What is Contingent Executive Search and How Does It Work?

Hiring the right person is hard. Hiring them fast is even harder. This is where executive search firms come in.

There are two main types of executive searches that you should know about: contingent and retained.  With retained search, a dedicated search is run just for you after you make an upfront payment to the firm.

For contingent search, no upfront payment is required, and you pay nothing unless you hire the person that they sent your way.

This blog post is all about contingency executive search. We’ll talk about how it works, where it works best, and what to be mindful of before you decide to work with a firm.

How Does Contingency Executive Search Work?

Contingency executive search operates with one simple rule: no hire, no fee.

You only pay a recruiting firm if they find you a suitable candidate for your open position whom you eventually end up hiring.

If you fill the role on your own, or you don’t hire anyone, you don’t have to pay the firm. The fee varies. It is usually 20% to 25% of the new hire’s salary for the first year.

In real life, it looks like this: Let’s say there’s an open role for an IT operations manager at an IT company. The existing team is overwhelmed with work, and they need someone to fill the vacant seat as soon as possible.

The IT company connects with two contingency firms that specialize in hiring tech people. After a few days, Firm A sends four resumes while Firm B sends three. The company picks five people to interview and makes an offer to the candidate that Firm B sent over. The candidate says yes to the offer. Firm B will get paid while Firm A will get nothing, even if they put in the same level of work.

This is a pretty good deal for the IT company. They get a quick shortlist of suitable candidates from two different contingency firms, and only pay for the result.

Why Contingency Firms Specialize?

Do you know why contingency firms tend to stick to certain job levels and industries? It all boils down to how they get paid. A contingency recruiter is aware that the majority of the roles that they work on won’t be able to pay them anything. The client may hire or promote internally, put hiring on hold, or another agency will fill the role first. This is why recruiters spread their bets.

One recruiter handling multiple clients or openings is a normal occurrence. This works best if they already have a pool of suitable candidates. And specializing is the easiest way to do that.

Let’s take a look at a firm specializing in IT as an example. Over the years, they are able to build connections with IT managers, database experts, network analysts, and programmers in their area. When a highly-skilled candidate expresses openness to a new job, the firm immediately keeps their resume on file.  When a client calls saying they are looking to fill an IT role, the recruiter won’t be starting their search from scratch. All they have to do is check their database, call possible candidates, and start sending resumes to the client.

One strong candidate may end up on the shortlist of multiple clients at the same time. This also explains the job levels. Most contingency firms work on roles from entry-level up to basic manager positions. They rarely take on senior managers, directors, vice presidents, or C-level roles. Those searches take far more time, and a firm that only gets paid on success can’t spend weeks on a role that might never pay off.

The Contingency Model Places Speed Over Quality

Contingency search is fast. With this model, speed is the whole point.

Because the firm gets paid for every successful hire, finding a few qualified candidates, sending them over to companies, and moving on to the next job opening is a smart move. For companies looking to hire, this means receiving resumes within days instead of waiting for weeks.

Speed, however, shouldn’t compromise quality. Contingency recruiters are highly skilled at looking at a candidate’s hard skills. They might ask about programming language or team management experience, although they don’t focus as much on other areas such as long-term culture fit or leadership style.  Remember this: in a contingency model, recruiters aren’t recruiting just for you.

One candidate may also be talking to several of the firm’s clients. It’s a fair trade for most roles. If you’re in need of a new IT supervisor or an experienced accountant next month, fast and skilled is exactly what you want.

Where Does Contingency Executive Search Work Well?

Despite the name, contingency executive search usually doesn’t cover top executive roles. Most of these firms focus on professional, supervisory, and mid-management positions.

It is recommended for companies that need to fill several openings, hire fast, and have plenty of qualified candidates to choose from. For directors, VPs, and C-suite hires, companies usually turn to retained executive search. Let’s take a closer look.

Position Level

Companies looking to hire people to fill entry- to mid-level roles usually know what they want in terms of skills and experience. Recruiters can easily check whether a candidate possesses them or not.

Hiring for upper management or C-suite roles is another story. You want to hire the right person because a bad executive hire can cost the company money. Is the person highly capable of making big decisions? How do they promote a positive work culture? What is their leadership style? A mere skills check won’t be able to give you answers to these questions.

A recruiter would have to go beyond their work history to find out, and that takes time. But when payment is dependent on whether a candidate is hired or not, the extra time needed to get to know a candidate deeper would require a bigger commitment.

A recruiter may spend several weeks looking for a senior role candidate and still end up with nothing. A smart move is to focus on roles that are easier to fill with their existing contacts. For senior hires, a retained executive search is more suitable.

The firm gets paid to conduct a dedicated search focused solely on finding the right candidate for the job.

Candidate Market

Contingency search works well when the candidate market is good. This means there are many qualified people actively seeking work.

Recruiters can connect with them on job boards to discuss the details of the job and then send suitable candidates your way.

Hiring Goals

If you’re looking to fill several open roles, or if you need resumes fast, a contingency firm is what you need. The recruiter looks for the right people, introduces them to you, and then your team can handle the interviews.

Fee Structure

You only pay if you hire someone that the firm has endorsed to you. You can work with several firms at once and make it a competition. Whoever finds the person that you hire gets paid. The rest get nothing. This is a big advantage if you’re watching your budget.

Hiring a Contingency Executive Search Provider: Tips for Hiring Companies

If you’re considering working with a contingency firm, here are six things that you should think through first.

1. Consider the seniority of the role. Contingency search is a great fit for entry-level to mid-management hiring needs. If you’re looking to hire someone for a director, VP, or C-level role, a retained search is usually the ideal choice.
2. Think about your timeline. If you want to hire someone quickly, contingency firms are the way to go. If you’re not in a rush, are willing to wait for a couple of months, and want a deeper, more meticulous search, retained firms might suit you better.
3. Count how many people you need. Hiring one person is different from hiring ten people. Contingency firms usually have candidates lined up so they can handle volume well.
4. Match the firm’s specialty to your role. A recruitment firm specializing in IT will have more IT-related connections than a firm that does a bit of everything. Ask what job types and industries they fill most often, and the number of successful placements they’ve recently made in your field.
5. Read the fee terms and the guarantee. Always check these three things: the fee percentage, the due date, and the guarantee. Many recruitment firms have a 60- to 90-day guarantee period. This means that they will gladly replace a hire at no additional cost if that person leaves within the guarantee period. Make sure to get all of this in writing before you start accepting resumes.
6. Decide how many firms to use. Using multiple recruitment firms can mean you get more resumes quickly. Sometimes, however, two firms can send you the same candidate at once. If you end up hiring that candidate, both firms will ask for payment. Make sure that you set clear rules and that all firms that you work with agree. For example, “the first firm to submit a candidate gets the payment”.

Is Contingency Executive Search Right For You?

If you’re looking to fill mid-level or professional roles fast, and you prefer paying based on the results, you may want to seriously consider contingency executive search. Choose a recruiting firm that knows your industry best, be clear about your needs, and get the agreement in writing.