Retained Executive Search vs Contingency Staffing

In today’s competitive business world, recruiting upper-level executive talent can be an organization’s making or breaking point for success. When seeking leadership to drive growth and innovation, organizations face a fundamental decision: do they utilize retained executive search or contingency recruitment? 

Understanding the intrinsic differences between both models is critical to making an informed decision that optimally meets your organization’s specific needs, timeline, and budget.

The Fundamental Differences Between Retained and Contingency Search

Retained executive search and contingency staffing are two different methods of acquiring leadership talent with different methodologies, levels of commitment, and fee structures.

A retained executive search involves hiring a search firm on an exclusive basis, and a payment is made before your search starts. The client pays an upfront retainer fee to initiate the search, and installments are made throughout the search process. This method secures a committed partnership focusing on finding the best-fit executive rather than just filling an opening.

On the other hand, contingency recruitment is on a “no placement, no fee” basis. Multiple agencies can work on the same job simultaneously, competing on the speed of placing candidates. The payment is only made when they successfully hire a candidate, which creates an incentive for speed of search instead of depth.

The Retained Executive Search Process

The retained search is an established, full-scale procedure aimed at selecting the best leadership candidate:

1. Initial consultation and needs assessment: The executive search firm has thorough discussions to comprehend the position requirements and the corporate culture, strategic aspirations, and leadership requirements.
   
2. Market research and talent mapping: Instead of relying on active candidates, retained firms conduct large-scale market research to find the market’s leading performers.
   
3. Strategic candidate outreach: Executive search consultants often contact top-performing executives who are not actively in the job market.
   
4. Rigorous candidate assessment: The candidates are stringently screened through behavioral interviews, skills tests, and reference checks.
   
5. Presentation of a curated shortlist: The client is presented with an appropriately qualified shortlist of candidates who meet the requirements and fit the culture.
   
6. Interview facilitation and offer negotiation: The search firm undertakes the entire process from initial placement through onboarding and ultimate acceptance.
   

The Contingency Recruitment Approach

Contingency recruitment is performance-based and has key differences from retained staffing:

1. Different talent pool: While retained staffing tends to focus on executive or high-level talent, contingent staffing is more for entry, mid, and senior-level roles.
   
2. Multiple agencies receive job specifications: Companies often engage several recruitment firms at a time.
   
3. Also focuses on active candidates: The recruiters source active job applicants from public job boards and existing databases of passive candidates.
   
4. Rapid resume submission: Contingent recruiting tends to have quicker candidate submissions as a result of a larger pool of candidates for low to senior level positions and less stringent hiring needs.
   
5. Less involvement in recruiting process: Contingency arrangements do not include the extensive time and effort that go into retained executive searches.
   

Cost Comparison: Investment vs. Fee Structure

The business models of the strategies reflect their key differences regarding commitment and level of service.

Retained search is typically a larger investment, and the cost varies between 25% and 35% of the first-year salary of the executive. The cost is generally paid in three installments:

• Initial retainer (⅓ of total fee)
• Progress payment when candidates are submitted for interviews (⅓)
• Final payment upon successful placement (⅓)

The contingency fees are between 18% and 25%, with some being upwards of 35%, of the candidate’s base salary for the first year depending on the role. The payment is only made upon placement success. While cost-saving initially, the long-term cost of less in-depth search procedures must be considered.

Different Candidate Pool

The main difference between these models is the candidates they are designed to target. 

Retained search firms specialize in accessing passive candidates—top-performing executives or high-impact roles who are not actively on the market but might consider the right opportunity. They use extensive networks within an industry, detailed market mapping, and targeted headhunting techniques to find best-in-class performers who would otherwise be out of reach.

Contingency recruiters focus on active and passive candidates already in their databases. While this approach generates great candidates, it is not as hands-on in the talent acquisition and screening process that is required for executive positions.

Commitment Level and Exclusivity

The level of commitment on the client’s side and the search firm varies significantly between models.

Retained search is done on an exclusive basis, and the search agency invests significant resources in one client’s specific requirements. The exclusivity allows the sole focus and the ability to have greater strategic, thorough consideration in finding the best executive fit.

Contingency recruitment is not exclusive, and multiple agencies could be competing to fill the same position. This can create a race to present candidates quickly, which can impact the quality of the search process if the role requires a more thorough search.

Long-Term Success and Retention Rates

Most significantly, perhaps, is the difference these models exhibit in long-term success on the executive level.

Retained firms typically provide 12-month or extended placement guarantees, reflecting confidence in the potential to hire executives who will excel and remain with the organization. Their fit orientation and careful screening are critical elements of improved retention and long-term leadership stability.

Contingency recruiters provide guarantees for short durations, usually 90 days, with an incentive for rapid placement and less focus on long-term fit. Focusing on rapid placement at the cost of depth sometimes results in an imbalance between the company’s and the executive’s needs, leading to short tenures. This is why this model is usually used for non-executive roles. 

Choosing the Right Approach for Your Organization

In deciding between retained executive search and contingency recruitment, the following factors are essential:

• Position level and strategic importance: Retained search is best suited to C-level and other higher-level positions with significant organisational impact.
  
• Complexity of requirements: The retained level of search caters to highly specialised expertise or specific skill and knowledge sets.
  
• Timeline considerations: While contingency recruitment provides earlier initial outcomes, retained search provides better long-term outcomes for executive roles.
  
• Budget constraints: Consider not only the initial cost but also the long-term potential value and risk minimization of each solution.
  

Ready to Find Your Next Executive Leader?

Our firm, Hunter Recruiting, understands the significance of finding the leadership fit for your business. We customize executive search services to find and acquire top-level executives to meet your current needs and the vision for the future. Contact us today for a free consultation to find out how our tailored approach to executive recruiting can help you build a leadership team to drive long-term growth and success.