How to determine the right type of search agreement for you.

One of the many things that drew me to SkyWater Search Partners is our firm's capability to run contingent, engaged, and retained searches. Coming from over seven years of purely contingent search, I was excited to use this higher-touch, extremely nuanced approach to helping my clients hire the best leaders.

I’m often asked about these three search formats and what makes each of them the right choice for certain circumstances. I’d like to give a brief overview here.

Which contract is best for you? 

Each search type is designed to best meet certain job types. Generally speaking, the more senior the role you’re trying to fill, the more likely you’ll benefit from a retained agreement. But in real life, every hiring scenario is different. How urgently do you need this position filled? How scarce are top-quality candidates? Your executive recruiter can help you choose the right search format by walking you through these and many other questions.

Because I work all three, I can tell you that most clients are happier with retained contracts.  But I can also tell you that, very often, new clients start by choosing Contingency agreements.  Why?  Because the costs look lower with contingency than they do with retained contracts. You, too, may decide to try a firm on contingency first.  If that approach delivers a solid performer, you may see the greater value that retained contracts offer. But be sure you’re evaluating all of the costs, including the often-hidden costs of longer hiring timeframes as you decide. 

Retained Contracts and Fee Structures

With this approach, you are paying the recruiter for their work on filling your open position, even if you don’t end up hiring any of the candidates they present to you.  The fee is usually 30-40% of the open position’s annual salary and is paid on a pre-determined schedule. Typically, 1/3 is paid upfront, with the remaining 2/3 due within the following few months.  These are almost always exclusive contracts.  What does that mean? It means that your recruiter agrees not to submit candidates for your position to any other company and you agree not to assign the open listing to another recruiter.  With this agreement in place, you can unleash the full force of your recruiter to assess and rank all potential candidates, including your own internal staff. 

You may be looking at the guaranteed fee as an unnecessary risk.  But consider what you’re getting when you sign this contract.  With a retained contract, you have hired someone.  They’re working for you.  And if you’ve chosen a highly skilled executive recruiter, they’re at the top of their game and working hard, every day, on getting your position filled quickly. 

Contingency Agreements and Fee Structures

Contingency agreements are exactly what they sound like.  You pay the recruiter only if you hire a candidate they present to you.  While it is also a percentage of the new hire’s first-year salary, the percent amount may be less, likely 20%-30%.  This arrangement is absolutely not exclusive.  You are free to hire many firms the same way.  Some employers do this, hoping that it will spread the net wider and motivate each contingent recruiter to work harder and faster.  But because your recruiter is working on contingency, they will be seeking to get as many good resumes to as many employers as possible. While credible recruiters vet candidates for their contingent positions scrupulously, only submitting those whom they deem qualified, less credible – or less experienced – recruiters may be tempted to toss everything in every direction, hoping something will stick.  Instead of reviewing the final few, top-tier candidates, you will likely be sorting through a taller stack of resumes.  More importantly, you will not have the undivided consulting attention from any of the recruiters working your search.

Consider the real-life implications of this: if for any reason, there is a hiccup, change or delay in your internal hiring process, contingent recruiters simply can’t afford to hang in there on that open position.  They need to move on to positions they can fill, for which they can earn compensation. If the position you’re trying to fill is less senior, less specialized, with a bigger population of potential candidates available in your area, a contingency agreement may indeed be the right way for you to go.  But, the higher level, more specialized a job gets, the more you’ll benefit from a professional recruiter with a keen eye for top talent and access to a strong network.

Engaged Contracts and Fee Structures

For some employers, the engaged arrangement offers the best of both worlds, offering advantages of the retained and contingency agreements. With fees ranging from 20%-35% of the first-year compensation, these agreements require only that 20% be guaranteed and paid upfront, with the remaining 80% due only if you hire a candidate presented by the recruiter.  With this guaranteed partial compensation, the recruiter is in a position to place your search above all contingent searches.  Many clients are very happy with the pace, quality, and outcome of their engaged agreement.

Making your decision

When you do decide that it’s time to bring in a professional recruiter, make sure you’ve done your homework on who’s out there, how they charge, and what they deliver.  If you're ready to hire new leaders for your team but aren't quite sure if contingent, engaged, or retained search will be best, send me a note! I would love to learn about your business and hiring goals and share some ideas with you!