What is the difference between a retained search firm, contingency search firm and a headhunter?

To start with, the term headhunter is one of the oldest terms used in the recruiting industry and can be applied to a single-shingle recruiter or individuals within a larger firm whether they are contingency recruiters or retained search consultants.

Contingent search and their recruiters are generally driven and measured by numbers and not necessarily quality.  That is the number of dials, connections, candidate phone interviews, candidate submissions to their client, client/candidate phone interviews, client/candidate onsite interviews, client/ candidate final interviews, etc.

One way to describe contingent search is that it is a race to see which of their recruiters can find the most candidates first to win ownership of the most candidates.  Why the rush?  Because they are not only competing against their own internal recruiting team to email/connect with candidates, but they are also competing with other contingent firms.

Additionally, some contingent firms stop working on roles that become stale or have an undesirable hiring manager, etc. and they will not tell their client they have stopped working on their role.  They move on to the lowest hanging fruit of the typically 30+ searches they are working on concurrently. This behavior is driven by the environment that their clients have created, because they would rather work on something that has a greater likelihood of success with the least amount of work.

There are two key criteria that sets retained search firms apart from contingency search firms, which is coupling a retainer and exclusivity on a search.  A signed engagement letter provides the retained search consultant with the client’s commitment to get a role filled and removes any conflicts of interest along the way. It also creates a more trusted advisor relationship between the hiring manager and the search firm.

Why would an employer want to work with a recruiting company on an exclusive basis if they can have multiple firms working on a search?

For starters, it is more complicated to work with and manage competing recruiters from multiple search firms when filling a position.  The first issue is time. Hiring managers don’t have a lot of time to devote to recruiting on top of their primary role. To have to dedicate time to having launch calls with multiple recruiting agencies, answering questions that arise during the search, reviewing candidates, going over the must haves for the role, managing interviews and scheduling candidates across different firms is complicated and time consuming.

Whereas a retained search firm only works on an exclusive basis with its clients. Therefore, there is one point of contact, one kickoff call, and the retained search consultant has the time to understand the must haves for the role, the culture of their client’s work environment, and a much better perspective if a candidate is the right fit before presenting a candidate. It is a common phrase for retained search firms to recognize themselves as being on the same side of the table as the client. While a contingency recruiter only gets paid if the employer hires one of their candidates they are more likely to flood their client’s inbox with potential resumes of candidates to get credit for the search being filled if their candidate is hired before one of their competitor’s candidates.

Basically, the relationship between the client and the retained search consultant is less transactional, and viewed more as a trusted advisor relationship than when clients work with contingency recruiters.

Importantly, companies that work with multiple headhunters on the same role can have a negative impact on their client’s brand since prospective candidates do not like being bombarded by multiple recruiters regarding the same opportunity.

When a company decides to work with multiple contingency recruiters on a search, do conflicts generally arise?

Yes, conflicts are known to arise and may include a dispute between competing recruiters from different contingency search firms if they present the same candidate to the hiring manager. At that point, the employer then has to determine which search firm should get credit for the placement, or if the fee of the placement should be split between competing contingency recruiters.

Can a company minimize its exposure to conflicts while managing different recruiters working on the same search?

Most companies will put some safeguards in place, nevertheless conflicts will arise. In the contingency search world, there will also be times when a company itself is actively recruiting in the marketplace to fill the same position that they have multiple headhunters working on. That’s right, they are competing with their own service providers. With all that competition, a contingency recruiter will only share the name of their client with the potential candidate after they receive a resume. The recruiter may then send that resume directly to the client, only to find out that the candidate was already presented by another firm or applied for the role through the company’s website or job board.

Due to the competition on each search, contingency recruiters are not always open with the candidates as to who their client is in order to reduce conflict. They will say it is a confidential search when in fact the search is not confidential until they have their resume in hand. Afterall, why would a recruiter working non exclusively on a search want others to know who their client is and invite increased competition? Or, the headhunter may fear that the candidate may want to go around them. Or share the opportunity with a friend who may contact someone he or she may know at the company and backdoor their way into the position without the company having to pay a recruiting fee.  Or another contingency search firm may learn about the position and try and pitch their own candidates to the hiring manager.

AWhen working with contingency recruiters, they will tend to parallel process their candidates for roles that are in high demand. For example, if they know a senior level developer is looking to make a move, they have a huge incentive to market this candidate to multiple clients. And, the client that is willing to pay a higher fee, is the client who will be in the front of the line to interview this candidate.  Whereas, most retained search firms will not parallel process candidates.

These complicated scenarios generally take up more time of the hiring manager, candidates, and recruiters. In addition, if the candidate knew more about the company upfront, they may let the recruiter know that their client is not a company they are interested in or doesn’t fit with their career objectives.

While on the surface it may sound like a good idea having multiple recruiting firms working on a search, it generally takes more time for the hiring manager’s team, and in the end time is money.

Who pays the recruiter once a search is filled?

It is the client (employer) of the recruiter who will pay the contingency search firm, headhunter or the retained search firm once a search is filled.

Charging up to 38% of on target earnings for a newly placed candidate seems high, please explain?

Some retained search firms charge up to a 15% administrative fee on top of the recruitment fee being charged based on a candidate’s on target earnings. For example, a contract with one of these top tier firms will charge 33% of a new hire’s annual on target earning potential, plus a 15% administrative fee to cover some of the costs of doing business. A 15% administrative fee on top of 33% of on target earnings of your new hire, equals roughly 38%.

What type of guarantees do different types of search agencies provide their clients?

Retained search firms typically provide a one-year guarantee in the event their new hire leaves the job voluntarily or involuntary, and will replace that person at no additional charge. A contingency search firm will provide their clients anywhere between no guarantee and six months, but the average is closer to 90 days. A retained search firm has a lot more on the line with a one-year guarantee, and will not cut corners to have to redo a search. Whereas a contingency search firm only has a 90-day guarantee, and is less likely to be asked to redo a search if their candidate doesn’t work out, since it is rare someone leaves their new employer within the first three months of being in their new role.

Why are recruiters sometimes able to share a lot of information about a role including company name, must haves, culture, and a lot more, while other times it is a confidential search?

There are multiple reasons for this. First, retained search consultants who work on an exclusive basis without any competition from other headhunters will take a deep dive with the hiring manager to understand more about the company, its mission, why they are seeking to fill this role, what does success look like in the role, upward mobility, culture, etc. In this type of relationship, there are no conflicts of interest and everyone’s interests are aligned which saves time and money.

A contingency recruiter will want to protect the identity of their client for as long as possible to minimize competition from other contingency recruiters, in house talent acquisition teams, and from candidates who may try to get the job through one of their friends who works at the company. In this case, all interests are not aligned.

Under another scenario, whether it is a contingency or retained, a search may be confidential because an incumbent is being replaced, and until a new hire has been identified, the client will keep the incumbent in place until someone has accepted a job offer.

Can you find me a job?

A recruiter is being paid by the employer to fill an open position. If the timing is right, you might get lucky, but recruiters generally find the candidates that their client is most interested in interviewing for their openings.

What can I do to be found by recruiters?

One of the best things to do is work on your LinkedIn profile. Consider LinkedIn a digital billboard that is your autobiography. Use the space wisely. Put yourself in the role of the hiring manager. Ask yourself, what are my strengths and how do I convey them so that if someone is looking for my skill set, I will be found. Think about keywords most fitted that a hiring manager or headhunter would be seeking in their next hire. Leverage those keywords into your profile while also including key metrics and milestones you have achieved throughout your career.

Once that is completed, search for recruiters in the geographic area you are seeking a position, and send them a request to connect on LinkedIn. Most will be open to expanding their networks with individuals who have flushed out their LinkedIn profile. Include a photo, because if there is no photo, they are not likely to connect with you. If you seem like a good fit for an open role they are seeking to fill, they will respond accordingly.

While you’re on LinkedIn, connect with your friends, family and past work colleagues.

Also, many retained and contingency search firms have databases. Check their websites to see if there is a page for you to send your resume to be added to their database.