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 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 executive search firms and recruiting services available means that executive search prices vary 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 Ordering In?
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. There are research companies that offer flexible unbundled search and recruiting research services, a trend that has grown in popularity in recent years. In fact, our own research division Intellerati offers services designed to support internal executive search teams.
Employers seeking full-service executive search services usually turn to a search firm. For companies that want to go “out to search” there are two traditional search firm models: retained search firms and contingency firms.
- Retained: 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. Retained firms focus on getting companies the best talent available for the job. As a result, they focus on recruiting gainfully employed and successful senior-level executives. They are passive candidates who are not actively looking for their next job. They invest more time in research and vetting candidates.
- Contingency: Contingency search firms are only paid when they make a placement. They tend to concentrate on recruiting candidates that are actively looking for their next jobs. The talent pool is not considered as high in quality, because it includes dysfunctional and disgruntled workers who have been fired or who have quit their jobs. While there is some cross over — mainly at the VP and Director levels — retained firms focus on executive searches, and contingency firms focus more on staffing level searches that are not at the senior-executive level.
Executive Search Pricing: Search Firms
The pricing model of traditional search firms typically does not give clients an opportunity to save. Employers pay a full fee regardless as to whether the search takes a week, a month, or half a year. That’s because the pricing is based on a percentage of annual compensation.
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.
- Retained search: 30-33% of total first year cash compensation of the candidate placed, plus expenses
- Contingency Search: 20-25% of first year base salary of the candidate placed
Flat Fee Pricing
A small percentage of search firms charge a flat fee, including Egon Zehnder, one of the leading retained firms in the world. (Full disclosure: The Good Search also offers retained services by flat fee.) Egon Zehnder maintains the pricing model enables the firm to be “completely unbiased” and to “facilitate hiring negotiations with no conflict of interest. Most fixed fees are similar in total amount to the percentage based fees.
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 Full-Service Executive Search Fee
$50,000 – $300,000
Executive Search Pricing:In-House Services
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 augment their own efforts. Sometimes, all they want is a list of potential candidates for their own executive recruiters to call. Sometimes, they want interested, qualified candidates that they’ll usher through the interview process through to hire. Sometimes, they want a firm that flexes to serve as an extension of their own team.
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:
- $30 to $50 a name
Average By-the-Hour Prices:
- $90 to $150 an hour
Average By-The-Month Prices
- $20,000 – $40,000
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 True Cost of Executive Search
Last, price is not the same as the total cost of a search, 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.
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