Why would anyone want to pay a retainer

Why would anyone want to pay a retainer

April 27, 2017

The question of retainers is coming up sometimes when I talk to people who haven’t used retained search services before. A very short answer: to get headhunter’s full attention to their case and find best people effectively.

There are two types of recruiters around — retained search consultants and contingency-based recruiters. Both get majority of their income from success fees, but retained search consultants (headhunters) like myself would charge a retainer fee to start a search assignment. Usually it is 1/3 of the total fee agreed. The retainer is both a confirmation of the business relationship and cover for the research costs. Our search mandate is exclusive — we do our best to find suitable executive or professional for our client’s needs and we are not competing in this process with anyone. No other search firms are commissioned at the same time and there is no ongoing search done by the client. This means that all potential candidates that approach client or attract their attention during the process are referred to us and handled equally with other candidates both in terms of their chance to be shortlisted and fees payable in case they are employed. This condition helps us to be a real trusted advisor for our clients. Why do we need to charge a retainer? There are several reasons for this. First — by committing ourselves to the case we start spending our resources for the research which is unique to each search case. We also have to say no to other business opportunities, refusing to work with others in the same industry and comparable vacancy profiles for the period. We want the same kind of commitment confirmed by the client. And of course, we want our costs covered as well.

Contingency-based recruitment business is different. The search firm introduces candidates who have indicated their willingness to move. The recruiter gets paid in case one of these candidates is employed. Usually the recruiter competes with several other consultants who present their candidates and sometimes also with ongoing open search advertised by the client. In these circumstances time is of essence, the recruiter who presents candidates first has an advantage. Naturally, there is no time for extensive field research and so the database of the recruiter is the main source in combination with job boards.

The crucial difference between these two models is that the contingency-based recruiter mostly (not exclusively though) deals with people “on the move” — i.e. the candidates who have sent their cv and indicated their willingness to move out from their job situation with current employer or being an “independent consultant” — the widespread euphemism of being “between jobs”. These are the kind of candidates who are also probably looking the job ads pages and sending their cv-s. Direct search (retained executive search) consultants are looking for people who are reasonably happy with their current job situation and actively not looking around. These people do not respond to ads or sending their CV-s to recruiters. Still, they might be happy to meet a headhunter to discuss their current situation and career perspectives, and, as a result of the discussion often also consider change, if the company and offer are attractive. We tend to be trusted advisors to both candidates and clients and develop long-term relationships with both.

I know that there are companies who “never pay retainers”. Fine, if they do well like that. But I have heard some of them complain that they haven’t heard from their recruiters for long time and no introductions have been made. I’m afraid that’s what happens if there is no commitment from both sides. For those who “never use retained search” and are not happy with their current providers I suggest to try something different, give a try to retained search The possibility to lose is comparatively small if compared to possibility to get great people on board quickly.

Why do retained search firms usually avoid doing contingency-based assignments even if there might be possibilities to do both? Because there are clients who prefer us working for them exclusively based on retained search model and we have only 24hours in each day.