Once upon a time, employment agencies represented only the interests of the job hunter, known in agency jargon as the "applicant." The applicant "registered" with the employment agency, which in turn kept master files of applicants in every functional specialty. A potential hiring company contacted the employment agency and described the attributes it sought in a new employee. The agency consulted its extensive files and immediately produced a number of individuals meeting the basic criteria. These individuals (in some cases half a dozen or more) were contacted and sent out to interview for the job. A successful applicant one who was hired paid a certain percentage of his annual salary to the employment agency. Usually the jobs filled by the agency were not senior positions, and the responsibility for screening the applicants and checking references was left to the hiring company.
In contrast, executive recruiting firms, which grew out of management consulting, worked only for the hiring company. The client engaged the firm in a "search assignment," providing it with a detailed description of what it desired in a new employee. This description, known as the job specification, included such information as exact school attended, height, weight, personality, and spouse's personality. The potential employee was not an applicant, but a "candidate".
The search firm frequently helped to develop job specifications and spent considerable time with the hiring company starting the search. Generally, an executive recruiting company searched only for senior people and received a retainer on starting a new assignment. The search firm received partial payment even if the search was not successful. Final payment was made only after at least one of several candidates was recruited, screened by the search firm (including reference checks), sent for an interview, and hired. The total fee to the hiring company ranged from 25 to 30 percent of annual salary.
The search firm claimed to differ from the employment agency in that it worked for the hiring company rather than the job hunter. In addition, the firm generally recruited only senior executives and was paid whether or not it filled the position. Unlike the agency, the search firm actively screened its candidates thoroughly, provided reference checks, and offered a money back guarantee on its placements.
Today, in many cases, the differences between these two types of companies are inconsequential and difficult to distinguish. Most employment agencies will accept job orders where they are paid by the hiring company; indeed, some agencies handle only fee paid positions. Today many agencies fill top management positions, including vice presidents, presidents, and chief executive officers. At the same time, many respectable search firms now accept assignments for lower level positions as well as higher level ones.
Much the same has happened to methods of payment I know of employment agencies that work on a retainer basis. I also know of search firms that accept assignments for which they are paid only for a hire, or have a subsidiary that will. Recruiting versus files of resumes? Many search firms maintain comprehensive files, and many employment agencies go out and recruit Screening and reference checks? Both types of firms do reference checks today. Generally, however, a company that is paid a retainer does a more thorough job of screening and pre-interviewing. And yes, you guessed it; most employment agencies offer a money back guarantee to the employer as well.
In many states the difference between a search firm and an agency is defined by law according to the level of annual compensation paid to the candidate placed. In California, for example, a firm that places individuals earning less than $20,000 per year is licensed by the state as an agency regardless of its operating policies. A firm that limits its business to individuals earning more than $20,000 is not required to become licensed as an agency.
Unfortunately, this definition often fails in practice. Many agencies place executives who earn more than $20,000 per year; in fact, such executives may comprise most of their business. Similarly, many firms meeting every other definition of a search firm will maintain an agency license, have a wholly owned agency subsidiary, or ignore the law. As the president of a leading search firm told me: "When you have just successfully placed your third $65,000 a year executive with the same company and the pleased CEO, as he hands you a good size check for your services, looks you in the eye and says 'Wonderful job, now find me two junior assistant accountants,' you do not say no."
If the differences between agencies and search firms are not great, why not treat them the same? First of all, how the firm perceives itself will govern how you use it to your advantage after initial contact. Second, in some cases the differences are significant. Some firms deal only in executives making $50,000 or more. And some firms are totally unprofessional, even unethical, and are better left alone.
Even an expert can have difficulty distinguishing between an agency and a search firm by company, and new firms in the industry are founded every day. Therefore, in writing sales letters to executive recruiters and developing your mailing list, treat both types of headhunters the same. After you have made direct contact, vary your techniques according to the firm's philosophy and modus operandi, as discussed below.
