It can be difficult for a hiring company to decide whether the services offered by an executive search firm are necessary or whether a contingency firm might suffice. Morgan Samuels Associate Consultant Robby Kempton is one of our executive recruiters and sells career-defining opportunities to senior executives and C-level candidates every day. Ms. Kempton has experience working on executive searches with both retained and contingency firms. Understanding the differences between retained search firms and contingency firms is the first step to understanding their value and the best fit for your company’s needs.
With thousands of potential candidates competing for coveted senior-level opportunities, executive search firms can be valuable partners in helping companies identify and attract not only top talent, but those best suited for the particular role and company culture. “Retained executive search firms like Morgan Samuels truly collaborate with the hiring company to deeply understand the strategic needs of the business and how the role will contribute to the future of the company, as well as more nuanced elements like company culture. Morgan Samuels recruiters scour the universe to seek out the most qualified talent that matches the specific needs for each role,” says Kempton. "Unlike contingency firms that tend to rely on their existing database, retained executive search firms are more likely to reach out into the market to recruit 'passive candidates' -- executives who are not actively looking for a new opportunity, but may be a strong fit for the role. Contingency firms are likely to have a large pool of candidates in their database to shop around to several companies who have broader and more open criteria.”
Contingency and retained search firms also have different business models. “As the name implies, retained search firms are paid a retainer to source the best possible talent. They are typically the only firm engaged to fill the role and are paid for their services at the start. Contingency firms, on the other hand, are only paid upon placement and may be competing with several other firms in the market.”
Retained search firms and contingency firms also differ in terms of the advantages they provide. “The advantage of retained search is that by partnering with the firm, the client company has a greater chance of finding the best candidate in the market, who possesses the specific requirements for the role,” says Kempton. “The level of the talent and the loyalty of the candidate significantly increase when they are paired with a search firm that aims to match stated requirements, like educational background and work experience, versus candidates in an existing database.”
The way that candidates are found also varies between the two types of firms. According to Kempton, in most cases with contingency firms, the candidates approach the firm, especially if it is a reputable agency. Retained search firms seek out the best specific talent in the market, targeting certain companies and industries and reaching out to candidates with the skills and backgrounds that meet the client’s needs.
The use of executive recruiters through both retained and contingency firms can benefit any company. Whether searching for senior-level executive placements or mid-level executive placements, executive recruiters can provide value.
"For higher level placements, including C-level, it is beneficial to use a retained search firm, because there tends to be a very small selection of candidates who possess the specific skills, experience, qualities and culture fit the client is looking for,” says Kempton. “On the other hand, contingency firms are more appropriate when the needs are not as specific and there is a large pool of qualified candidates in the market.” Kempton believes that both types of executive search firms are beneficial and can serve as extensions of the client’s Human Resources department. Both types of firms provide the most value when they are viewed as true partners to the HR department, working together to find the best possible talent based on the hiring company’s strategy, culture, challenges and key business objectives.