How would you pay a retained firm for a candidate you referred to them?

You are a corporate recruiter. A retained firm is working a position for your company. Your company, maybe a hiring manager, gives that firm a name to connect with regarding that position. Do you pay the same fees on that candidate?

How do you construct your agreements with retained firms to account for referrals from your company that get placed at your company? What are best practices for this?

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Permalink Reply by Charles Haines on August 21, 2007 at 3:18pm

Joshua,

For the purposes of full disclosure, let me preface my response by stating that I am the Managing Partner of a boutique retained search firm. With that being said, I am curious as to why this question is even being asked.

Typically a company uses a retained search firm (vs. contingency) because they want a high level of expertise and a proven, thorough, homogeneous process, that will fully and equally weigh and evaluate all candidates (Internal or external, referred or not) with the net result being a slate of candidates that have been accurately profiled and presented to the search committee.

Unlike contingency search (which I conducted for 13+ years) which is as the name implies, contingent on a hire, retained search is about the process and the attendant skills and resources.

To your question, if all of the candidates that the retained search firm is to consider are internal referrals and this was agreed upon in advance, then there may be a basis for talking about a reduced fee, since this would eliminate the search portion of the process. Otherwise, an internal referral might actually cause the search firm to invest extra time and effort, because they will more than likely vet the internal candidate regardless of their qualifications, where as the same candidate may have been passed over if they were external.

Just my opinion…CHaines

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Permalink Reply by Joshua Kahn on August 21, 2007 at 4:53pm

Charles,

thanks for taking the time to respond. I appreciate you outlining your thoughts so thoroughly.

My intent in asking the question is to get a read on the opinions of those in the industry with more experience than myself. In asking it, I fully realize that it seemed an odd question to Retained Search recruiters as well as corporate recruiters. I also asked it without revealing my own thoughts on it so as not to color the responses I might get.

I think the organization, in this case Best Buy, has to pick which way they'll go. Either they decide to keep referrals, names etc., in the hands of their internal recruiters to run down, or they, as a practice, share those names with the retained firms they are working with for the purposes you outline above. Mainly to vet against other candidates being researched by the firm.

Not surprisingly, those in sourcing, think the former idea is better, while those in retained search feel the latter practice is better.

Mostly this is an exercise in reading the pulse of the recruiting world to help me influence the decision here.

Thanks again for your opinion and feedback.

Cheers,

//josh

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Permalink Reply by Heather Ali on September 13, 2007 at 8:46am

Having worked in corporate HR as well as vendor side retained executive search, my opinion is this...typically by the time a company decides to retain a firm for a search it is because the company has tapped its own resources and needs outside intervention to recruit a candidate of both quality and ability. It is deemed unethical in many corporate circles to headhunt from competitors by name of candidate. I have had clients hire me in the past to "headhunt" an individual from a competitor simply because it would be unethical for the company to do so directly. In these instances, no discussion or requests occurred regarding a reduction in my fees. A situation like yours sounds like a rareity vs. a common occurrence. If a company does have a list of names but (for whatever reason) can not recruit the individuals directly, perhaps an initial discussion during the fee negotiation phase with the recruiting firm might be in order. Otherwise, an internal referral here or there does not warrant a reduction in fees. The same amount of time and expenses will be incurred by the recruiter in investigating this candidate in the same manner as all others. The sourcing or "name generation" aspect of the search is typically the easiest and fastest phase of the recruitment process. The true value in working with a retained recruiter is the amount of time and resources applied to qualifying candidates once they are identified and filtering them through the selection process to ensure that the company ultimately ends up hiring the best candidate for the position. There are exceptions to every rule, but at the end of the day, results are what should matter the most to a hiring organization.