Contingency Recruiter: What are the advantages and disadvantages?

Recruiting is the hardest, “easy” task in American business today; it sounds simple.  Just find the right resume, talk to the person it belongs to and put them in the open job.  But it’s easier said than done.

Recruiting means a lot more than just putting a person into a job.  It takes time and energy to gather and screen resumes to start the interview process.  And unless you’re a recruiter you probably don’t have a lot of time to spend on sorting, screening, and scheduling.  Fortunately, you don’t have to do it on your own, even if you don’t have an in-house recruiter. When you’re ready to begin recruiting, you can work with a contingency placement firm.

What is contingency placement?

While there is near-infinite specialization for recruiters, there really are just two fee structures they work under — retained recruiters and contingency recruiters.

With a retained recruiter, you are paying for the efforts of a recruiter for providing you with the right candidate.  Retained recruiters are what are commonly called “headhunters.” They’re usually used for very senior positions; the kind of jobs that you wouldn’t fill by placing an ad online.  Contracts vary of course, but most companies generally pay half of the recruiter’s fee upfront and the other half once they find the person for your job.

A contingency recruiter, on the other hand, is paid if (and only if) you hire one of their candidates.  In other words, they are paid in the event of a successful hire. There is usually a guarantee period for a contingency placement, generally between 30 and 90 days, during which the candidate must be employed by the client to be sure they will be successful in the position.  Following the successful conclusion of the guarantee period, the recruiting firm would be paid by the client.

Companies work with retained executive search firms on an exclusive basis, engaging one firm at a time.  The candidates they provide are generally not interviewing with other companies and may not be actively looking for a job at all.  Contingency search firms, on the other hand, may find a candidate and market them to other companies, including your competitors, while the candidate themselves may be talking to other agencies or searching for a position on their own.  Under these circumstances, it’s easy to understand why there aren’t many contingency executive search firms.

Bottom line is that a retained search agency is paid for the recruiting effort, while a contingency recruiting firm is paid for the results.  There is generally less cost when working on contingency, however, there are more variables and less certainty. 

What kind of recruiting firm should your company use?

Most of the time, your company will probably use contingency recruiting companies when they are looking for good people with more common skill sets.  For example, you are much more likely to find an IT manager than a CIO. Therefore, any IT manager you find will likely be on the job market and may have already talked to some of your competitors.  These recruiters will be aware of the candidate’s search and will be able to advise you on ways to secure the candidate. The recruiter will be able to tell you if the candidate already has an offer that exceeds your salary range from a company that requires them to be in the office all day.  In a case like that, your company could structure an offer including benefits such as allowing remote work and flexible scheduling. Or the recruiter could help you find candidates that are a better fit for your salary range. 

When do you use a contingency recruiting firm?

Recruiting candidates is not easy.  It takes time and expense to find potential employees in the first place and, having found someone worth interviewing, schedules have to be set up and managed.  A lot of this can be handled by Human Resources, but there are times when you need to fill a necessary position quickly. When you work with a recruiting company, you are working with someone who is only paid for results, meaning they are only paid for successful hires.  The recruiter has a strong disincentive to waste a client’s time in interviews that are unlikely to result in a hire. Additionally, recruiters have a candidate pipeline and can respond quickly to changes in your business, such as changes in the number of openings or changes in necessary qualifications.

What are the downsides to using Contingency Recruiters?

When you’re working with a recruiting firm, there are a few things to keep in mind: 

• An outside recruiter is, well, an outsider.  That means that they don’t know your company well, and they may not give the most accurate and complete picture to clients.  What’s worse, they may not even tell the candidate who they are interviewing until the night before. Be prepared to explain your company and the position to these candidates.
• Recruiters often specialize, but that doesn’t mean they won’t be able to provide you excellent candidates.  Just because a firm is focused on accounting doesn’t mean they can’t find you a good HR Generalist. But you should be prepared to read resumes closely, and don’t be afraid to ask for a quick phone interview with a candidate they’ve presented. 
• It’s important to be very clear with the recruiter what you want and what you don’t want in a candidate.  If you aren’t willing to consider a candidate who doesn’t have a college degree, be upfront about it. If you only want candidates who have a particular license (such as a CPA) or who have worked in a specific market like healthcare, state it clearly and repeat as often as necessary.  Giving the recruiter as much information as you can at the start of the recruiting process will save everyone a lot of time and energy.

Conclusion

Finding the right candidate at the right time can be challenging.  It’s not unusual for employers to have more than one option for finding good people- their own recruiters, employee referrals, and outside recruitment firms.  Make connections with your colleagues at other companies and find out which firms they’ve had success with. Look at online resources like Recruiters Lineup for more references. Your recruitment efforts will be stronger when you don’t limit yourself.