Executive Search Firm Pricing
Search firm pricing is a top concern of executive search buyers. Whenever employers have an important board or senior-level opening to fill, it is reasonable to ask, “What does an executive search cost?”
Of course, there is no easy answer. it all depends on how your company prefers to recruit and how important getting top talent is to your corporate strategy. The wide array of executive search firms and recruiting services available means that search firm pricing varies wildly.
However, I can give you a sense of what companies typically spend on an executive search by sharing common price ranges of various executive search services.
Going Out to Search or Do It Yourself?
The first question a company needs to answer is whether it wants to hand off the executive search to a search firm or whether it wants to manage the engagement in-house. Companies usually opt for search firms when an executive search is important enough to warrant the cost of an executive search. Additionally, in-house teams simply may not have the time or expertise to do the search themselves.
For businesses that have to go “out to search”, there are two traditional search firm models: retained firms and contingency firms.
Retained Search Firms
Retained executive search firms are paid a retainer to do the work of executive search. The fee is not contingent upon making an actual placement. The firms get paid regardless.
Retained firms focus on getting companies the best talent available for the job. They target top-performing senior-level executives. Candidates must be more than qualified. As a result, retained search firms typically recruit passive candidates — those who are not actively looking for their next job.
Retained firms invest more time in consulting with the client, setting search strategy, researching ideal candidates, vetting those contenders, positioning offers, and closing the candidate. In other words, more work is involved. Consequently, retained search firm pricing is higher.
Contingency Search Firms
Contingency search firms are only paid when they make a placement. That means you will pay if you are successful, which you want them to be. So, despite what they say, there is no such thing as a contingency firm that searches for free.
Contingency firms tend to concentrate on recruiting candidates that are actively looking for their next jobs. They focus on delivering qualified candidates. It’s a lower bar, and for some openings at some companies, that is perfectly okay.
Retained firms focus on senior executive searches, and contingency firms focus more on staffing and mid-level searches with annual compensation of less than $300-thousand. As a result, contingency search firm fees are generally lower.
Search Firm Pricing
Typical search firm fees for individual engagements rarely give clients an opportunity to save. Employers pay a full fee regardless of whether it is retained or contingency.
Most search firms charge a percentage of a candidate’s annual salary or total compensation. However, percentage fees bake in a conflict-of-interest. The more the winning candidate is paid, the more a search firm makes. Clearly, that is not in the best interest of the client. You shouldn’t have to wonder where a search firm’s loyalty lies.
Retained Search Firm Pricing
- 30-33% of total first-year cash compensation of the candidate placed, plus expenses
Contingency Search Firm Pricing
- 20-25% of the first-year base salary of the candidate placed
Flat Fee Pricing
A small percentage of search firms charge a flat fee. Egon Zehnder, one of the leading retained firms in the world, charges a fixed fee. (Full disclosure: so does our firm The Good Search.) Egon Zehnder maintains the flat-fee pricing model enables the firm to be “completely unbiased” and to “facilitate hiring negotiations with no conflict of interest”.
Still, most fixed fees are similar in total amount to the percentage-based fees. It is just that flat-fee pricing eliminates the appearance of a conflict-of-interest and also avoids surprise higher fees when a candidate has to be paid more than expected.
While there will always be firms that charge less, and there were always be search engagements that enable a firm to charge more, most executive search fees fall within a basic range, regardless as to how the firm does the math.
Average Search Firm Fees
Will a Retained Search Firm Even Take On Your Search?
Leading global retained search firms rarely accept searches for fees of less than $100,000. In fact, lately, our clients tell us these firms are walking away from searches where the fee is less than $125,000.
In other words, the minimum fee is increasing. That gap is leaving companies with important Vice President openings underserved. It leaves many companies scratching their heads, at a loss for what to do.
Boutique Search Firms Take Market Share
Boutique firms with lower overhead often charge less while offering concierge-quality service to their client. As a result, a growing number of retained search buyers are giving their business to smaller firms.
Industry publications report that, in recent years, the pendulum has swung to the smaller retained search firms.
Multi-Search Package Deals
Companies with multiple executive openings a year are in the position to reduce the executive search cost. They simply purchase a package of multiple searches for a fixed lower fee. Doing so makes it easier for the companies: they don’t have to transact individual contracts for every single search and they save money. It is a great way to avoid search firm pricing sticker shock.
Research Firm Pricing
At large corporations, the do-it-yourself executive search model has grown in popularity. Large employers with at least a dozen-and-a-half executive openings per year are bringing executive search in-house. In doing so, they frequently turn to executive search research firms and vendors offering unbundled executive search services to boost their in-house recruiting efforts.
Sometimes, all corporations want is a list of potential candidates for their in-house recruiters to call. Alternatively, they may want interested, qualified candidates that they’ll usher through the interview process through to hire. More proactive in-house teams may turn to research partners for investigative work wrapped around talent mapping. In fact, some of our clients are opting for target company org charts to super-charge their efforts.
Executive Search Research and Unbundled Services
Executive Search Research firms and search firms offering unbundled services typically charge by the hour, by the project/search, or by monthly retainer.
Research firms offering name generation services also charge by-the-name. Name-gen research produces lists of target candidate names. Typically, the lists are comprised of information gathered from the Internet and from calling into companies.
The wide range in pricing depends on the services offered and on domain expertise, access to top talent, consultative abilities, and the stature and executive presence of the firm. The budget firms may produce candidates who are simply “willing to take a call”, without qualifying, interviewing, and vetting the candidate with a more thorough assessment. Research firms typically do not position offers, assist in negotiations, and close the candidate.
Average By-the-Name Prices
Average By-the-Hour Prices
Average By-The-Month Prices
The Research Firm Advantage
Increasingly, in-house recruiting teams are turning to research firms that offer the expertise of retained search firms, but a much more flexible model. Frequently, they serve as a natural extension of the in-house executive recruiting team. The approach is collaborative and collegial. The research firms boost recruiting effectiveness and speed time-to-hire.
In most cases, firms offering unbundled services are not responsible for the hire. However, research firms do make it a practice to guarantee the quality of their research. Corporate search teams own the end results and generally manage onsite interviews, offer, closing, and onboarding the candidates. In other words, the in-house team maintains control and saves money. They benefit by leveraging the expertise of their recruiting research partners.
Executive Search Research Package Deals
Again, a growing trend is buying weeks or months worth of research in advance and then spending down the research throughout the year. The package deal makes it easier for corporate teams to get the support they need when they need it, without having to get a proposal, negotiate, and transact a contract every time they need support.
The True Cost of Executive Search
Last, price is not the same as the total executive search cost, a figure that is the one that ultimately is the more accurate measure. It is a figure that also takes other factors into account, such as the cost of a position languishing unfilled, or of a cheaper, but bad hire. There is a reason that the most powerful and successful employers in the world continue to invest in quality executive search, whether through their own teams or in league with a trusted executive search partner.