What is the Difference Between an Executive Search Firm and a Recruitment Agency?

The terms are often used interchangeably when a third party firm is hired to find candidates for a specific position within a business. There are however several significant differences between what an executive search firm does versus what a recruitment agency does.

Businesses should have a firm grasp on these differences in order to decide which one will provide the best results for their next search.

Senior Level Roles vs. Entry & Mid-Level Roles

One of the first and biggest differences is the seniority level of the roles. Executive search firms focus on senior-level positions (C-suite, VP, Director, Boards) as well as positions that are typically hard to find or require a specialized skilled set. These senior level positions are business-critical in terms of leadership within the company as well as the unique abilities to execute long-term plans and daily operations.

On the COVID-19 front, businesses are looking to realign their org charts to identify business critical roles. At the onset of hiring, executive search firms can play a strategic role and assist the selection committee in defining these needs and identifying what skills are essential versus nice to have. This often results in a broader pool of candidates for organizations to select from.

In contrast, recruitment agencies are typically hiring more generic positions at the entry or mid-level, where candidates can fit the job description without a specialized skill set that is hard to find. Typically there is a large pool of qualified candidates that have the required skills to perform a given task

Sourcing Passive vs. Active Candidates

The second difference, and a major determining factor for whether you need an executive search firm or recruitment agency is the type of candidate you wish to attract for the role – the passive or active job seeker. Executive search consultants proactively seek passive candidates, those that are not currently seeking a new role or those that may not have been aware of a new opportunity without direct engagement. On the flip side recruitment agencies typically utilize a database of pre-existing candidates who are actively looking for a new role.

In executive search, the majority of the time the successful candidate is not an active job seeker that submitted their resume. The focus of each search is to identify qualified candidates that fit the profile for the role. The next step is connecting with these candidates, enticing them to consider the specific opportunity. Search firms take a personalized approach involving strategic conversations with each interested candidate to assess the fit for the role and the organization.

In contrast, recruitment agencies are sourcing candidates who are typically in a database of people that have submitted their resume or are actively seeking a new role by submitting their resume through job advertisements. The focus is on posting the role to job boards and creating job advertisements with a broad marketing approach to reach the largest quantity of job seekers as possible and then matching skills to a job description.

Retained Search vs. Contingent Search

Another difference that needs to be highlighted is the payment terms for the services rendered. Executive search firms are a form of retained search, meaning that an upfront sum or partial payment is required to conduct the search. It is essential to find an executive search firm that you are confident can execute or there is a risk of a partial payment without an actual placement. Retained firms are solely dedicated to the client side of the hiring process and are committed to follow through ensuring quality candidates are placed with the right organizations.

A contingent recruiter only receives a payment or fee once the company hires a candidate. There becomes an obvious focus on filling the role quickly to recognize revenue on projects. The risk involved with contingent is that the focus is on placement, and candidates may not be fully vetted to ensure a quality fit with an organization. Due to the nature of payment being on a placement, contingent firms represent both the interest of the hiring client and the candidate.

With a sudden influx of candidates due to COVID-19, contingent search firms are more likely to be shopping candidates around to make a placement and spending less time vetting them since the employer demand could be high as rehiring opens.

In addition, post-COVID-19 passive job seekers will require a more enticing reason to consider a change due to economic uncertainty and this is where the expertise of an executive search firm can be effectively utilized.

Exclusivity vs. Working with multiple companies

With retained executive search, the firm conducts the search for the role on an exclusive basis. This means that the company who engages an executive search firm works with one firm to ensure that they understand their organization and hiring need, resulting in a true partnership to help find their next senior level executive.

With contingent recruitment, it is primarily on a non-exclusive basis, meaning that other agencies are all in competition to fill the role. This quick fire approach to make a placement is one of the reasons why the industry can sometimes get the reputation of simply throwing resumes against a wall. Passing along applicants that look ok, can result in candidates being recommended that haven’t been fully vetted and requires additional screening by the company’s hiring manager.

Long-term guarantees vs. Short-term or no guarantees

In our current environment, every hire carries a risk of failure. That’s why guarantees are so important. Clients should measure their search partners by how committed to standing behind their work they are. In executive search, typical guarantees are between 6-12 months, meaning if the candidate leaves or doesn’t work out for any reason the executive search firm will find a replacement at no additional cost to the client. That is why industry-leading executive search firms leverage executive coaching to facilitate success and maximize the ROI for their clients by ensuring the maximum performance of each successful candidate.

Typically with contingent recruitment firms there is either no guarantee or a shorter guarantee on the placement, 0-3 months. In this situation, due to the focus on making the placement transaction as opposed to ensuring the success of the candidates the risk of failure can increase.

Confidentiality

When it comes to executive search confidentiality is of the utmost importance. When senior candidates are engaging in conversations about a new role, keeping it under wraps is essential. There is also confidentiality for the actual employer as well if needed, as they might be looking to replace someone who is currently still in the role. All in all, it is a very confidential process.

With recruitment agencies many times, they are sending out resumes of candidates to a number of employers and third parties trying to find placements. This can result in a lot of wasted time for both candidates and employers.

When do you need an executive search firm vs. a recruitment agency?

Executive search provides a solution for senior level roles that are critical to the success of the business. If it’s a situation where a deep specialization or rare skill set is needed, executive search firms can prove to be an invaluable resource to locate and persuade top quartile potential candidates to make a move. There is a focus on ensuring the right fit and success of the candidates placed with rigorous screening and post-placement support.

Recruitment agencies will be better suited for non-executive positions where the focus is on filling a skill gap rather than ensuring an impactful hire. They are also better positioned to fill immediately required roles where you are looking to hire someone in a matter of days. .

Final thoughts

Understanding the differences between executive search and recruitment agencies can ensure that you choose the right type of firm to maximize the chances of success for your search.