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Why Do Companies Retain Recruiters?

Updated: Oct 28, 2020

retaining a recruiter over no win no fee

Hiring is tough. There are many challenges and mistakes can easily be made. Fortunately, you don't have to do it alone. But even with external support, decisions have to be made about the best approach.

There are a number of ways that you can engage with external recruitment suppliers. The best known is so-called ‘contingency recruitment’ (AKA no-win-no-fee). It’s a pretty simple model: recruiter sends you candidates; if you hire one you pay a fee based on a percentage of the candidates’ salary. Don’t hire anyone? Don’t pay a thing!

Why then, with such a seemingly sweet deal, do so many hiring managers and business leaders opt to retain a recruiter, to work on their roles?

Simply put; they understand that what they receive is a different service all together.

Here are some key factors taken into account by hiring managers and business leaders when deciding whether a retained approach is right or not…

The importance of the role you are hiring for:

Let’s be honest; not all vacancies are equally critical to your business.

You see, sometimes you have roles that would be good to fill and lots of different people could fit the bill. Other times you have roles that you must fill, and few people have what you need.

Retained search, or headhunting, is for the latter.

For these roles, it’s a good idea to treat the hiring process as a stand-alone project. This will ensure that you secure the very best candidate possible (whether they are looking for a move, or not) in a pre-determined timescale.

The steps involved in a dedicated search are numerous:

· building the brief, including role requirements, personal characteristics & cultural attributes,

· designing the search, approach and assessment strategy for the role,

· mapping the totality of the possible target market,

· approaching the standouts in the market,

· assessing them fully (references, competencies, cultural fit, aptitudes, psychometrics etc.),

· managing the client interview process,

· offer negotiation support,

· notice period / transition management,

· on-boarding assistance and aftercare.

The list goes on…

The simple fact is, if you want to maximise your chances of hiring the best possible candidate, these are the actions needed. If you can’t or won’t retain support, you will not receive this depth of service in a no-win-no-fee assignment. Why? It doesn't make commercial sense for the recruiter, when the risks of making no money at all are quite high. Mapping, approaches and assessment alone may be 120 – 160 hours of work. They simply cannot do that for free.

So, if the role is important enough to your business, then retaining dedicated recruitment support is the best way to ensure that it gets the attention and service it requires.

Don’t confuse the importance of the role with the seniority. Many still refer to retained recruitment as “Executive Search”. This is a general misnomer. Sure, it is often applicable to c-suite and senior hire requirements. But it’s equally applicable to all manner of roles, if the success of the hire is critical enough to your business.

Having your own dedicated recruitment resource:

Let’s face it, most hiring managers and business leaders don’t want to spend all day speaking with recruiters or screening random (and often irrelevant) speculative CVs.

A retained recruiter is your recruiter. They are dealing with your requirement exclusively. You have retained their services. You have set project milestones, deliverables and KPIs. They are there to take care of this for you.

So, you can ignore the speculative CVs. Screen your calls. Forward any process related tasks that you want off of your desk.

On the other hand, a contingency recruiter can choose to work on your role or not. They owe you nothing at all. They will either send you candidates or not. You’ll either chose to hire one of their candidates or not. This makes it very difficult to understand at any stage just where you are in the process and how the assignment is progressing.

Need to report on progress to your superiors? A retained recruiter will do this at pre-defined intervals as a matter of course. A contingency recruiter will not.

Increasing your chances of success in the hiring process:

Alas, hiring is an entirely human process. As such, nobody can say to you that they 100% guarantee to get anyone in particular to join your business. Free will is a bitch.

However, it is very well researched and documented that retained search assignments have a spectacularly higher rate of success than contingency assignments. On average a contingency recruiter can expect to fill around 30% of their roles. That figure does not take into account the percentage of those hires that are still in post in 12 months. For retained search the average is 87%. At Elemental it's 95%!

There are several reasons for this, not least of all the depth of service delivered on retained assignments. But also worth considering as a determinant of success is this: mutual commitment.

When you retain a headhunter to support you in your hiring, you are delivering a very clear message. It is this: “I am definitely going to hire this role”. And moreover “I am going to hire one of your candidates”. This makes your role a top priority for the recruiter. It does not matter what size the retainer is. The fact it is there demonstrates your commitment to hiring.

On a contingency assignment however, the recruiter must balance the risk of you not hiring one of their candidates, or perhaps not filling the role at all. They do this by working on many other roles. By assigning effort to your role based on the likelihood of success. And crucially, by making sure that the candidates they do attract are shared with more than just you.

Ensuring discretion in your hiring efforts:

Ever had to find a replacement for someone who is still working in the business? What about looking for a new leader before the team are aware that a change is in the works?

The standard post-and-pray approach is of no use whatsoever under these circumstances. As such, contingency recruitment is not the right way to go.

A retained recruiter can take the full brief for what you need and ensure that candidates are assessed effectively whilst respecting the sensitivity of the role at hand. NDAs can even be entered into if discretion is absolutely paramount. Will a non-retained recruiter be able to do this? No. 100% not.

Supporting a diversity agenda in your hiring:

This is something that is coming up more and more frequently. Companies make a commitment to interview balanced demographics of candidates. For example, they may wish to interview an equal number of male and female candidates. Or they may want to interview a set percentage of BaEM candidates. It is likely that laws will be implemented to this end.

A wonderful idea. But there is an issue. What if you don’t get any candidates from those demographics?

To address this problem you would need a targeted search approach. See point 1 above. This is too much work and too much risk to deliver on a no-win-no-fee basis.

Need diversity amongst your interviewees? You need to retain a recruiter.

Getting a better ROI from your hiring budget:

Wait, isn’t retained search more expensive? It can be. But often, it is far more cost effective.

The retainer you pay is not in addition to the overall fee, it is a part of it. If you have agreed a 20% contingency fee, a 20% retained assignment will cost the same. Only with the retained assignment the chances of success are much higher, and you avoid other potentially costly complications of working with multiple no-win-no-fee agents, like fee disputes and arguments over candidate ownership.

You will also have much more favourable replacement and refund policies with retained assignments. And, there is a much greater probability that the person you hire will work out (so you don’t need to go out and hire again in the next 12 months). This is because the depth of search and assessment conducted makes the likelihood of a sound hire significantly greater.

Utilising market intelligence from your recruitment activities:

The research that goes into a retained search assignment always creates a by-product. Information. With most recruitment businesses, when you work on a no-win-no-fee basis, you are effectively saying “all I want you to do is send me CVs”. You miss out on the opportunities that come with the hiring exercise.

Do you know what your competitors are paying their people? Why ABC Ltd. keeps stealing your best and brightest? Who are planning redundancies next quarter? Who is tendering for the work you are also bidding for?

Knowledge is advantage. A retained search will come with a comprehensive market report that provides you with valuable information on the market you operate in. The business leaders who choose to retain their recruitment support value this greatly.

So there you have it…

Not an exhaustive list by any measure, but a decent start to understanding why you many business leaders opt for a retained approach.

The bottom line is that both retained and non-retained approaches are sound. It just depends what you are trying to achieve and the level of support that you expect.

If you want to discuss this in more detail to see which is the best approach for your hiring needs, I’m always happy to talk!

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