As the real estate recovery begins to gather steam, the process of hiring top professionals, always a difficult proposition, becomes even more challenging since there are more jobs available than there are quality professionals. Regrettably, the real estate industry is challenged by a shortage of talent, so it is often necessary to seek the help of a recruiter to get the job done with the best results. However, it is important to recognize that there are two different types of recruiters from which to choose. One is a retained firm and the other is contingent. Let's explore the differences.
Retained firms are the clients' exclusive representatives in the market concerning a particular assignment; they do not compete against other search firms to present candidates for the position. Retained firms do a thorough analysis of the market and contact a wide range of candidates and sources. Target candidates tend to be individuals who are currently employed, doing well in their positions and have no intentions of leaving their current employers. Although retained firms may present qualified individuals who happen to be actively seeking employment, such candidates are typically incidental to the search strategy and not the primary focus.
Retained search professionals are consultants who work with the client to identify organizational solutions. If a search strategy is not yielding the appropriate caliber of candidate, these consultants work with the client to revise the strategy. They outline alternative approaches or compromises and clearly articulate the advantages and potential liabilities of each. Since they are working on a contractual basis, they are committed to completing the assignment and attaining an optimal result, regardless of the difficulty of the search.
Another important consideration in selecting a retained firm is the fee arrangement. Retained firms generally charge a fee equal to 33% of the successful candidate's first-year cash compensation (base and bonus). Most, if not all, of the fee is paid upfront in three retainers over 60 days. Although a retained firm is obligated to complete the search (and the best firms usually do) there is no guarantee that the search will be completed, so the investment in a retained search is significant and warrants careful evaluation of the firm before signing a retainer agreement.
Contingency firms are paid only if they make a placement, and the fee for a contingent search may be lower than a retained arrangement, typically 25% versus 33% for a retained search. Contingent firms are under no obligation to complete an assignment and prefer to concentrate on situations where they can quickly fill a position. They will typically ignore a search once it becomes problematic. Consequently, they must work on a volume basis and cannot take the time to act as a consultant or to work on difficult situations where the fee is no more attractive than an easier assignment yielding an early placement.
Contingency firms can effectively address many recruiting situations, and there are many fine firms that specialize in contingent searches, but they are typically most appropriate to less senior, more generic positions where the situation is relatively straightforward and does not require senior leadership, "best in class" skills or a skill set that is in short supply.
Either way you decide to go, a professional recruiter will typically leverage the hiring manager's time and produce a better result, versus the disorganized and "last on the list" priority that typically afflict a do-it-yourself approach.
Anthony J. LoPinto ( [email protected] ) is managing director and CEO of Equinox Partners , a New York City-based executive search firm that focuses exclusively on real estate.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
