Headhunters:  Contingent & Retained - What's the Difference, and Why Should I Care?

Care.  

There's a huge difference, and if you don't know what it is, you can really hurt yourself.

A lot of job-seekers think that headhunters work for the candidate. The recruiter is always paid by the client, so beware of thinking that  a recruiter will be your agent and find you a job. 

Instead, you should always treat recruiters as if they are employers!

There are two types of recruiters: retained and contingency. Here's the difference:  

Retained Search Firms are retained as consultants by their clients, and paid their full fee - normally one-third of what you'll earn, plus expenses - even if no one is hired to fill the position. They work on the higher-end positions. The smaller firms will work on positions that pay as low as $100,000; the major firms, such as Heidrick & Struggles, now have minimum salaries of $225,000.

Just like a lawyer, accountant or any other consultant, the retained search consultant is trusted by the employer, and paid for his advice. The client depends on the consultant not only for candidates who fit their needs and organizational mindset, but also to help them compare and select the right person from the panel of three to five candidates the firm presents to them, all of whom normally meet the qualifications for the position closely.

A typical retained search consultant works on a dozen searches a year, all with very specific requirements. A typical search I conducted was to find the Sr. VP of Marketing & Sales for a $100-million biotech products company selling to the research departments of the major pharmaceutical companies. The mandate was to find someone with marketing management and sales management experience (so someone with a very senior background in sales only wouldn't have been right for this position), and the person needed experience selling to pharmaceutical and biotech research departments. Someone who was selling products used for pharmaceutical manufacturing would not have been acceptable, nor would someone working for a pharmaceutical company who was accustomed to marketing their products to the consumer.

Most retained searches come with a mandate that is that narrow, or narrower. That means that if you don't fit these requirements to a T, the retained recruiter won't give you the time of day. Even if you are a superstar at what you do. Imagine that I'm working on searches for a AAA Second Baseman, a minor league hockey Goalie and a back-up Center for the Pittsburgh Steelers. You are a major league all-star Third Baseman, and come to me. Do I have an interest in you?  Not at all. Even though you're incredibly marketable, I'm not going to shop you around to the Yankees, the Indians and the Cubs, all of whom would be interested. I'm overwhelmed by and going to concentrate on filling my searches and if, down the road, on the off chance that I do get retained to find a Third Baseman, I'll call you. Of course, that search will be for San Francisco, a city in which you will not live.  At that point, I would continue contacting other Third Basemen - I'm not interested in getting you a job, because I work only when my client retains me.  

 
Contingent Firms are paid only when the client hires a candidate.  Most people are far more familiar with this type of search firm or headhunter; in fact, many people don't even know that retained firms exist. Contingent firms are paid a fee of 15% to 33% of the candidate's earnings, depending on the deal they cut with the client, the industry and the market conditions.

Most of the positions that contingent search firms fill are for positions with salaries of under $100,000.  Some do fill positions in the $100,000 to $150,000 range. It is rare for contingent firms to fill positions above $150,000.

Because the contingency firm gets paid only if you get hired, the contingency firm wants to get you hired. The contingency firm will frequently submit your resume to more than one employer, while the retained firm will never do this. 

Unfortunately, the ease of entry into this market has produced a number of charlatans who merely shuffle paper.  Some will take your resume and mass mail or mass email it to employers, regardless of whether you have given them permission to do so or whether the employer has requested candidates from them. Other contingent firms will ask you where you want to work, pretend they are well-connected at those companies, and then start calling those companies cold to present you. This is something you can do yourself, and when you do it yourself, the client doesn’t pay a 25% fee. Some companies are more likely to hire someone if there is no cost attached to the hiring.

The VP/Human Resources at a 5000-employee electronics firm once told me a horror story that illustrates the worst of what any headhunter can do. The company had a regular group of contingent firms that they used, but this time hired an engineer from a contingent firm outside their normal cadre. Several months after the candidate started at their Massachusetts plant, the company advertised for a similar engineering position at one of their Virginia plants. To their surprise, the same recruiter submitted the resume of the same candidate for the Virginia position. The company called in the new engineer to ask him about this, and he was completely unaware that the recruiter had submitted his resume to anyone since he had been hired. The recruiter, who was obviously merely a paper shuffler, had forgotten he had placed the candidate with the same company several months before.

Fortunately, most contingent firms won't do this to you, but how do you stop a crumbumb  from doing this to you?

If you are in the $150,000-plus range, the answer is easy. Don’t get involved with contingency firms. They won’t truly be working on any positions at your level.  If you are in the $100,000 to $150,000 range, tread gently. If you are earning under $100,000, or are not in a management position, contingent firms are the only recruiters that will produce any results for you. 

There is no clear way to prevent a contingent recruiter from doing something dishonest. The first rule is to stick to firms with which you have some degree of familiarity. Next, talk to the recruiters first, and tell them that they can only present you for a position after they have discussed the specifics with you. It's highly unlikely that contingency will tell you the names of the employers, because they don’t want you to go backdoor and go directly to the employer, or have you let the world know about the availability of the position. However, there is nothing wrong with you asking for significant detail about a position before you allow yourself to be presented. 

Don't get me wrong. Most contingent firms do good work, and can be good resources for job hunters earning under $100,000. Just be prudent enough to ensure that your resume is not floated without your permission.