Retained versus Contingency Search: A Tale of Two Methods

There are two prominent styles for finding executive talent:

1. Retained
2. Contingency 

Understanding the pros and cons of both can save you time and help you meet your hiring needs.

So, what are the pros and cons of each style?

Pros and Cons of Retained Hospitality Executive Search

The retained hospitality executive search tends to be used to fill a specific position usually at senior or mid-executive level, depending on the structure and size of the company. 

Instances where a need for a search arises include the departure or promotion of an executive in which case the company might simply want to refill the position or use the opportunity to redesign the role, the creation of a new product/services line or a new company start up.

Even when an internal candidate presents themselves, the company might opt to hire a search firm to source additional candidates and help them vet the internal candidate, thus adding a layer of objectivity by introducing an unbiased third party. This is certainly the case for high profile senior positions at publicly traded companies.

Let’s review:

Who: senior to mid-executive level hiring
What: opportunity to hire a search firm to source additional candidates among those internal
When: departure or promotion of an executive
Where: important in publicly traded companies because of transparency, but not mainly
Why: opportunity to redesign the role, create new products, branch off to new start-up company

Pros of Retained Recruitment

The benefits of retained recruitment come in various ways. Going over the list of pros:

• Consistent Message – The search firm/consultant selected works as a strategic partner with the client on an exclusive basis throughout the completion of the search (usually around 90 days). The third party hiring firm acts as a de facto extension of the company’s recruiting effort. By working as a partner a consistent message is sent out to the marketplace that there is a shared goal between the firm and client of finding the best placement.
• Cost – The retainer fee typically is the equivalent of 1/3 of the total first year’s cash compensation of the selected candidate and paid in three installments spread over the 90 day period. During this period candidates are sourced and vetted and there is an ongoing dialogue between the firm and client to find the best solution.
• Low HR Management Effort – Services provided in return are extensive and usually include position description, candidate sourcing and interviewing, reference and background checking and compensation negotiation. In essence, the client pays the search firm to take full ownership of the assignment so that (HR) resources can be dedicated elsewhere.
• Strategic Long Term Relationship – This type of partnership tends to lead to long term client/consultant relationships that are more strategic in nature versus a more tactical “one-off” approach.

Retained Executive Search Cons

On the other hand, there are some downsides to the retained model. Keep in mind:

• Upfront Cash Layout – First-time users of retained search might feel uncomfortable with the fact that there is a layout of (sometimes significant) cash throughout the search with no guarantee of a solution. The reputation of the firm or consultant, therefore, is paramount and backed up by references and testimonials accumulated during the years of service in the business. Providing a cancellation clause might also reassure the client there is a way for them to exit before the end of the agreement.
• Timeframe – Another client concern often voiced is “how long will it take to have someone in place”. A retained search timeline from the start of the search to offer extended and accepted – is typically 90 days. However, it depends on factors that are not always under the control of the hiring consultant such as client and candidate availability for interviews. Getting off to a fast start when a search has been awarded shows commitment and dedication to the search and helps alleviate the pressure and reassure the client.

Working on a retained basis when doing hospitality executive search creates the opportunity to build strategic long term partnerships and sends a consistent message to the marketplace.

Having a retained hospitality search firm work assertively with you may be what you need to finding great employees. It might cost money to start, but it’s going towards a long-term partnership with a recruitment firm.

Pros and Cons of Contingency Hospitality Executive Search

Contingency executive search is typically a non-exclusive relationship whereby the company might welcome resumes from various search firms as well as their own resources creating a competitive environment where speed is of the essence. 

In this case:

Who: All-level Positions
What: Quick turn-around for positions, often multiple
When: Unrestricted timeframe
Where: Majority of lower-level hiring of multi-structured corporations
Why: Larger pool of executive applicants through third party hiring firm

Pros of Contingent Recruitment

The list of benefits of contingent recruitment include:

• Financial Commitment – Usually, contingency firms do not get a fee if they did not provide the placement so the client only pays in the case their own resources did not identify the solution. Essentially the client has access to a high volume of resumes without a financial commitment.
• Short Time Frame – Often clients don’t have the luxury of a protracted process as the need to fill a position might be acute. Having a quick solution to the vacancy is of value to them.
• Low Recruitment Fees – usually 20 or 25% or even less, thus making contingency search a better option in case of a lower level and/or high number of positions that need to be filled.

Cons of Contingency Recruitment

Some downsides of contingency recruitment include:

• Less Extensive Services – Services provided are less extensive and usually limited to sharing resumes with clients. The process is less thorough, thus requiring the client to use considerably more internal (HR) resources (Time=Money).
• Time and Money – Another significant potential downside is the lost time and cost associated with hires that have not been thoroughly vetted and result in a wrong fit for the position or company culture.

Your business could benefit from this broader approach to hiring. After all, a contingency search can give your business more options in a quick time frame, for little-to-no money while searching.

Whether a company opts for a “limited service” contingency search or a “full service” retained search, the services of a professional unbiased search partner with an established reputation in the hospitality industry are valuable and help the client calibrate their internal as well as external options when a vacancy opens up.

Happy hunting!

Author Karine Gill is a former member of Cayuga Hospitality Consultants.

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