Hiring for a startup isn’t just about filling seats; it’s about finding the right talent that can drive your vision forward. So, when it comes to choosing between contingency vs. retained recruitment, it’s crucial to understand which approach aligns best with your startup’s needs.
Is It Time to Call in the Pros? When Should Startups Turn to Recruiting Agencies
Early-Stage Startups:
Early-stage startups often kick off their hiring efforts by tapping into the personal networks of founders, advisors, and investors. But what happens when those connections dry up? That’s when startups need to shift gears and dive into outbound recruiting.
Outbound recruiting, however, is incredibly time-consuming. It involves sourcing candidates, crafting personalized messages, reaching out to 50-100 candidates a day, scheduling and conducting screening calls—it’s practically a full-time job. And let’s be real: early-stage founders are already juggling enough with fundraising, finding product-market fit (PMF), and leading sales. They don’t have the time or expertise to handle outbound recruiting on top of everything else.
This is where recruiting agencies step in to fill the gap.
Growth-Stage Startups:
For growth-stage companies, the challenge looks a bit different. They usually have an internal recruiting team, but those teams are often stretched thin trying to cover multiple disciplines. Plus, the roles they’re hiring for at this stage are often highly specialized and niche. With founders and engineering leaders busy tackling other priorities, there’s simply no bandwidth to focus on recruiting.
These companies need someone efficient, with a proven track record of filling niche roles.
What do these scenarios have in common? Both types of companies are pressed for time. Early-stage startups have tapped out their networks, while growth-stage companies have internal teams that are overwhelmed and require a specialist to step in. At this point, partnering with a recruiting agency becomes more than just an option—it’s a necessity.
Contingency vs. Retained Recruitment: Choosing the Right Match for Your Startup
When it comes to recruiting for your startup, choosing between contingency vs. retained recruitment is like navigating relationships. Are you casting a wide net, hoping something sticks, or are you ready to commit to a partner who’s all in?
What is Contingency Recruitment?
Think of contingency recruitment like dating. It’s a low-risk option where you spread your trust among multiple recruiters, hoping that one of them will find the right match. You only pay if a candidate is placed.
However, this approach comes with its own set of challenges. Recruiters aren’t guaranteed payment, so they often spread their efforts across multiple roles and clients to maximize their chances of making a placement. They may also choose to submit their top candidates to as many clients as possible.
While you cast a wide net, keep in mind that the contingency recruiters you’re working with are doing the same thing.
Why Choose Contingency Recruitment
Considering contingency recruitment might be a strategic move. Here’s why it could be the right fit:
Flexible Approach: Contingency recruitment offers flexibility by charging fees only after a successful placement. This means you avoid upfront costs and pay only when a candidate is successfully hired. It’s a risk-free way to explore various options without initial financial commitment.
Broad Reach: Since contingency recruiters often work with multiple clients, they cast a wide net to find potential candidates. This approach can increase the volume of candidates you see, giving you more options to choose from. The goal is to present a range of candidates, so you can find the right fit for your role.
Varied Talent Pool: Because contingency recruiters juggle multiple roles, they often have access to a diverse pool of candidates. This can be beneficial if you need to fill various positions quickly or are looking for candidates with a broad range of skills.
Speedy Process: The nature of contingency recruitment means that recruiters are motivated to fill roles as quickly as possible. This urgency can be advantageous if your startup needs to move fast and fill positions without a long waiting period.
If your startup values flexibility and wants to explore a wide talent pool with minimal upfront costs, contingency recruitment could be an effective choice. While it comes with its own set of dynamics, it provides a risk-free approach to finding the right candidates to help drive your startup forward.
What is Retained Recruitment?
On the other hand, retained recruitment is more like getting engaged. It’s about commitment and trust. When you choose a retained recruiter, you’re not just hiring a service—you’re entering into a partnership.
You pay part of the placement fee upfront, which might seem like a bigger risk, but in return, you get a recruiter who’s fully dedicated to your search. They’re not splitting their focus across a large number of clients; they’re laser-focused on finding the right fit for your team.
This commitment leads to more time spent getting in-sync, higher accountability, responsiveness, and a more thorough search process.
Why Choose Retained Recruitment
When your startup is focused on finding high-quality talent, opting for retained recruitment is often the smarter choice. Here’s why:
Commitment Equals Quality: Retained recruitment is all about commitment. By choosing a retained recruiter, you’re partnering with someone who’s fully invested in your search. Unlike contingency recruiters who might juggle multiple clients, a retained recruiter dedicates their time and resources to your specific needs. This commitment ensures a more thorough and focused search, increasing the likelihood of finding top-tier candidates who truly fit your needs.
Trust in Results: With retained recruitment, you’re not just paying for a service; you’re investing in a partnership. The upfront payment you make is a sign of trust and commitment from both sides. In return, you can expect a recruiter who is motivated to deliver the results you’re looking for. They are accountable for their performance and driven to meet your expectations because their success is directly tied to your satisfaction.
Deeper Role Calibration: Retained recruiters dedicate time to fully understand your job openings. They work with you to fine-tune job descriptions and requirements, ensuring they reflect both the necessary technical skills and that they align with your company’s culture and objectives. This careful approach allows them to find candidates who are not only qualified but also a good cultural fit. This way, you get candidates who are genuinely suited for both the role and your company.
At Kofi Group, we use a role calibration spreadsheet to ensure that everyone is on the same page from the start. This spreadsheet allows recruiters and hiring managers to quickly align on the specifics of open roles, streamlining the process and minimizing misunderstandings. By using this approach, we ensure that both the technical requirements and cultural fit are clearly defined and agreed upon, leading to a more efficient and effective hiring process.
Streamline your hiring today and get your team aligned on every role with ease.
Download our Role Calibration Spreadsheet
Focused Effort: When quality is your top priority, the dedicated approach of a retained recruiter means they will dig deeper into their network and use their expertise to identify and attract the best candidates. They’re not spreading their efforts thin; instead, they’re concentrating on finding the right fit for your startup. This ensures that every candidate they present is a strong match.
If your goal is to secure high-quality hires and you value a recruitment partner who is committed to delivering exceptional results, retained recruitment is the way to go. The investment in this approach often translates into a more effective and successful hiring process, providing you with the top talent needed to drive your startup forward.
Breaking Down the Costs: What to Expect with Contingency vs. Retained Recruitment
The payment structures for contingency and retained recruitment are similar, with both typically costing 20-30% of the candidate’s first-year salary. But while the costs are the same, the way those fees are structured can significantly affect the quality of service you receive.
In contingency recruitment, you pay the fee only after a successful placement, which may appear to be a flexible, low-risk option. However, this approach often leads to a less personalized search. Since recruiters aren’t guaranteed payment, they tend to submit a higher volume of candidates in the hope that one will be selected, which can result in a more scattered and less tailored process.
On the other hand, retained recruitment involves an upfront payment, with the overall fee spread out over the duration of the search process. This approach ensures your recruiter’s full commitment from the outset, enabling them to invest more time and resources into identifying the ideal candidate. The upfront investment in retained recruitment often leads to a more focused, thorough, and ultimately successful hiring process.
Benefits of Hiring Top Recruiters
Here’s what top recruiters bring to the table that raises the quality of your hiring process.
Storytelling That Attracts Passive Candidates: Startups need someone who can craft and share their company’s story in a way that grabs the attention of passive candidates—those who aren’t actively applying but could be a perfect fit.
Guidance Through the Interview Process: It’s crucial to have someone who can guide both candidates and hiring managers through the interview process. This involves asking the right questions, addressing concerns, and ensuring a smooth closing process, which is essential for securing top talent.
Access to a Deep Network of Skilled Candidates: Having access to a recruiter with a deep network of candidates who possess specific skill sets can make all the difference in finding the right match quickly.
Leverage Expertise to Minimize Opportunity Cost: A critical point to consider is the opportunity cost of having founders and engineering teams spend their time on recruiting, especially when it’s not their area of expertise. Every hour spent sourcing candidates is an hour not spent building the product or moving the company forward. When you think about the future valuation of your startup, the cost of spending time on recruiting can be significant.
Investing on the right recruitment partner not only optimizes your hiring effort but also frees up your team to concentrate on what they do best—growing your business.
Key Takeaways for Startups
Whether you’re an early-stage company just getting off the ground or a growth-stage business looking to scale, the choice between contingency and retained recruitment can greatly impact your success.
Ultimately, the decision comes down to what your startup needs most—speed or specialization, flexibility or commitment. Recognizing these needs and understanding the strengths and weaknesses of each approach will help you make a more informed choice.
