The most frequently asked questions and answers about selecting a retained search firm with the Clockwork Network.
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Contingency search firms get paid when they place a candidate. Consequently, they tend to act in a transactional manner and focus only on active candidates. As such, they often misunderstand or disregard the company’s needs and tend to focus on filling lower-level, commodity-type roles.
In contrast, retained search firms are paid over the course of the project and work more closely with you. They tend to better understand your company and your unique hiring needs. They take the extra time to find the best candidates, including passive candidates. As such, they particularly excel in executive and strategic searches.
Active candidates are actively looking for work, meaning they are looking on job boards and submitting their resume. Often they aren’t currently employed. Contingency search firms tend to focus on these candidates because they can be placed quickly and the firm can get the fee before a competing firm or a candidate is placed in-house.
Passive candidates aren’t looking for work, they are already employed, and they aren’t looking on job boards or submitting their resume. Contingency search firms don’t consider these candidates because they take too long to place. Yet, these are the best candidates for executive and strategic roles. Retained search firms excel at finding and placing these candidates.
Stick rate can be defined in a few different ways, but it is essentially the likelihood a placed candidate will still be in the role after a certain period of time. It is intended to indicate the quality of the candidate, but it is difficult to measure accurately and is susceptible to a number of other factors such as market and organizational changes. It is seen as a concern in recruiting because it is with contingency placements, where the search firm is motivated to place a candidate as fast as possible and typically without a deep understanding of the company’s needs. However, it so rarely occurs with retained searches that the metric is not meaningful in the analysis.
The difference is only a few percent, with contingency typically at 25% of first year salary and retained at 30-33%. Hiring the right candidate is an investment in your company’s future performance. The value of having access to much higher quality candidates and having a true partner in the search more than outweighs this marginal cost.
This option is becoming more popular, particularly with early stage companies. It is an excellent option to defer some of the cash cost of the search to stock without jeopardizing the partner relationship with the firm. Indeed, the search firm is even more incentivized to find you the best possible candidate as they now have ‘skin in the game’.
It’s to ensure a collaborative relationship with you. Both parties need to be aligned around finding the best candidate, regardless of where they come from.
Note that exclusivity doesn’t mean the candidate can’t be sourced from outside the search firm. If they are, the firm will still provide a lot of value as the candidate goes through the process.
The term ‘uptick’ comes from the real estate market and the fear that the agent will push for a more expensive property to get a higher commission. Often with hiring you enter the process with your perspective and expectations but limited knowledge of ‘the market’. As the search progresses you learn a lot about the candidate pool, the level of experience and expertise, and what the market will bear in terms of salary. On occasion the expectation and the market don’t line up and you might see an increase. This effect is not due to any influence by the recruiter, and indeed a good retained search firm will advise you if this situation is a possibility well in advance.
You can, but traditionally you look at other firms because you don't know who is the best or you don’t have any independent performance data. In that situation you’re reliant on their brand and sales materials. The Clockwork Network analysis is based on actual performance data for search projects just like the one you're looking to do. You can already rest assured you're getting the best firm for your project.
You can… But the best retained search firms specialize. The firm that was great for your last search might not be best for your current search because of a difference in seniority, department, or other factors. Besides, it doesn't hurt to have options. ;-)