Retained Search Fees
Whenever you have an important board or senior-level opening to fill, it’s reasonable to ask, “What are typical retained search fees?” or more to the point, “How much does retained search cost?” The answer depends on how your company prefers to recruit and how important hiring top talent is to your corporate strategy. Retained search fees are a significant investment.
The wide array of executive search firms and recruiting services available means that executive search prices vary wildly. But the cost of executive search depends, in part, on the kind of executive search firm you choose. Here, we’ll give you a sense of what companies typically spend on an executive search by sharing common price ranges of various executive search services.
Doing the Math
For retained search to make sense from a budgetary perspective, executive or technology leadership positions have to be senior enough — and important enough — to warrant the investment in retained search. That because the major global retained search firms charge at least $100,000 per search engagement. That’s what large search firms cost. That recruiting fee is based on a minimum of $300,000 in cash compensation of the candidate who is ultimately hired. Boutique search firms fees typically range between $75,000 and $125,000 per engagement. On average, that is what a boutique search firm costs. It doesn’t have a huge overhead and so its fees are usually more reasonable. Board searches average $90,000. For some C-level roles, the retainer is higher. Though titles vary, most of the roles are at the vice president level and above.
(For searches that don’t warrant an investment in retained search, our research division Intellerati gives clients the opportunity to save because it’s designed to support internal executive search teams.)
Most executive search firms charge a percentage fee. You simply need to do the math to figure out what search firms cost. On average, retained executive search firms charge 33% of first-year total cash compensation (base salary + bonus). Retained firms pass on search-related expenses at cost (e.g., candidate travel). Some tack on another 3% to 5% for other office expenses. To determine a retained search fee, multiply the total annual cash compensation for the executive you want to hire by .33, or by .38 if expenses are involved.
The large retained executive search firms (Korn Ferry, Spencer Stuart, Heidrick & Struggles, Russell Reynolds) prefer searches with cash compensation in excess of $300,000. Their retained search fees are usually in excess of $100,000. Because they have a global footprint, their expenses are higher than boutique search firms that are usually more willing to take on executive searches with total compensation ranging between $200,000 and $300,000.
With percentage fees, the more a candidate is paid, the more a search firm makes. Some contend that is a conflict of interest. Percentage-based pricing provides financial incentive for search firms to negotiate higher salaries of the candidates they place, which is not in the best interest of the client.
In addition to determining what a search firm costs, it is important to consider how a headhunting firm comes up with the fee for an executive search engagement. The Good Search charges a simple flat fee based on the amount of work involved. And we are not alone. One of the leading global retained search firms, Egon Zehnder, also charges a fixed fee. Our clients want a search firm they can trust. Percentage fees are not based on the amount of work involved. They also set up an inherent conflict-of-interest. Percentage fees reward any search firm that inflates the compensation of the candidates they place. The more a candidate makes, the more the search firm makes. Egon Zehnder explains it thusly:
“Unlike the traditional model of search consulting, we charge a fixed fee for our assignments. That means our only incentive is to deliver what’s best for you. Our fixed-fee policy frees us to be diligent, thorough, and completely unbiased, able to assess internal and external candidates on an equal basis and facilitate hiring negotiations with no conflict of interest.”‘
Pricing You Can Trust
The Good Search works by simple flat retainers for a reason: you should not have to wonder about your search firm’s loyalty. By decoupling our fees from candidate compensation, we eliminate the conflict-of-interest of percentage-based fees. Percentage retainers set up an inherent conflict-of-interest by rewarding search firms that inflate the salaries of the candidates they place. Flat-fee retainers not only take the moral high road, but they are also easier on the budget. For every retained search engagement, we draw up a proposal detailing our fee, based on the search’s requirements and difficulty. Clients know exactly what an executive search will cost from the beginning. There are no surprises.
Retained search is an investment.
As is the case with any investment, it helps to run the numbers to determine what search firms cost. The Good Search charges a simple flat fee. Our retained search firm fees are based on the amount of actual work involved, not on candidate compensation. For details on the different search firm models (retained, contingency, and research), check our earlier blog post.
Retained Search Research and Unbundled Services
At large corporations, the do-it-yourself executive search model has grown in popularity. That’s because 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 retained search research firms and vendors offering unbundled executive search services to augment their own efforts. Sometimes, all they want is a list of potential candidates for their own executive recruiters to call. Other times, they want interested, qualified candidates that they’ll usher through the interview process through to hire. And sometimes, they want a firm that flexes to serve as an extension of their own team.
The Good Search’s research division, Intellerati, offers unbundled services including name generation and typically charges by the project/search, or by monthly retainer. Name-generation research produces lists of target candidate names, biographical work histories, and contact information. (Note, research firms typically do not position offers, assist in negotiations, or close the candidate.)
Average by-the-month prices for retained search research range between $20,000 and $40,000. 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. 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.
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, theses firms work by monthly retainer as a natural extension the in-house executive recruiting team. Unlike the retained model, the monthly retainer gives companies a significant opportunity to save. 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.
The Good Search Retained Search Fees
The Good Search charged a fixed flat-fee retainer based on the amount of work involved. Our minimum retainer is $50,000. Our average retained search fee ranges between $75,000 and $125,000. Most of the executive-level positions we work on have total annual cash compensation in excess of $250,000.
Succession BenchFee Varies
Conduct confidential search
Benchmark senior leadership
Replace problem incumbent
Retained Executive SearchMinimum
Candidates you never dreamed existed
Flat fees you can trust
All the candidate research
Diversity RecruitingFee Varies
Boost executive diversity
Conduct talent mapping
Build diversity talent pool
The True Cost of Executive Search
Remember, price is not the same as the total cost of a search, a figure that ultimately is the more accurate measure. The total cost takes other factors into account, including 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.