Executive Summary:
Contingency search firms are employee recruiters who get paid for their services only after a candidate is placed with a client company. This sets them apart from retained search firms, which are paid up front for their work. Contingency search firms also tend to concentrate on mid-to-upper management candidates, whereas retained search firms focus on the highest-paid executives.
The strong local job market, particularly in such areas as information technology and financial services, has created huge demand for the services of contingency firms, as companies struggle to find qualified candidates to fill positions. This has created an intense competition for potential candidates, both among client companies and among search firms themselves, according to Harry Boxer, president of the Inglewood-based Century Group. Not only do the most desirable candidates get multiple offers and counter offers, but the search firms get offered higher fees if they can find the right candidate for a client.
The entrepreneurial nature of executive recruiters has caused many to break away from the larger firms and to start out on their own. As a result, there is a large number of boutique-style firms that cater to a well-defined niche of the labor market.
The Pacesetter:
Source Services Corp., a national firm headquartered in Dallas, operates four divisions in its L.A. offices. Source Finance provides accounting and financial professionals and Source Edp specializes in information technology professionals. The two other offices, Source Consulting and Accountant Source Temps, focus on information technology consulting and temporary accounting and financial staffing, respectively.
Although the firm’s revenue from information technology recruiting is about the same as that from accounting and finance recruiting, information technology is by far the faster-growing sector, according to Managing Director Paul Ratajczak. One of the main challenges the firm faces is to keep up with the growing demand for experienced information technology professionals. In Southern California alone, the firm has 45 recruiters who specialize in information technology, compared to 16 for accounting and finance. The shortage of qualified candidates translates into higher salaries and, consequently, more revenues for the firm, which is paid a percentage of the first year salary of the placed candidates.
As in most other industries, consolidation is reshaping the future of the contingency search business. Source Services is currently involved in merger talks with Tampa-based Romac International Inc.
