Retained search, also called executive search, is an interesting option for companies that need to hire senior-level executives or other key positions with salaries that are well into the six figures. Employers contract with recruiters for retained search who will work exclusively with the company to give full attention to the search. Retained search recruiters handle the entire process of selecting, screening, and evaluating candidates and present suggested candidates for hire.
The advantages of retained search are numerous. They include high-quality recruiting and confidentiality. Retained search provides access to talent pools of senior-level candidates. It offers a graduated payment system that spreads the costs over time. There’s a high return on investment when a top-quality executive is hired. However, retained search also comes with its own unique challenges.
Read this blog post to discover the 6 disadvantages of retained searches.
#1 Upfront Retainer
It’s hard to get around the disadvantages of the hefty retainer required upfront for retained search services. It’s the price of exclusivity, for the recruiter to work on your search only and not poach your employees, as well as the high-quality services provided by experienced search firms.
But paying for services before they are performed can be hard to justify in a challenging or down economy or in an industry with slim profit margins. And paying at milestones such as when qualified candidates are identified and again at interviews, all before a hire is ever made, can seem like a gamble.
#2 Higher Fees
The higher fees in retained search are definitely a disadvantage, although they may seem like a trade-off for exclusive quality search efforts. Contingency search fees are typically 20 percent of the salary for the position, while retained search fees run 30 to 35 percent. Fees can often top $100,000 for companies recruiting larger teams or senior-level candidates, making them hard to swallow, especially if it’s a time when a company is going through tough times.
#3 Risk
Retained search can be an expensive risk because there’s no guarantee of a hire. Fees for search services are paid regardless of whether there is a resulting hire or not. Like any risk, there is the possibility of loss, and a loss of $30,000 to $50,000 represents a loss of operating capital that could have been used to maintain or grow the business.
#4 Long-Term Contracts
The long-term contracts involved in retained search may not be ideal for every business situation. A company may have to make changes to be responsive to the market or industry, but will be tied to a retained search contract requiring payments for services that you might not be needed in a changing business situation. This can be a problem in an evolving economy and a global market with rapid advances in technology and business practices.
#5 Accountability
While accountability may seem to be part of retained search, without any guarantee of hire and with up-front payments, recruiter accountability becomes very important. The extent of that accountability is usually exclusivity, but is not really measurable.
How can you tell how hard a retained search firm is working to find quality candidates or even if they will find someone to hire? Are these issues your business can afford to deal with while trying to fill an executive position?
#6 Work Done by Lower-Level Employees
One of the less obvious yet notable disadvantages of retained search firms is the common practice of delegating substantial chunks of the recruitment process to lower-level employees or junior recruiters. While clients may believe they’re securing the expertise of seasoned professionals given the premium price they pay, in reality, much of the groundwork, like sourcing candidates or initial screenings, may be conducted by junior staff with less experience and understanding of the intricacies of senior-level executive searches.
Such delegation can potentially lead to overlooked high-caliber candidates or a misalignment between the client’s needs and the candidates presented. Moreover, with senior recruiters only stepping in at the later stages, there might be a loss of valuable insights or nuances that could have been gathered during the earlier stages of the search. The irony is that companies pay top dollar for the expertise of senior search consultants but might not always get their full, undivided attention throughout the process. This disparity between expectation and reality can sometimes result in a less than optimal outcome for the hiring company, both in terms of candidate quality and overall search efficiency.
Conclusion
Retained search is a good recruitment option for a few very specific hiring needs, such as a worldwide corporation that needs executive-level candidates for mergers or expansion. But for most other recruiting situations, creative alternatives such as on-demand recruitment process outsourcing often provide the recruitment needed without the bugaboos of the retained search process.
Weighing the pros and cons of retained search is crucial for making the best hiring decisions. If you’re reevaluating your recruitment process or searching for flexible, effective alternatives, let’s discuss how on-demand recruitment process outsourcing can fit your needs. Contact us today to explore the best solutions tailored for your company’s hiring challenges.
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