When a company is looking for key personnel, headhunters are often the method of choice.
No wonder: they promise "tailor-made", pre-selected candidates within a very short time, and from a larger candidate pool than a simple job advertisement could ever offer. Headhunters are a useful alternative, especially when internal resources are currently lacking.
As tempting as headhunters are, many HR managers make a fatal mistake when they place their order: they rely on the wrong payment model. This not only has consequences for their own HR budget, but also for the quality of the candidates and thus for the effectiveness of the entire HR department.
"Success-based" vs. "retained search"
One after the other: In headhunting, there are two typical payment models with very different implications.
In the success-based search or contingency recruitmentmodel, clients only pay the headhunter as soon as a recruitment actually takes place. With retained search , on the other hand, they pay in advance, namely the retainer. Success-based search sounds intuitive: you hardly run any risk, instead this lies with the headhunter. In addition, you can easily work with several providers who address a particularly wide pool of candidates; only the headhunter who delivers the "right" candidates first receives payment. And if internal recruitment strikes first, you save yourself any costs.
However, there is a common mistake hidden here that many managers overlook: In many cases, success-based searches are not in the interests of companies.
The main reason is that the motivations of companies and headhunters are not completely aligned. Put yourself in the headhunter's shoes for a moment:
- With the success-based model, you know that you will probably not work exclusively on one dossier, but will share the probability of success with competitors and your client's internal HR department.
- As the customer has not yet paid anything, there is a higher risk that the order will be canceled without further ado.
- You are therefore faced with the real danger that all your work was in vain - every additional hour of work in the success-based model becomes a risk.
- This is anything but theoretical: In the success-based model, headhunters work for free 75 to 92 percent of the time, which means that they only deliver "successful" candidates in 8 to 25 percent of cases.
- So what is the best solution for you as a headhunter? Deliver as many candidates as possible, as quickly as possible, in the hope that your client will take one of them. Instead of "tailor-made", profile sales prevail; there is no exclusivity. Quality? Special requirements? A strong fit with the company profile? Not infrequently also a miss.
Why retained search is probably the better choice for you
Of all things, retained search, the exclusive search, with its seemingly poorer risk profile, often performs better for companies.
The headhunters have no concerns as to whether the client is serious about the dossier and whether they have received it exclusively - neither of which matters in any case, as the remuneration has already been paid anyway. Without the risk that the project will be canceled or that they will be left empty-handed because a competitor strikes first, headhunters can put in exactly the work that is needed to fulfill the assignment. Instead of a "wave" of second-rate candidates who clog up the capacities of your own HR department in the second step, you receive precisely fitting, more pre-selected CVs. And since working with you is more attractive, headhunters prefer to send the highest quality candidates to you rather than to success-based clients.
Of course, retained search also has its pitfalls.
There is still an upfront payment to be made, which becomes particularly painful if internal priorities change and the candidate search is abandoned. Since in the retainer model you usually work exclusively with one headhunter for financial reasons alone, it is a smaller "net" that is cast overall. And there is a risk that the headhunters - whose payment is guaranteed - will not do the desired work.
Toreduce such risks, you need to consider some best practices: Make sure that the candidate search is based on robust assumptions about your company's future needs. Use retained search, especially where it is less about the broadest possible selection of candidates and more about the right candidates. And take due care when choosing headhunters to ensure that you are working with a professional provider. For example, it is often a sign of quality when headhunters only offer retained searches. Such companies understand the value of their work and have enough returning clients to avoid having to rely on success-based searches - a good signal for you.
Headhunting, but the right way
Headhunters are a valuable tool for HR managers, as long as a few pitfalls are avoided.
Understanding the difference between performance-based search and retained search can make the difference between a mediocre hire and an excellent hire. The most important task here is to understand what your company needs. Lots of candidates in a short space of time, for relatively generic or inexperienced roles? Success-based searches can definitely work here.
Are you looking for high-quality candidates for important positions with a lot of professional or management experience?
With specific or highly sought-after skills for which there is a lot of competition? You're better off with a retained search. And the upfront payment more than pays for itself when you make an excellent hire.
Good to know:
Wouldyou like to fill a large number of vacancies at the same time? In this case, you should take a look at completely different models than headhunting, as its price-performance ratio quickly falls off with high volumes. Interim recruiting, where you bring an external personnel service provider into your company on a temporary basis, or active sourcing as a service ("active search as a service") could be more suitable for you.
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