negotiating complex compensation packages, relocations, etc., I am often the person the CCO and HR rely on, to handle all pre-Offer compensation and other negotiations for the Company with the candidate-to-be-hired, including collecting important data the Company “will” need for a potential Offer such as start date, hybrid vs. remote vs. on-site work expectations, vacation and PTO expectations, relocation assistance, and questions about Company benefits and other perks.

In Retained Search, it is our job to avoid last-minute “surprises.” To be able to see around corners and anticipate everything that can and will go wrong, along the entire search process — well in advance, of the Offer being formulated and/or presented.

The value of working with a leading Retained Search Firm or Recruiter is that the Retained Search Firm is under contract, working on the Company’s behalf, each and every day, going out and proactively finding the best candidates that match the Company’s needs, especially passive ones. Retained recruiters do all of the legwork for the Company —they take over the really time-consuming parts of the search process. Perhaps most important, I view my job in Retained Search as acting as a “Brand Ambassador” for whatever Company I am representing. A skill that comes naturally from my PR days.

CONTINGENCY SEARCH

Brief Tangent Alert] I am not a professional journalist. But I did go to journalism school. And I have written for both trade and consumer publications, not to mention my college newspaper (let’s hear it for the Badger Herald!). So while I ultimately chose a different career path, PR and executive search, what has stuck with me most from my j-school days and catering to the media’s needs and wants, is a desire to understand all sides of a given story and an insistence on accuracy. Which means that, unlike the “fake it til you make it” approach so pervasive in today’s social media and online publishing, I have a strong aversion to writing or talking about topics on which I am not an expert.

Why am I telling you this? Seeing as I have never done Contingency Search, I tried my best to get you cowgirls and boys a basic, working definition from two sources — and came up short.

The first person I reached out to runs his own Contingency Search Firm in an industry in which I’m a deep SME (subject matter expert). Said person replied after my second email, declining to participate because he was too busy. How fortunate for him to be so busy in such a lousy job market for recruiters!

Then, I turned to a senior exec at an industry “organization” which represents my own — executive search. He replied that he would be happy to help and then tried his utmost to sell me on his company’s data, media and information products, including an online platform I could be part of for a “bargain rate” and a pair of high-priced events (and as an added bonus, there was still time for me to take advantage of early-bird pricing!). After disappearing, re-appearing, and missing an agreed-upon deadline with a highly questionable excuse, he vanished. Went “dark” (in PR parlance). Ghosted me completely.👻

In summary: two leading practitioners in the search industry (whom I would have happily credited) found themselves unable to provide me with a basic, working definition of what they do — a simple ask that would have helped me, helped you, and probably even have helped them. This, dear friends, is just further proof that TALENT ACQUISITION IS BROKEN, which we will cover in an upcoming Rodeo.

So, having no other choice but to lean on my 25 years of experience as a Retained executive recruiter, and my short but successful stint on an in-house executive Talent Acquisition team at a major corporation, and my internet search and GenAI skills, I developed a working definition of Contingency Search for us. Drum roll, please…

Like a Retained Search Firm, a Contingency Search firm works with a company as an outside contractor to help it fill one or more open positions. But that’s where the similarities end. Because in contrast to Retained Search, the relationship between the Search Firm and the Company in Contingency Search is not “exclusive.” In fact, a Contingency Search Firm gets paid only when and if the candidate it presented for a position is actually hired by the Company — meaning the search firm’s compensation is CONTINGENT (a.k.a., “dependent”) upon successfully filling the Company’s open position(s). No upfront payment is involved.

Typically, a Company shares job descriptions for open positions with multiple Contingency Search Firms — at the same time — for the simple reason that there is a certain level of urgency to make the needed hire(s) — and it doesn’t cost the Company anything in advance. Because those Contingency Search Firms are competing against one another, they’re working at a frenzied pace to deliver viable candidates. And as you can imagine, this leads to duplicate efforts and even multiple firms sending the same candidates to the Company. To make matters even more inefficient, said candidates could also be applying to the exact same job simultaneously on the Company’s website or through online job search engines.

Other differences between Retained and Contingency search are: Contingency Search Firms offer a more limited replacement guarantee - typically 30 days to six months vs. Retained Search whose guarantee is typically six months to one year. Contingency Search Firms are also not going after “passive” potential candidates, as is the standard for Retained Search. Like Retained Search, Contingency Search Firms get paid a set percentage of the new hire’s total annualized compensation (typically 20-30 percent), and are often specialized by industry and/or job function expertise, and have networks and databases representing same. But Contingency Search is far less likely to spend its time working on searches where it has to proactively go into the Companies themselves, to research and find the picture-perfect candidates. The ones that Companies need and want, especially for highly-specialized, senior-level and leadership positions.

I have never done Contingency Search, although some clients and potential new clients have asked me to do so. Many Search Firms that do Retained Search make exceptions and do Retained Search during job markets like the one we’re all experiencing, where there are many more experienced executives newly-unemployed and job searching, than senior-level, open jobs to hire them into. Employers right now, can afford to be “selective.” That still doesn’t mean they can find the talent they want, and the job market always recalibrates. Talent at Companies changes all the time, especially the talent pool that all Companies seem to covet — “rising stars.”

To close out this Rodeo, I want to share that I was terribly upset at being ghosted by someone who purports to be a thought leader in my own industry. I was disappointed that someone who reached out to me a few years ago, asking me to have a conversation about combining our experience and going into business together, when we’d never met nor spoken, could not supply a simple definition of what he does — because I don’t do it. It would have made my storytelling better, stronger. The industry better, stronger.

I help people and always will. I will continue trying to fix what’s broken in Talent Acquisition, despite the many people who work in my industry whose ethics, values, integrity and style, don’t mirror my own.

So many Companies have a negative view of Contingency and Retained search. And when people behave like this in your own industry, to one of their own, reaching out politely and respectfully for help, it’s not surprising why.

One of my long-time clients, a CEO who wanted to hire me to work on a finance search, shared with me that he hired a Retained Search Firm — and six months later, it delivered zero candidates. Not even one qualified one. So every time I do a search, I have to prove the “haters” wrong. I have to prove to an HR leader who has a million other things to do besides talk to me about one Search (no matter how impactful the future hire will be to her organization), and review my highly-qualified candidates that I go out and find — an HR leader who often, has never worked with Retained Search before and has no idea what it is, let alone why she’s paying me thousands of dollars upfront to find her Company a senior-level employee, that I know what I am doing. I have done it over and over again. Making my Hiring Managers and HR look good to the C-Suite and company Chairpersons, removing hundreds of interviewing hours and utter nonsense, off of their plates. It’s what I do, I do it really well, and I love it.

I am confident the right clients and candidates value what I have to offer. The quality of the executives I have hired into great jobs and are making me proud as I sit in the bleachers, quietly cheering them on as they show up for their Companies and new Companies, years later, in ways that I never could have imagined. I follow them all. A Senior Manager I hired years ago into a national organization with instant name recognition in Washington, DC, to run all of its for-profit partnerships? He’s now the CEO of his own AI-fueled predictive data, analytics and intelligence company servicing government agencies and important industries like aerospace. That CTO I found and helped hire for a small, regional environmental data and information company in the Northeast? He eventually became a CTO for the parent company. Those are my benchmarks, my KPIs for success. And many of these candidates and hires have become friends and hired me to do their searches.

To the person who ghosted me, please market your pay-for-play products to those who value them. I don’t want to be in a global directory that is non-merit based. As Groucho Marx famously said, “I refuse to join any club that would have me as a member.”

Thanks for coming along for the ride. I hope you are finding my initial information about talent acquisition and how it all works from an insider’s perspective beneficial and will consider taking out a paid subscription to support my work. I put a lot of time and research into everything I write and aim to please 🎯. My content will live behind a paywall in a few more Rodeos.

For now, my goal is for us to “conquer” the basics, how Talent Acquisition works from “inside” the Companies themselves and at the Search Firm level. Soon, we will begin our ride 🐎 into more advanced, complex topics that many find challenging. From answering questions about compensation and how to negotiate to expert storytelling advice from people in my vast content leader network - editor in chiefs, chief content officers, creators... Resumes will be a multi-part series that will live behind my Substack paywall as I have been helping high-performance executives — with low-performance resumes, for decades. The resume “summary” section in particular always seems to be a real leader’s weakest link. Not sure why — but we’re going to fix it! I’m going to be interviewing leaders in their respective industries and job functions to help you plot your career, whether you’re a college student graduating in 2024 or pursuing your master’s degree in the hopes of making a career transition in your ‘50s.

Realistically, we’re not ready to enter “the ring” just yet, so please dust off your chaps and spurs from this primer until we meet again next week, when I do a deep dive into Why Companies Can’t Hire Their Own Talent. There are so many reasons… and I’m even going to include feedback from real Hiring Leaders to understand it from their perspectives…

Now giddyap and have a great weekend, y’all!