The basics of working with contingency recruiters

Jose Guardado
Apr 25, 2019 · 4 min read

In my various talent roles over the years, I’ve had to work with lots of contingency recruiters. Having also worked as one, I thought it would be helpful to publish a few pointers o how to get the most from working with them.

Contingency recruiters can be a viable short term resource for startups. Before a company can afford a full time in house recruiter, partnering with a few trusted firms can help boost hiring pipeline and expedite time to hire.

But engaging firms does require work on your part. They aren’t magic, and though they’re being paid to headhunt, you will also have to expend time and effort to be successful.

Benefits of the contingency model

  • Lower risk — no upfront costs and you only pay for success
  • Free pipeline — you get to interview active (hopefully qualified) candidates for free. Unless you hire someone, which is the point.
  • Flexible capacity — you can turn the volume on / off depending on your needs

Downsides of the contingency model

  • Most search firms will waste your time. Get trusted referrals whenever possible.
  • They are expensive. At 25%, most fees are 25–40K per hire.
  • Firms are motivated by money. They only get paid if you hire their candidate, so their objective is to make hires happen. This may or may not align with your objective of hiring the best person. You must arbitrate this.
  • Firms are a 3rd party and will only understand your company on a superficial level
  • Time suck. Getting value from contingency firms requires time on the part of the hiring manager. More pipeline volume = more time spent processing candidates.
  • You are competing with the firm’s other clients. Firms generally run their candidate through multiple clients, so you will likely have competition in closing them.

Questions to consider when selecting a search firm

  • Quality of clients — can they name real, recently closed searches for reputable companies?
  • Specialists or generalists — what is their core competency and how well do they understand the function they’re hunting?
  • Strength of the individual recruiter — who will be working on your search and can they sell your company? Ask them to pitch you on your own company and judge for yourself how compelling they are.
  • Competing clients — do they work with any of your competitors? Any off-limits companies for recruiting out?

Vetting a recruiter or firm

  • Ask them to send over 10–20 “dummy profiles” of candidate targets — even if they can’t recruit these folks, they should know what “great looks like”.
  • Ask them about the toughest search they closed recently. Why was it tough and why were they successful?
  • Have them walk you through their process and how they begin a search. Look for a collaborative, partnership based approach and a thesis / methodology on how to be effective.
  • Ask them where they find candidates. The best recruiters have many ways to find talent. Average recruiters rely 100% on LinkedIn or their internal database.
  • Customer references. Ask to speak with companies they’ve helped in the past. If they’re good, this should not be hard to arrange.

Best practices when working with contingency firms

  • Start with a kick off call — identify target companies, define the profile, establish mutual understanding for compensation (cash and equity).
  • Help them help you. Give them insights / selling points that with help them sell your company to the market
  • Define / agree on process — who gets hands offs, turnaround timing (SLAs) and what to expect from process: how many interviews, who candidates will meet, timing on making offers. This can be a 2-way street, with both sides offering suggestions.
  • Be responsive — ignored recruiters will ignore clients. They will focus their time on clients who are engaged and offer a higher chance of success.
  • Give thoughtful feedback — they will improve more quickly if they are given solid guidance and critical feedback.
  • Don’t adjust your bar based on the recruiter’s performance. If the recruiter is only bringing you sub-par candidates, perhaps you should consider getting a new recruiter.
  • Be realistic — just because you pay a recruiter, doesn’t mean they can create miracles. Try to be self aware about how your opportunity compares to others in the market.
  • Dial up competing efforts — you can have 2 firms working the same role. Recruiters will often ask for exclusivity, but this is not always in a company’s best interest.
  • Track how effective they are — candidates submitted to candidates phone screened should be at least 3:1, and 2:1 should be the goal.

Terms

  • Contingency vs retained vs contained. Contingency is lowest risk, and lowest average quality. Contained requires a small payment upfront, with remainder due upon success. This model is usually offered for non-executive leadership or senior talent. Retained firms require ⅓ payment to get started, full payment within 60 days. There is no guarantee of success, but most quality firms will stick with a search until it’s done. Executive recruiters are almost always retained.
  • Length of representation — how long a submitted candidate is represented by the firm. Standard is 6–12 months.
  • 90 day guarantee — most firms offer a full refund if the candidate is let go within 90 days (excluding layoffs). Make sure the guarantee is at least 90 days This should be enough time to determine if a candidate is working out.
  • Non-solicit. The recruiting firm agrees to not recruit out of as client company for a set period of time. Standard is 12 months.
  • Payment within 30 days. Most firms require payment in full within 30 days. Late payments can void guarantee periods, so be clear about their policy.

Written by

Learner. Builder. Talent Whisperer. Dad. SF Native. Oakland Enthusiast.

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