Paving a De-Risked Road to Ed Tech Talent: Retained vs Contingent Fee Search

Ed Tech leaders looking to enlist the assistance of an executive search firm face the choice between two basic options for structuring this relationship:

  1. Retained Executive Search: In this model, the client pays an upfront fee for an end-to-end consultative relationship covering every phase of the hiring process, including strategy, sourcing, evaluation, and final selection, hiring, and integration. The search firm acts as a hands-on strategic advisor in addition to executing the desire hiring strategy.
  2. Contingent Fee Search: In this model, the executive search firm in question only receives a fee when a hire is successfully completed. If no hire is made, no fee is paid. The search firm is focused on finding and contacting relevant candidates for the position.

At a glance, the contingent fee arrangement seems to be financially preferable for any hiring company. A retainer agreement, however, is a popular choice for firms hiring for management and executive-level positions. That’s because a retained search structure facilitates a greater degree of involvement with every phase of the hiring process. This involvement seeks to  de-risk the hiring process by developing a detailed sourcing strategy and hiring process, leveraging proprietary data assets on relevant talent, and providing for end-to-end shepherding of the hiring process. A contingent-fee search seeks to present a quality slate of candidates given client-defined parameters concerning education, background, experience, culture-fit, and aptitude. A retained executive search, meanwhile, seeks to provide a deeper engagement with both the strategic process that goes into selecting these key parameters in the first place and the final evaluation of presented candidates.

The retained search consultant should not just help find quality candidates, but define a long term talent development strategy, a brand to present to prospective candidates, and a systematic approach for defining the right profile and selling the position to the right individual. Using a retained approach, the executive search consultant can engage with deeper issues--like what positions should be hired, and how to promote diversity and inclusion through hiring strategy.

The more expansive relationship offered through retained search agreements does come with some additional costs. We want to avoid the oversimplified idea, however, that “retained is better and pricier, contingent is worse and cheaper.” For many organizations, contingent searches have resulted in many high quality hires. For other firms, the broad expertise in talent acquisition offered by retained search firms has been an essential facilitator of top quality hiring strategies.

Instead, we want to help Ed Tech enterprises seeking top talent develop a strategic understanding  of precisely what sort of help they’re looking for: a comprehensive, end-to-end talent acquisition consultant relationship, or more logistical assistance sourcing a suitable quantity and quality of relevant resumes.

Differentiating Sourcing Assistance and Executive Search Consulting

We can helpfully conceive of contingent and retained executive search services as overlapping but distinct solutions to the same business problem. Executive search services using either method should be centered on the fact that executive-level are vitally important to clients’ long-term future, necessitating a far more exacting process than recruiting efforts for lower level positions. Ed Tech firms hiring for key positions are faced with navigating a multi-stage process (you can read more about a high quality hiring process in more detail here) to ensure a quality end result:

  • Define a strategy to source professionals with the skills, background, and leadership abilities suited to the position (and, crucially, define what these traits should be!) This strategy should be informed by both qualitative and quantitative data gathering.
  • Execute this sourcing strategy, contacting and filtering potential candidates in preparation for interviews with a final slate of candidates.
  • Evaluate the results of the executive search process. This evaluation may concern not only deciding between candidates, but deciding whether to make an immediate hire at all.

Each of these stages represents a real challenge, requiring time, resources, and knowledge of the talent market feeding the industry. A company looking for help navigating this process can reasonably take two approaches:

  1. “We’re comfortable defining our own hiring strategy and don’t need help evaluating candidates. But we don’t have the time or data in-house to source a quality pool of candidates. We’d rather focus our executive search budget on securing sourcing assistance.
  2. “We’re working to define a talent acquisition strategy and aren’t sure how to efficiently source quality talent in this emerging industry. We need expert help developing our hiring strategy, gathering data on prospective candidates, and contacting candidates for initial conversations and preliminary interviews. We’re looking for an expert consultant to function as a true executive hiring partner, taking on the most burdensome chores of every aspect of the executive search process, letting us focus on our core business and final decision.”

For a hiring firm with the first perspective, a contingent search is probably ideal, providing an ideal mix of service and value. But  a company with the second perspective is really looking for the sort of full-service consultancy that only a retainer agreement can provide. Retained search firms don’t face as much financial pressure to fill every search in short order, allowing them to not only act as search specialists, but perform a much broader advisory role. We can usefully think of retained search firms as providers of specialized management consulting services:  they’re not only helping execute a given hire, but helping define and develop a longer term plan of organizational development through hiring.

Contingent Fee v. Retained Executive Search

Deciding How to Manage Risk in Executive Hiring

Every hiring process--executive or otherwise--comes with substantial costs and risks. A delayed hire can leave crucial workflows unattended, stretch existing personnel past the breaking point, and leave valuable resources waiting in place. A poor ultimate hiring decision, meanwhile, can take years to ameliorate, costing time and money along the way (and leaving the hiring company back where they started, kicking off a new search).

These concerns are only amplified in the executive hiring context, where any given hiring decision can ripple through the organization over the long-term, defining its success or failure as an enterprise (especially at earlier stages in a company’s growth).  

A high quality search process should anticipate these risks and avoid the classic pain points associated with executive hiring decisions.

Key processes for de-risking executive hiring include:

  • Developing deep knowledge of talent in both Ed Tech and related industries, paired with a network of industry contacts to gain deeper insight into the market for talent.
  • Refining this knowledge into a concrete sourcing strategy.
  • Acquiring substantial data resources on industry talent. Pre-existing data assets help minimize the need for additional data on every search, dramatically shortening the potential talent acquisition timeline.
  • Dynamically adjusting the sourcing strategy according to real time feedback from research and potential candidates.
  • Pre-define a hiring process to avoid unexpected pitfalls and ensure full transparency for potential candidates.
  • Proactively defining a workplace brand that can attract talented professionals.

These risk-minimization strategies are essential. The question is whether the hiring firm wants to take on these tasks in-house, or outsource them to an industry expert. While a retained search approach comes with more upfront costs, it also supports high-quality outsourcing of each of these vital quality control steps. And exhaustive quality baked into the hiring process can often help save money over the long term: research suggests that the cost of a bad hire (even non executives!) approaches $250,000.