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Working with Recruitment Firms

Human Resources professionals are likely very familiar with the process of using outside staffing firms to meet their personnel needs, especially when a role is outside their normal realm or a particular challenge. They allow business owners to hire top talent and not take away their focus from business operations.

There are two types of staffing organizations, with very different processes and reasons to use each.

Contingent placement firms are frequently used for administrative or other labor roles, generally with salaries of $50,000 or below or hourly rates of pay. Contingent firms will be able to give you a handful of screened candidates to review from the get-go, and they are particularly useful when you have multiple positions to fill. With contingent firms, you only pay a fee for hiring a candidate if you select that candidate. Fees vary from 20 – 30 % of the anticipated annual base salary of the candidate.

Executive search firms are generally used to fill higher paid roles, which are more difficult to fill. Very commonly these are retained firms. With retained firms you pay a percentage of the firm’s fees up front and agree to pay the rest of the fees upon hiring a candidate. You will likely see fewer candidates from a retained firm, but you’ll see higher quality candidates that meet more limited criteria, and a good firm will work to partner with your organization in a very thorough manner. This partnership relationship will help them to pinpoint the best people for your culture and needs, and ultimately will result in a faster search for the future leader. Retained search fees hover around a 1/3 of the anticipated first year compensation of the role.

Both types of search firms will also have specializations and guarantees. There are firms that will be able to supply you with hospitality and healthcare workers, while others focus on finance executives. Others may simply be focused on executive level roles in any industry. Generally search firms have a placement guarantee varying from 3 months to a year of retention for the candidate.

The type of search firm you partner with is critical depending on your needs and goals. The common element is that organizations with critical hiring needs usually have urgent needs and need the best people as soon as possible. Whether you’re a business leader or an HR professional, here are some questions to ask yourself when you have hiring plans ahead.

• How quickly do you need to bring aboard the new hire(s)?
• How many people are you currently hiring?
• Does the role usually have high turnover?
• What is the pay rate of the role(s)?
• Has your organization already made an effort to recruit this role?
• How difficult is it to find someone who meets your criteria?
• Do you think you might have to relocate the right person?
• Does your HR team have experience in recruiting high-level positions?
• How long can I last without additional talent on my team?

If you decide that you need to move ahead with a third-party recruitment firm, ask yourself some additional questions to determine whether you should look at a contingent or retained firm.

• What is the strategic importance of the role?
• What search fees can I afford vs. how much is it costing me not to have the role filled?
• Do I need a partner with my organization or simply have some seats filled?
• Will I benefit from objective assessment tools to select my critical hire?

If you can answer these questions, you are ready to determine whether you need outside help and if so, what kind. Of course you should obtain references on the firm and ensure that all screening steps of the hiring process will comply with the requirements of the law and be consistent with others at your organization. Take care with your hiring!


Article by Jim Geisler.

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