Why retained recruitment is a winning model for result-driven organizations
Let me first cover the 2 main models in the recruitment industry:
The contingency model. You get forwarded the CVs of active candidates or candidates from the database with the minimal screening of those. You pay the success fee once the candidate accepts the offer. No long-term guarantees given, no hand-holding through the process is occurring - a hiring company does a massive pull on recruitment activities. No responsibility is taken for who is approached, how candidates are approached, no support through the process. Think about the job board with few questions - same function. I call this a “CV forwarded” model.
The retained model. The percentage of the gross salary is paid in 2-3 stages. Usually intense, targeted representation is provided with in-depth interviews. The existence of shortlist, longlist, and assessment methodology is present, guaranteeing the confidential and careful approach to the market. You work hand in hand with the retained recruiter and they usually vouch for the results with long-term guarantee.
When in need of hiring support, consider the following:
Your brand image
Leading talents is just fine where they are. They need a very compelling motivation to move companies. In product & engineering you tend to grow into what you create, so leaving your role is a very personal thing and oftentimes is not at all about money (that is the A talent is not going to be motivated just by the paycheck, if that is the only thing candidates care about - you are looking at B or C talent).
Who represents you and how they talk about your company and the opportunity is critical from the first minutes of conversation. The ability to ask in-depth questions about their career and support the discussion with the candidate in the subject matter area is the first step. The more senior you go the more insider knowledge you need to possess to appropriately support that discussion.
Working on contingency pushes recruiters to optimize their time and spend as little as possible on each individual. Sometimes no call is even made to present the opportunity. And worse - the roles are pushed to candidates that have nothing to do with that role or sector. What this does - exposes you to the tire-kicker candidates that are there to waste your time and moves the job of the (actual) recruiter to your delicate busy hands. CV forwarding service is a gamble. A gamble with 19% success rate.
Your representation
Contingency recruitment is not made for in-depth conversations. In 20 min of a “hello-goodbye” call, you will collect just the main points on the candidate. Your company’s name will be dropped everywhere.
From the candidate’s perspective - how likely are you to work with a recruiter that does not care about your next career step (i.e. the next 2-5-10 years of your life), what perception do you get of the companies that work with recruiters such as this? Will you be certain they understand what you want and get you in front of the best opportunities?
Your actual priority on recruiters desk
Retained search guarantees you that the focus of the recruiter is going to be on you. Why? Because you invested in a relationship with them, which shows that you are serious about closing the role and you are ready to commit to finding the right person together.
Contingency does not offer any guarantees. You will be de-prioritized and the presented talent pool will be cross-sold to others for a higher fee. If you pay below what others pay, be sure your account will be on the bottom list. Will that bring you the result and help you reach your objective? I think it’s a no.
Market coverage
Retained recruiters will leave no stone unturned to close the role and will often advise on any modifications you might need to make (geo coverage, experience, compensation, inclusivity, interview process, job descriptions) so we are not catching a fictitious profile.
Contingency is not made for advice - it’s made for the speed of closing the slots. If your requirements are not attainable, they won’t get worked on. End of story.
The Cost
Let’s recap what are we comparing here - the “CV forwarding service” and the “Full-fledged dedicated search targeted at result”. The difference here is likely to be .5-.10 between the fees. Is the spread worth all the work that you need to still do with a CV forwarder?
Let’s do the math:
Let’s say your recruitment process is short: 2 hours with leadership, 2 hours with peers, and 1 hour debrief between those.
Salary: let’s assume $80,000
Team value/ hour: C suite $300, peers $150
Let’s say you hired 1 person.
Contingency 20%: presented 30 candidates for 1 role, many interviewing somewhere else at the same time (lower chance of success).
60 hours of leadership time spent. 60 hours of peer time spent. 30 hours of time spent on both sides for debriefing (total 90 and 90).
$300 x 90 + $ 150 x 90 + $80,000 x 0.2 = $56,500 cost of hire (you actually pay 70%)
Retained 30%: presented top 2 candidates in shortlist, all available to speak with the company having been pre-qualified and assessed already (and are not cross sold, they remain exclusive to you).
$300 x 6 + $150 x 6 +$80,000*0.3 = $26,700
Now, factor in the opportunity cost lost with the time you spent on the hiring activities - features you could have developed, partnerships started, tasks completed, your personal family time after all.
Then, factor in the time wasted pondering over a large volume of CVs, the stalling of the product (because you are busy somewhere else), and the overwork of the team (because they need to interview 30 people).
Question - is it worth a decimal point difference?
When you are climbing Mount Everest, climb it with the right partner.
