Understanding the differences between Retained Executive Search Firms (Head Hunters) and Recruitment Agencies

We are often asked to explain what the difference is between an Executive Search process and the method used by a Recruitment Agency or an organisation that solicits CV's from the market and distributes them to Clients.

Executive Search

Executive search is focused on middle and senior management.

In South Africa Woodburn Mann is focused on finding suitable candidates for positions with guaranteed remuneration levels above R1 million per annum. Agencies generally focus on lower paid staff.

Woodburn Mann's Executive Search process involves identifying Executives through discreet research. Contact is made with potential candidates directly to establish their interest in pursuing discussions in respect of a particular position. The individuals who are contacted are rarely actively considering a move and the role of the Executive Search professional is to motivate them to open up to the possibility of a career change.

As the Executive Search process involves a dedicated commitment of resources to a pro-active process undertaken by experienced Executive Search practitioners, it is a retained fee service.

Executive search is a challenging, stimulating and highly rewarding profession and the Researchers and Consultants who work in the industry are highly skilled in managing the process and the relationships with Clients and Candidates.

Recruitment Agencies

Agencies or companies that solicit CV's from the market run job advertisements to increase the numbers of people on their databases. Their recruitment process is thus limited in scope to the individuals who reply to advertisements.

Recruitment Agencies work on a contingency basis and are only paid a fee on the placement of a candidate.

Some important differences between the two processes are as follows:

 

Retained Executive Search

Recruitment Agency

The client company agrees to work exclusively with a search firm on a particular role.

The client will place the request for candidates with a number of agencies.

While an Executive Search Firm maintains an extensive database, Search Professionals do not rely on who they already know, but rather who they can identify for a specific position.

The database is extensively relied upon in a Recruitment Agency.

The search firm will carry out extensive research, analysing the marketplace, gathering feedback and putting together a target list of potential candidates from telephonic desk research, industry reports, news sources, Linked In and other networking resources.

The Agency will run an advertisement and will select the best of those individuals who apply to the advert. for screening and presenting to the Client.

The result is that the Client may get the best candidate who applied for the position but not the best candidate available in the market.

Once it has been verified that there are no sensitivities around contacting the candidates identified (for example an ideal candidate could be working for an organisation which is an important supplier or client of the Client company) the search firm will make discrete direct approaches to the candidates.

The traditional headhunting call is the part of the process most familiar to Executives everywhere. The first contact is usually made at the potential candidates place of work to establish if that individual is open to receiving information about the position.

Suitable and interested candidates will be invited to have a further conversation with a Search Consultant who will conduct an in depth interview to establish how well the candidate meets not only the requirements of the position as well as the culture of the Client organisation.

The best CV's of those individuals who apply to the advertisement will be presented to the client.

For Senior Executives this process lacks confidentiality and may result in news leaking into the market that could affect share prices and compromise an individual's current position.

A search Consultant will also consider if the opportunity is right for the candidate's career progression.

Only those individuals who meet the requirements for the position will be presented to the client for consideration.

Executive Search firms are committed to providing the solution to a client's needs and will re-work the assignment as many times as necessary until the client is able to appoint the best candidate available to a position.

Guarantees are provided by Executive Search firms to:

  • Re-work an assignment if the successful candidate leaves within a specified time.
  • Never approach a successful candidate again while they remain with the Client organisation.
  • Not headhunt anyone in the Client organisation for a specified period from the successful completion of an assignment. Woodburn Mann provides a one‑year off limits guarantee.

Ideally the repeat business provided by a client organisation will place them permanently off limits to the Executive Search firm.

Contingency search is cheaper and potentially quicker although it offers none of the guarantees that an executive search does.

Fees

Executive Search Fees are traditionally paid in thirds. The total fee will be based on one third of the finally agreed first year's guaranteed package paid to the candidate. At Woodburn Mann the retained portion of the fee is a minimum of R330 000 and this will be billed in three equal instalments during the course of the assignment.

On completion of the assignment there would be a final billing based on one-third of the finally negotiated first year's guaranteed compensation package, less the retainer fee already billed.

The Recruitment Agency's Contingency fee process requires payment on the appointment of a candidate. The bulk of candidates submitted will come from online advertisements on internet job boards This development has altered the market in the Recruitment Agency space as Job boards themselves now market aggressively to the end client to cut out the recruiter middleman.

In summary

There is support for various business models depending on the role and the level of the role.

Retained search is high-end executive search which requires a retainer to undertake a specific search for a Senior Executive, Technical Specialist or Key Manager position. Typically, retained searches tend to be for positions that pay upwards of R1 million per annum and often far more.

Search firms work on an exclusive and retained fee basis.

Search fees are typically 33% of the annual compensation of the recruited executive. In a retained search the fee is for the time and expertise of the search firm. The firm is employed to conduct the entire recruitment effort from startup until the candidate has started working.

Retained recruiters work for the Client organisations and not for the candidates seeking employment.

Search firms commit to off-limits agreements and may decline assignments from certain companies, in order to preserve their ability to approach candidates from those companies.

Executives generally don't respond to advertisements and executive search represents the professional approach which they trust.

Recruitment Agencies (contingent recruitment)

Companies tend to work with contingent Recruitment Agencies when filling mid-level positions.

Contingent Recruitment companies are paid only when the candidate accepts the position. A discounting approach may also be taken to seal the deal. Fee reduction merely compromises the quality of the service that may be delivered. The old adage, "you get what you pay for" is as true in recruitment as in any other sphere of life.

It is common for a client to work with a large number of contingent recruiters on the same recruitment process in order to maximize the volume of job seeker Curriculum Vitaes they receive.