Retained or contingency:
which model fits.
A retained search is an exclusive engagement paid in stages through the search, regardless of outcome. A contingency search is paid on placement. The difference decides how much of the market a firm can afford to work, and therefore which candidates reach the shortlist.
The two models compared
| Retained | Contingency | |
|---|---|---|
| When the fee is paid | In stages: engagement, shortlist, placement | On placement |
| Exclusivity | One firm, agreed in advance | Often several firms |
| Who carries the risk | The client, who commits before a hire exists | The firm, which may work for nothing |
| Market coverage | The whole relevant market | The reachable part of it |
| Suits | Board, C-suite, confidential or scarce roles | Senior roles with a deeper pool |
| Typical fee | A quarter to a third of package | A fifth to a third of package |
What each model pays a firm to do
Fee structure is an incentive structure. Understanding what each one rewards explains most of the behaviour clients find puzzling.
Retained
The firm is paid to complete a process. It can afford to spend three weeks persuading one person who was content where they were, and it can afford to report that the market contains only two credible candidates. Being thorough and being honest both cost it nothing.
Contingency
The firm is paid for an outcome. It has every reason to move quickly and to favour candidates who are reachable and available. Where several firms compete for the same role, speed compounds: the one that submits first has the advantage, whichever candidate that happens to be.
Marquee runs on contingency, so this analysis describes our own incentives as much as anyone else’s. The discipline we apply against it is turning down briefs we would be working at a disadvantage, rather than taking them and submitting whoever is available.
Why coverage is the real difference
The fee is the visible difference. Coverage is the one that shows up in the shortlist.
A retained mandate justifies approaching the entire qualified population, including people who will take months to move and people who will decline. A contingency mandate justifies approaching the part of that population likely to engage within the window in which the role is still open.
- Where the qualified population is large, the two approaches reach similar shortlists and retained spend is hard to justify.
- Where it is small, the difference between working all of it and working the reachable part of it is the difference between a real shortlist and a compromise.
How a retained fee is usually staged
The conventional split is into thirds, and the timing matters more than the proportions.
- On engagement. Paid at the brief. It buys the market map and the firm’s commitment to work exclusively.
- On shortlist. Paid when an agreed number of assessed candidates is presented, which ties the second payment to a deliverable rather than to a date.
- On placement. Paid when the candidate accepts or starts, and usually reconciled against the actual package agreed.
Worth settling before signing: what happens if the search is cancelled, what happens if the role is filled internally, and whether the first two stages are credited against a future mandate.
Choosing between them
Four questions settle it in most cases.
- How many people could genuinely do this job? A countable number argues for retained.
- Does the vacancy need to stay quiet? Confidentiality argues for a single firm and an exclusive engagement.
- What does a week of the seat being empty cost? A high figure justifies paying for coverage rather than for a result.
- Has the role already gone unfilled? A role that has run once unsuccessfully on contingency rarely succeeds by running again the same way.
Reading the engagement letter
Most disputes between clients and search firms trace back to a clause nobody read closely. Six of them account for the majority.
- The fee base. Whether the percentage applies to base salary or to total first-year compensation including bonus and equity. The difference at senior level is substantial.
- Off-limits. Which of the firm’s other clients it agrees to leave alone, and for how long. A firm with many clients in your sector has a smaller reachable market than it appears.
- Ownership of introductions. How long a candidate introduced by the firm remains theirs, and what happens if that person is hired into a different role a year later.
- The replacement term. Its length, and crucially what triggers it. Resignation only, or any departure.
- Cancellation. What is owed if the search is stopped, the role is withdrawn, or it is filled by an internal candidate.
- Who actually runs it. The consultant named in the pitch and the one who works the mandate are frequently different people. Name them in the letter.
These are ordinary commercial terms and a reasonable firm will discuss all six openly. Reluctance to put any of them in writing is itself the answer.
Switching models mid-search
A role that has run unsuccessfully on contingency rarely succeeds by running again the same way. Something about the brief, the package or the market made it hard the first time, and repeating the method repeats the result.
Three things are worth doing before switching to a retained mandate, and doing them sometimes removes the need to switch at all.
- Re-test the brief. Ask what the role has to achieve in its first year. Where that answer differs from the job description, the search was looking for the wrong person competently.
- Re-test the package. Benchmark it properly. A role that has gone unfilled twice is frequently priced below the market it recruits from, and every firm working it will hit the same wall.
- Ask what the previous firms found. A firm that worked the role and stopped usually knows why. That conversation is uncomfortable and more useful than the market map you would pay for next.
We have taken roles that had already gone unfilled elsewhere and assumed the previous firm worked them badly. Often enough the brief was the problem, and we spent a month proving something the client had effectively paid to learn twice.
Replacement terms under each model
Both models usually carry a replacement term: where the appointed person leaves inside an agreed window, the firm runs the search again at its own cost. Three to twelve months is the common range, and twelve is rare outside retained work.
Read what triggers it. Some terms cover resignation only, leaving the client exposed on the more common case of a hire that simply falls short. Marquee carries three months on every placement.
A replacement term is weaker protection than it sounds, and it is worth being clear-eyed about why. It returns the fee or the effort. It returns none of the six months the role sat filled by the wrong person, the decisions taken badly in that time, or the credibility spent internally on the appointment. On a senior seat those costs dwarf the fee, which is the argument for spending more on getting the assessment right rather than on insuring against it going wrong.
The related term to check is the off-limits period: how long the firm agrees to leave your people alone after a placement. Twelve months is common and two years is achievable. A firm that recruits into your organisation and then out of it a year later has been paid twice for the same relationship.
Frequently asked questions
An exclusive engagement where the fee is paid in stages through the search rather than on placement. The firm is paid to run a complete process, which gives it room to work the whole market including candidates who take months to move.
It is better suited to scarce, confidential and board-level roles. On roles with a deep candidate pool it is overspending. The question is how many people could genuinely do the job. A countable number argues for retained; a large field rarely does.
A quarter to a third of the appointed candidate’s first-year total compensation, split into stages. The conventional split is thirds: at engagement, at shortlist, and at placement, with the final stage reconciled against the package actually agreed.
The staged fees already paid are usually retained by the firm. Many firms credit them against a future mandate or re-run the search at cost. Establish which before signing, alongside what happens if the role is filled internally.
You can, and it more often hurts the outcome than helps it. Competing firms optimise for speed over fit, candidates receive duplicate approaches that damage the employer’s reputation, and disputes over who introduced whom are common.
A middle model: a smaller upfront payment than retained, with the balance on placement. It buys some of the exclusivity and commitment of retained work at lower client risk, and it is increasingly common on senior roles below board level.
Contingency, on every mandate to date. Retained is where the practice is heading rather than how it works today, and we would rather say so plainly than describe an engagement structure we have yet to run.
It means one firm carries it, which usually increases your visibility rather than reducing it. A single accountable firm has every reason to report honestly on what the market contains, including the news that the role as written is hard to fill. Several competing firms each have a reason to stay quiet about that.
