Insight Blog

As of 2023, there are 5,846 businesses in the United States categorized as Executive Search Recruiters. That number consists of sole proprietors, small- and mid-sized firms, as well as large companies, leaving hiring organizations with an overwhelming number of choices. In our last Insight Blog post, we covered the reasons to engage a search firm and questions to ask a potential firm before committing to working together.

This post outlines the differences between search firms.

Search firms can employ a variety of business models. Some focus on a client’s entire talent acquisition. Called recruitment process outsourcing (RPO), it occurs when an organization contracts an external firm to manage its permanent recruitment efforts. Other search firms may specialize in recruiting for interim roles while an organization is in transition or recruiting employees specifically for a project that may last for months, years, or a decade. The retained model, used often by executive search firms, involves a commitment to a client to identify, recruit, and secure a highly qualified candidate and a commitment by the client to only engage that firm on the search. Clients pay professional service fees to the firm. The contingency model is similar but does not require a commitment, and a client pays a firm at the conclusion of search if the client decides to hire a candidate presented by the firm. In other words, payment is contingent upon the results of the search. 

How firms are compensated is only one difference. Each type of firm has its own approach, methods, and advantages, and each type can be effective in meeting hiring needs. The key is to evaluate which approach is best for your organization.

 

CONSIDERATION	RETAINED SEARCH	CONTINGENCY SEARCH
Approach	Formal engagement between the hiring organization and search firm. Working in collaboration, a search strategy is developed based upon the hiring organization’s objectives, the role and its responsibilities, and competencies and characteristics of ideal candidates.	No formal engagement between the hiring organization and search firm. Job specifications are less structured to allow for a greater pool of candidates.
Fees	Professional service fees cover the search efforts as well as consultative services the firm provides. Fees are typically one-third of the selected candidate’s first-year compensation package. A retainer fee is paid to initiate search activities, and installments are due at certain stages of the search process.	Fees usually range from 20 to 30 percent of the selected candidate’s first-year compensation package. The search firm is only paid if a candidate is hired.
Candidate Identification	Firm conducts research and relies on recommendations, referrals, or nominations of possible candidates from industry contacts. Candidates receive a full briefing of the opportunity and remain in contact with the firm’s search consultant throughout the hiring process.	Firm identifies possible talent through a variety of research methods and contacts individuals to present to the client. After presenting candidates to the client, firm’s search consultant may or may not remain in contact with the candidates.
Candidate Assessment	Firm evaluates candidates based on their leadership and management ability, technical qualifications, career goals and motivation, and personality. Firm prequalifies candidates through phone or video interviews. Professional reference checks are conducted prior to an offer being extended.	Firm evaluates the technical qualifications of candidates but will typically rely upon the hiring organization to determine personality characteristics and potential to complement the organization’s culture. Hiring organization will perform initial interviews and, in some cases, professional reference checks as well.
Exclusivity	Hiring organization works exclusively with the search firm, which does not represent direct competitors at the same time. Firm will likely have an off-limits policy stating that it will not recruit employees of the hiring organization for a set period of time following a search.	Hiring organization does not have an exclusive agreement with the search firm. It can work with multiple contingency firms simultaneously on the same search as can the firm with multiple clients simultaneously. The firm is unlikely to implement an off-limits policy.

 

In summary: Retained search firms are valuable when a hiring organization wants to partner with a team that understands its organizational goals and can execute a strategic effort to secure the most suitable professional for a critical and/or senior-level role.

Contingency search firms are valuable when there are likely to be many qualified candidates who could perform well in the role or roles, and the hiring organization is willing and able to manage components of the search internally, such as screening and evaluating candidates. Knowing the differences between retained and contingency search firms makes it easier to choose the type of firm that meets your hiring needs. The next blog post in our three-part series will feature advice on how to collaborate with a search firm during the search process.

If you would like to discuss a hiring need at your organization or learn more about working with a search firm, please contact us to connect with a Helbling search consultant.