Pros & Cons of Retained and Contingency Hotel Executive Search
By Karine Gill Managing Director, KGillAssociates | January 05, 2020
There are two prominent styles for finding executive talent in the hospitality industry, Retained and Contingency. Understanding the pros and cons of both can save you time and help you meet your hiring needs. So, what are the pros and cons of each style?
Retained Hospitality Executive Search
This method of search tends to be used to fill a specific position usually at senior or mid-executive level, depending on the structure and size of the company. Instances where a need for a search arises include the departure or promotion of an executive in which case the hiring hotel company might simply want to refill the position or use the opportunity to redesign the role, or the creation of a new service or hotel brand.
Even when an internal candidate presents themselves, the company might opt to hire a search firm to source additional candidates and help them vet the internal candidate, thus adding a layer of objectivity by introducing an unbiased third party. This is certainly the case for high profile senior positions at publicly traded hotel companies. There, Board of Director oversight or inclusion in the search process lends to the retention of an outside source for greater transparency.
Who: senior to mid-executive level hiring
What: opportunity to hire a search firm to source additional candidates among those internal
When: departure or promotion of an executive
Where: important in publicly traded companies because of transparency, but not mainly
Why: opportunity to redesign the role, create new service or hotel brand
The benefits of Retained Executive recruitment come in various ways. Going over the list of pros:
- Consistent Message
The search firm/consultant selected works as a strategic partner with the client on an exclusive basis throughout the completion of the search (usually around 90 days). The firm acts as a de facto extension of the company's recruiting effort. By working as a partner a consistent message is sent out to the marketplace that there is a shared goal between recruiter and client of finding the best placement.
The retainer fee typically is the equivalent of one third of the total first year's cash compensation of the selected candidate and paid in three installments spread over the 90 day period. During this period candidates are sourced and vetted and there is an ongoing dialogue between recruiter and client to find the best solution.
- Limited HR Management Effort
Services provided in return are extensive and usually include: defining the needs of the organization and the profile of the ideal candidate for the position resulting in a position description, discussion of a search strategy, including a list of target organizations, conducting research regarding the target organizations, candidate sourcing and interviewing, presenting qualified candidates to the client with an assessment of their fit for the position, reference and back ground checking and compensation negotiation.
In essence the client pays the search firm to take full ownership of the assignment so that (HR) resources can be dedicated elsewhere. The approach produces a consistent, focused effort to drive the process forward and allows HR to continue its ongoing important functions.
- Strategic Long Term Relationship
This type of partnership tends to lead to long term client/consultant relationships that are more strategic in nature versus a more tactical "one-off" approach. Usually an off limits clause is built into the agreement whereby the entire hotel company or certain departments are off limits to the search firm, shielding the company against the poaching of their talent.
On the other hand there are some downsides to the retained model. Keep in mind:
- Upfront Cash Layout
First time users of Retained search might feel uncomfortable with the fact that there is a layout of (sometimes significant) cash throughout the search with no guarantee of a solution. The reputation of the firm or consultant therefore is paramount and backed up by references and testimonials accumulated during the years of service in the business. Providing a cancellation clause might also reassure the client there is a way for them to exit before end of the agreement.
Usually the firm agrees to a guarantee in case the placement is discharged within six to twelve months of hire for reasons that should have identified during the search assignment. In that case the firm usually agrees to conduct a replacement search without an additional placement fee, charging only for out of pocket expenses.
Another client concern often voiced is "how long will it take to have someone in place". A retained search time line from start of search to offer extended and accepted – is typically 90 days. However, it depends on factors that are not always under the control of the consultant such as client and candidate availability for interviews. Getting off to a fast start when a search has been awarded shows commitment and dedication to the search and helps alleviate the pressure and reassure the client.
Working on a retained basis when doing hospitality executive search creates the opportunity to build strategic long term partnerships and sends a consistent message to the marketplace.
Having a retained hospitality search firm work assertively with you may be what you need to finding great employees. It might cost money to start, but it's going towards a long-term partnership with a recruitment firm.
Contingency Hospitality Executive Search
Contingency Executive Search is typically a non-exclusive relationship whereby the company might welcome resumes from various search firms as well as their own resources creating a competitive environment where speed is of the essence.
In this case:
Who: All-level Positions
What: Quick turn-around for positions, often multiple
When: Unrestricted timeframe
Where: Majority of lower-level hiring of multi-structured corporations
Why: Larger pool of executive applicants through multiple third party hiring firms
The list of benefits of contingent recruitment include:
- Financial Commitment
Usually contingency firms do not get a fee if they did not provide the placement so the client only pays in the case their own resources did not identify the solution. Essentially the client has access to a high volume of resumes without a financial commitment.
- Short time frame
Often clients don't have the luxury of a protracted process as the need to fill a position might be acute. Having a quick solution to the vacancy is of value to them.
- Low recruitment fees
Another upside is that fees are lower – usually 20 or 25% or even less, thus making contingency search a better option in case of a lower level and/or high number of positions that need to be filled.
Some downsides of contingency recruitment include:
- Less extensive services
Services provided are less extensive and usually limited to sharing resumes with clients. The process is less thorough, thus requiring the client to use considerably more internal (HR) resources (Time=Money).
- Time and Money
Another significant potential downside is the lost time and cost associated with hires that have not been thoroughly vetted and result in a wrong fit for the position or hotel company culture. In this case the client is essentially back to square one and begins a new search, using internal resources etc.
- One–off approach
the relationship between search firm (often referred to as "agency" or "head hunter") and hotel (company) is usually tactical and transactional in nature. While the client might reward the firm by awarding them additional assignments based on performance, there usually is no expectation of an off –limits, leaving the client vulnerable to being targeted.
Your hotel (company) could benefit from this broader approach to hiring. After all, a contingency search can give your business more options in a quick time frame, for little- or- no money while searching.
Choose the Right Partner
Whether a hotel company opts for a "limited service" contingency search or a "full service" retained search, one must keep in mind the firm or consultant hired to conduct the search represents the company in the market place. Look for a search partner with an established reputation in the hotel industry, backed up by referrals and evidenced by a repeat clientele.
At the end of the day you, as a client, have to confident your search partner can reach and attract the right pool of candidates. The reverse also holds true: search firms will be more open to negotiation if the hotel company has a strong reputation as a "Top Employer" recognized for a diverse workforce, treating their employees fairly and offer opportunity for growth.
The services of an established and unbiased search partner are valuable and help the client calibrate their internal as well as external options when a vacancy opens up.
A well thought out strategy of needs and associated search firm capabilities will ensure the right match. Be sure you have thought through the issues noted above, that the entire team is dedicated to the approach you chose and move forward!
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