There’s no sugarcoating it - the job market is going through an acute crisis. The market is competitive, the candidates are many, and consequently, a lot of them are underqualified. This results in inadequate hires, high churn rates, and increased pressure on the hiring agencies and clients.
No market is immune to this issue right now, and that’s something every HR agency will tell you. In IT, the problem is perhaps particularly severe, and C-level management is facing acute turnover issues. Furthermore, 63% of recruiters state that their biggest problem is a talent shortage, while 71% of CEOs expect the shortage to continue.
To exacerbate the problem, many companies needing to hire are turning to recruiters on the contingency (a.k.a. “no win-no fee”) model. This model is seemingly cheaper for the client, so naturally, it is a more popular option, but in reality, contingency also implies looking for candidates basically by chance. It involves casting a much wider net and this is by no means conducive to quality hires.
More Commitment Means Less Trust Issues
Regardless of the model, a common problem that plagues recruiter-client relationships is trust.
Many companies have reservations towards recruiting agencies due to the expected low quality of candidates. In all honesty, this is often a real issue, especially with contingency-based contracts where the recruiter sends a bunch of candidates, hoping that one of them will “stick.”
Quantity over quality is never a recipe for success, and recruitment is no exception.
Another thing that harms the trust between the recruiter and the client is the lack of transparency and clear communication. Again, this is especially the case with contingency-based contracts, as these are not exclusive and a company can work with several recruiters hoping that one of them will bring a great hire. The recruiter also doesn’t know if he is the only agency the client is working with, which also harms the commitment.
Because of these issues, the collaboration very often ends silently and with no results. The recruiter simply stops sending candidates, and the client starts working with another agency.
It is a vicious circle that can be solved by improving recruiter-client commitment.
The Retainer Model Means Commitment
To fully understand why retainer-based contracts are better for both parties, let’s first quickly define the retainer and contingency models.
In contingency recruitment, the recruiter is only paid if the proposed candidate gets hired. In this model, the recruiter will send a greater number of candidates, hoping one of them will be a good match. If none of them isn’t, the recruiter gets no fee.
In retained search, the client pays an upfront, fixed fee to the recruiter, and the recruiter, in turn, dedicates more time, resources, and effort to find the perfect candidate. The client usually commits to work only with that one recruiter. The success rate of this model is generally higher. Although contingency appears cheaper than the retainer, the end costs are practically the same.
The retainer model means the client's explicit financial (and otherwise) commitment. For the recruiter, this means financial security that allows them to invest more time and resources in quality search and assessment since the retainer still depends on the successful hiring of the proposed candidates.
In addition, an exclusive relationship like this means that both parties will be more likely to work with each other in the future.
At FatCat Select, we have worked with both models, and, to us, the benefits of the retainer model are beyond clear. We prefer working based on a monthly retainer until the hiring is completed, and the retainer is deducted from the success fee.
Real Partnership Means Quality Hires
Collaboration between clients and retainer-based agencies is like a partnership. Since dedication is high toward each client, the recruitment agency will not collaborate with dozens of companies, just forwarding candidates from one to another. This gives recruiters extra time to integrate and deeply understand the client’s team, mission, needs, culture, etc.
In these unstable times, finding a lasting partner is a precious achievement. It is a solution that saves both time and money. Retained recruiters work with a high level of dedication toward each client, meaning they will not work with dozens of companies, just sending the clients back and forth between each one.
This improves the quality of the candidates that are presented to the client. The retained recruiter simply has more time to integrate and get to understand the client’s needs, as well as the company's end goal, mission, culture, and other vital factors.
In case a long-lasting relationship is formed, the recruiter will know exactly what to look for each time the client requires a new hire. This is true for all employee levels, but especially for executive recruitment, where a thorough understanding of the company's needs, goals, and dynamics is critical.
Exclusive Service Means Pressure to Perform
Although it is not necessarily always the case, retainer-based agencies usually have exclusive deals with client companies. When a company is committed to working only with one agency, the agency is encouraged to put that work on priority. The work is more thorough and the search is more substantial - retained agencies will often search among passive candidates, too, increasing the chances of finding the perfect fire.
With a long-term partnership in perspective, retained recruiters always go the extra mile, and on the client side, it’s more convenient as the bulk of work is done by the recruiter, especially the time-heavy parts like initial reviewing and screening.
Finally, retainers come with a higher sense of responsibility. In contingency-based recruiting, there’s no pressure to perform and no responsibility, as there are multiple agencies on the same job. If one fails, it’s not that big of a deal - they have nothing to lose.
So, let’s quickly sum up the obvious benefits of cultivating commitment between recruiter and client:
Thought search and assessment of candidates.
Build a lasting relationship with mutual benefits.
A deeper understanding of the client's needs.
Less time spent on candidates' evaluation.
Fantastic candidate's experience.
Positive impact on employer branding.
Yes, financial commitment can be scary, but in the case of the retainer model, it is definitely worth it.