Can you imagine a world where professional athletes only get paid if they win? In 1960, the Dallas Cowboys didn't win a game. In 1976, the Tampa Bay Buccaneers didn't win one. And as recently as 2009, the Detroit Lions didn't win a single game. In the NBA, the Charlotte Bobcats won just 7 games in 2012...and Michael Jordan was the guy running the team. He certainly knows basketball! Should those players on the NFL teams not receive any compensation when they couldn't win a game? They prepared. They worked hard. It took a big toll on them physically and emotionally. They went to work every day and they did what they were asked to do...except win.

The world of contingency recruiting is highly competitive. It has a 90% turnover rate in the first year...meaning most just can't make it. The biggest issue is the constant and high probability of failure. It's tough to win a game. In the contingency world, a recruiter gets a company to agree to let them work on an open search for them and they agree to only pay them if they fill the search successfully. But the companies who agree to this deal usually have deals with other contingency recruiters as well, meaning they could have 4,5,10 different recruiters working on the same open search. At that point, recruiters are tripping over the same potential candidates and contacting the same people over and over again - and by the 3rd call from a recruiter, the candidate hates all recruiters and the company who enlisted them to bombard them with calls all day.

Even more frustrating is when the recruiter is the first one to contact THE candidate - the one who is most likely to get the job. They get all of the information and get the candidate to agree not to speak with any other recruiters who may call regarding the same job. The recruiter submits the candidate only to hear from the company, "Well, we've put that search on hold for a while. We're re-evaluating if we really need that person or someone with a different skill set." Or, "You know, the timing is just a bit off. The person who needs to make this decision just went on maternity leave and won't be back for 90 days, so we are going to hold off until then." Or, "Wow! That's a great looking candidate, but we were just hit with a hiring freeze so we'll call you next year and see if that person is still available then."

The recruiter has invested time, money, and resources into working on a search that they will not get paid on. They have worked for free. They do this in the hopes that they will fill a handful of open positions every year and survive to the next year. Contingency recruiters understand that they likely will not get paid for the work that they do. So, they want easy to fill searches with quick turnarounds and as few competitors as possible when they take on a new search...this strengthens their odds of winning.

In most cases, a contingency recruiter will work hard on a search for no more than 2-3 days and if they don't see light at the end of the tunnel, they are off to focus on something else. This leaves their "clients" feeling frustrated because they didn't get any solid leads out of it - making all recruiters look bad and making it tougher for all of us.

So, a note to Contingency Recruiters...

Stop working for free! Get paid for your efforts.

I have worked on both sides - contingency and retained. Here are three observations that I've made personally:

  1. When companies have invested in the success of a search, the searches they give you are real. There are those companies out there who have no intention of hiring anyone unless you give them Superman or Wonder Woman. They are good with their current situation, but they would consider making a change to their staff if you make it impossible to say no. They don't have to invest anything into the effort - you do that for them - so they get to see what the market is looking like and have no obligation to make a hire.
  2. When companies have invested in the success of a search, they want you to win. When that company has paid something for your efforts, they work with you and help you to get the information needed to target the right people, the feedback required to make adjustments, and make themselves available to conduct interviews and make a hiring decision. Contingency recruiters, good luck getting a call with the hiring manager to answer all of your questions or to get feedback on anyone that you send over.
  3. When companies have invested in the success of a search, everyone achieves more. The recruiter is focused on filling the search and can be dedicated to it through completion. The company knows that it has someone short-listed only qualified people for them to consider (making it far more time friendly for the company). There is a mutual respect that comes into play that is totally absent when a company works with a contingency recruiter. The goal should be partnership and trust and neither can be built on a contingent basis.

As long as people are willing to work for free, some companies will take them up on it. Not all though. The ones who are serious about getting the search filled with the right person, and not just having resumes thrown at them, will use a retained recruiter. Consider which type of recruiter you really want to be.

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Tags: Human Resources, agency, contingency, headhunter, hire, recruit, recruiter, retained

Comment by Keith Halperin on July 14, 2014 at 7:55pm

Thanks, Doug. About a year and a half ago, I met a 3PR from New Zealand, who said that it's fairly common there for agencies to lower their rates a few percent in return for a retained search. ISTM that for firms who have established good, long-term relationships with clients, asking for a retained relationship seems very natural and reasonable. If you DON'T have this with a client- good luck getting one, but it doesn't hurt to ask...

-kh

Comment by Nicholas Meyler on July 15, 2014 at 12:04am

So true!  I want to be the kind of recruiter who makes money and makes placements with happy candidates and happy client companies.  The largest fee I ever collected was $151,000 for a contingency search.  I've done many, many retained searches, of course.  I still prefer to be retained.  On the other hand a retained recruiter who is only successful in collecting only 2/3 of a fee most of the time is not going to get a lot of repeat business.  Sometimes, working with a client on an exclusive contingency basis is as good or better than working purely on retainer.  I have clients that have used me for ten placements in less than a year, where they use me exclusively, and I encourage that arrangement, because they do have qualms about investing in a retainer deposit.  I'd rather make the placements than worry about doing only retained search.  Still, I think all recruiters would benefit from thinking of themselves as professionals who deserve to be paid for their time.  Good post!

Comment by Anna Brekka on July 15, 2014 at 3:53pm

I believe the saying goes something like this "You get what you pay for". 

Comment by Doug Douglas - DX2 Consulting on July 15, 2014 at 6:59pm

Those are true words Anna. I don't agree to contingent deals anymore, and haven't in several years. I want partnership and success...not a heavy investment of my time and resources with no guaranty of either occurring in the future.

Comment by Keith Halperin on July 17, 2014 at 3:20pm

@ Doug: "People in hell want ice water. Don't mean they a-gonna get it..."

Cheers,

Keith

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