Are you looking for a new employee to fill a less demanding position for which there are a number of candidates out there or are you looking for a highly specialized professional to take on a significant responsibility? You should choose a human resources agency according to what type of employee you are looking for.  

There is an ever growing number of headhunting agencies and individuals on the market offering their services. All of them are using one of two different approaches which differ significantly in quality and in price. The first approach is called contingency search and the second is called retained search. One could describe the difference between them as one being an everyday dress you wear to work and the other being an evening gown for a gala event. Both work well for their purpose, as long as one doesn't turn up in a sequinned frock in the office on a Monday morning. This article will shed a light on these two different approaches to make it easier to choose the right one for your needs. 

Headhunting is not unlike shopping for clothes: to buy everyday clothes you go to a regular store and to buy an evening gown you go to a designer boutique.

Contingency search: A one-time co-operation

Contingency search is based on prominent advertising in daily newspapers, on-line and on HR agency's own web site. Once the selected candidate is employed the client pays the agency a so called success fee. This means that the agency works fast and for multiple clients at the same time to ensure a higher turnover. Search prep is short and the selection of candidates is based on who did the published advertisement attract. The relationship between the agency and the client is short termed, often a one-time only co-operation and the price of the agency's service is somewhere between 10 and 15 percent of gross yearly wages offered by the client for the position they are trying to fill.

This approach is appealing to many clients mainly because they pay for a service once it has been completed. The risk is therefore mainly on the side of the agency which tries to minimise that risk by motivating its own employees with a success based (variable) wages thus encouraging a speedy selection of seemingly appropriate candidates. This, however, often influences the quality of the selection. What also happens is that the agency offers an interesting candidate, for example a sales oriented computer expert, to a number of different clients looking for this profile in order to maximize its chances to place the candidate quickly and successfully and by doing so also maximizing its profit.

Retained search: A partnership 

A targeted headhunting in a retained search, on the other hand, happens away form the public eye and is based exclusively on personal invitations to candidates who would be interesting to the client. Human resources agencies which practice a retained search approach forge long-term contracts with their clients and the relationship is similar to a client-lawyer relationship. Both sides are bound in a partnership which includes an exclusivity clause. Payment usually consists of three parts with the first part being a non-refundable fee. The fees are between 25 to 35 percent of the gross yearly wage for the position in question but can amount to a lot more as well. Sometimes human resources agencies can even get a stake in the ownership of the client and other times it is not uncommon for the agency to charge a monthly retainer fee for its services. 

How do the two approaches differ?  

In the retained search approach the preparation for the candidates' search is far more complex and demands a thorough research of the client, its business environment, its field, including competition, and also knowledge of the client's business and team culture, plans and business results. That is a very important reason why long-term relationship between a client and a HR agency makes the most sense. If the relationship is long-term, the prices for the agency's services can also be a bit lower and - more importantly - the quality of the service can be higher since the consultant has an excellent knowledge of the client and can always be on the lookout for interesting candidates.

The search for suitable candidates does not happen on the market but among experts who might not be thinking about changing their job, who's career is on the rise but they might still be interested in a new challenge, especially if it involves a progression in the industry's hierarchy. A team consisting of a consultant and a researcher conducts the candidate search in which the researcher provides the consultant with all the information about the field, noticeable experts in it and their professional contributions to the field.

This method is very time consuming and an agency practising a retained search approach has a small client count. Candidates are handled discreetly and in-depth (structured and situational interview, candidacy preparation) while the client is presented only the short-listed candidates, all of them in a package so the candidates have a more equal starting point. In addition to searching for and selecting suitable candidate consultants can also check their references which increases the likelihood of a successful position placement. 

Which approach to choose?

Contingency search is appropriate to fill less demanding positions for which there is no shortage of suitable candidates, who can be attracted to the position by advertisements. I would not recommend this approach for key positions, management positions, for presidents and members of boards because an ad placement for such a position can publicly signal that the company is weaker than usual and is undergoing potential changes and that can encourage the competition. Even if the agency places an anonymous ad, it is hard to avoid at least defining the field or industry in the ad, and that alone can already cause ripples in the industry and affect the business.  

Retained search approach is appropriate to fill positions on the first and second levels of management; in fields with a well developed and transparent work force market; where the job requires a highly skilled professional who is to achieve results in a short amount of time. This approach, however, is inappropriate and decidedly too expensive to fill lower levels positions with narrower job requirements and responsibilities. 

How do agencies select candidates, a comparison 

	Contingency search	Retained search
FINANCIAL ASPECT
Payment	Upon successful conclusion of the process (success fee)	In thirds: at contract signing, at presentation of candidates and upon  successful conclusion of the process. Retainer fee possible.
Average fee	From one gross monthly salary onwards.	From 25% of gross yearly wages, sometimes even in stock options and stakes in company ownership.
PROCESS
Method	Many clients and candidates at the same time, agency usually employs young and inexperienced consultants.	Boutique approach, individual handling of candidates and clients, a consultant and researcher team working together on a single project, thorough research and preparation.
HR agency's role	Execution, focused to conclude the project swiftly.	Consulting the client and the candidate.
Duration until short-list	2 to 4 weeks	8 to 12 weeks, sometimes longer
Success rate*	Lower, less reliable, more coincidental.	High due to a targeted search.
CLIENT ASPECT
Agency – Client relationship	Short term, one-time only or occasional.	Long term, partnership.
Search and selection prep	Minimal with a brief description of demands and the work, can be done over the phone. Prep input a few hours at most.	In depth, time consuming prep with a thorough analysis of the industry, competition and experts. Duration: 10 days or more.
CANDIDATE ASPECT
Agency – Candidate relationship	Lots of attempts, less discrete.	Consultancy and an in depth relationship, discussing past employments and career goals, high discretion.
Candidate search	Ads in daily newspapers and on-line; the agency's own base.	Direct search based on analysis; invitations to certain individuals; utilizing a business and social network.
APPROACH APPROPRIATE	For less demanding positions and beginners; positions with a lot of possible candidates on the work force market.	Demanding managerial and specialists positions with a large responsibility in industries with a lively work force market.

* The measure of success is when the same candidate is still filling the position a year after initial employment.