The Retained Recruiting Firm

We help your recruiting firm move from contingency to retained search by implementing a proven process that consistently works.

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The Truth About Retained Search vs. Contingency Search

Contingency search has been around for many years and used to be an effective business model. That’s why the majority of recruiting firms and recruiters learned to work this way. Two forces have made contingency recruiting firms far less viable than in the past:

  1. The internet, social media, and job boards have made it easier for companies to fill positions on their own.
  2. A large influx of recruiters and recruiting firms has increased competition and encouraged companies to work with multiple firms on the same searches.

It’s now common for contingency search firms to only fill 10-20% of their job orders. This means that they fail and lose money 80-90% of the time which leads to the following pattern (“The Contingency Dilemma”):

  1. The high failure rate of contingency recruiting causes firms to compensate by taking in as many jobs orders as they can to “play the numbers game”.
  2. A large number of low-quality jobs with clients who see recruiting firms as a commodity causes overwhelm and lack of ability to do focused quality work. This causes a higher failure rate.
  3. The high failure rate leads to the attempt to compensate by bringing in more job orders. And so the cycle continues.
 

What can be done to solve this problem?

Once you’re caught in this loop, it’s hard to get out. Trying harder, hiring more staff, and other efforts are rarely effective. Does any of this sound familiar?

Retained Search is the Solution to Contingency Search

The good news is that there’s a practical solution: Moving from contingency search to retained search. This entails working with clients on a mutually committed basis. A retained search agreement means you receive money upfront (a retainer or “engagement fee”) along with an exclusive. In exchange, you commit to executing a thorough, dedicated hiring search on your client’s behalf. This method of retained search is also known as engaged search or contained search.

Retained search benefits recruiting firms in the following ways:

  1. The recruiting firm’s search costs are covered (and hopefully a profit as well). This allows them to make a far greater investment of time, money and resources on behalf of their client and greatly increases the odds of a successful placement.
  2. The client is partnering (has “skin in the game”) with you. This changes the relationship to one of joint success and collaboration and prevents much of the conflict and distrust that can otherwise occur.
  3. The recruiting firm is viewed as a “trusted advisor” whose advice and suggestions are more likely to be accepted and acted upon. This increases the odds of a successful hiring and placement.
  4. The recruiting firm no longer takes a financial loss if the client chooses not to hire, promotes from within, or hires an internal referral.

Client companies benefit from the mutually committed retained searches as follows:

  1. The recruiting firm is committed rather than just involved in helping them fill their hiring needs. Lack of commitment is a common complaint that companies have with contingency firms
  2. Retained search agreement – companies receive expert advice about the job market, candidate perspectives, and how to gain a competitive edge in hiring. Many companies want and need trusted advisor expert advice for hiring.

Retained Search vs. Contingency Search – The Differences Between Contingency and Retained Search

Contingency Search
Retained Search
You frequently lose time, money, and resources working on your clients' behalf
You no longer take a loss when serving your clients
You're often treated like a commodity with a lack of respect and consideration
You're treated as a Trusted Advisor who is valued and respected for what you do
You and your staff suffer frustration and lost confidence due to failed searches that aren't your fault
You have far fewer failed searches due to a high level of client commitment and collaboration
You suffer excessive turnover and low morale due to a high rate of frustration and failure
You have a competitive advantage in hiring and retention because your staff have a better option than contingency firms
You take in too many low-quality searches to compensate for your high failure rate. This causes extra overwhelm and low productivity
You work with fewer clients of higher quality. This increases your productivity and work quality which results in a higher success rate and greater profitability
You lose trust, respect, and credibility with your candidates due to lack of responsiveness and feedback from clients
You gain trust, respect, and credibility with your candidates because you're able to secure more interviews and provide prompt feedback
You need a larger staff to cover the high volume of low-quality searches. This results in greater costs and lower profitability 
You require fewer recruiters to produce more revenue and profitability. This allows you to be more selective in hiring 

Two ways The Retained Recruiter helps recruiting firms break away from “The Contingency Dilemma” to build a retained search oriented business:

  Online course called “Moving From Contingency To Retained”

  One on One Coaching and Advising

Recruiting History.

Some Recruiting Industry History

Until the early 2000s recruiting firms had only two business models to get paid by their clients: Traditional Retained Search and Contingency Search.

 

Traditional Retained Search (TRS)

Traditional retained search (TRS) is predominantly used by large companies when hiring high-level executives. The fees are usually over $100,000 per placement and the search firms are guaranteed to receive ⅔ of the fee whether they fill the position or not; receiving the final ⅓ upon placement.

 

  • The benefits of TRS are that both parties are committed to a successful outcome and the search firm never takes a loss. They're pretty much guaranteed to make a profit.
  • The disadvantage of TRS is that the client bears all of the financial risks regardless of the results. This disadvantage is why TRS is not a viable option for the majority of recruiting firms.

Contingency Search (CS)

Contingency Search (CS) takes an approach that’s the opposite of TRS. Since the search firm assumes 100% of the financial risk they’re pushed to focus on quick submittals on a large number of searches to “play the numbers game”. CS causes both parties to be disadvantaged in the following ways:

 

  • The recruiting firm frequently takes a loss in the process of serving its client and is treated like a commodity rather than a trusted advisor.
  • The client doesn’t get the benefits of partnering with a committed search partner and trusted advisor which would serve them far better.

Engaged Search - The above negatives led to the development of a third option that combines the best of TRS and CS without the disadvantages of either. That is what we mean when we refer to “retained search”.
This "retained model" is sometimes referred to as “Engaged Search” since the client is engaging the recruiting firm with upfront money and an exclusive. In this case, the retainer is referred to as an “engagement fee”.

Contained Search - Other times the same model is called “Contained Search” since it combines the best of contingency and retained without the disadvantages. In this case, the retainer is referred to as a “container” or “container search”.

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