How Do Executive Search Firms Make Money?

How Do Executive Search Firms Make Money?

How Do Executive Search Firms Make Money?

Organizations and candidates are often confused about how executive search firms make money. Does the candidate pay? Does the company with the vacancy pay? 

Gaining insight into standard executive search business models and compensation structures can help businesses choose an executive search partner effectively and confidently. 

This blog will outline the most critical aspects of the executive search process, discuss tips on choosing the ideal executive search partner, and explain how executive search firms get paid.

What Is the Executive Search Process?

The executive search process can vary significantly from firm to firm. 

To give you an idea of what a winning executive search process looks like, here’s a quick breakdown of Medallion Partner’s four-step process that empowers our firm to make world-class placements with a 99% success rate. 

Note: Check out our comprehensive guide for an in-depth executive search process walk-through.

Step 1) Build a Winning Strategy

We believe no two executive searches are alike. As a result, each project benefits from a comprehensive analysis that includes the following: 

  • The primary and minor responsibilities of the role.
  • The company’s culture and organizational structure.
  • The must-haves and long-term vision for the new executive team member.
  • The state of the current global executive talent market.
  • The competitiveness of the total reward offer.

After we’ve completed our analysis of the role, the company, and any organizational needs, we create a bespoke talent acquisition strategy that aligns with the company’s goals. 

Step 2) Assemble a Pool of Top-Tier Candidates

Armed with a custom strategy, we begin tapping into our worldwide network of professionals to identify exciting, innovative, and impactful leaders and specialists with the skill set and experience the hiring organization needs. Then, we begin discreetly confirming our chosen candidates’ interest in the role and move onto the first round of evaluations.

Step 3) Choose the Finalists

After using our data-backed candidate evaluation matrix, we present a list of exceptional executive candidates that have demonstrated the same performance, leadership, and cultural values the hiring organization embodies. 

Step 4) Close the Deal 

After the company picks a favorite candidate, we work with the candidate to help them finalize the deal, sign a new contract, and resign from their current position. We also offer post-placement executive support services that support the candidate’s personal transition and professional assimilation. 

Executive Search Firms Advantages

Executive search firms offer a laundry list of advantages over internal recruiters and conventional recruiters. Here are a couple to consider: 

Executive Search Strategies

Executive search firms don’t rely on standard recruiting tools like job boards, social media platforms, or open interviews to identify and engage with candidates. 

Instead, they use their global executive market expertise to identify live pools of exciting talent that they interface with directly using various discreet and proven talent acquisition strategies. 

Networks and Access

Unlike normal in-house recruiters or recruiting firms, executive search firms boast access to worldwide networks of executive candidates at the top of their game across industries.

Equally important is executive search firms’ access to these talented industry leaders. Executive search firms invest heavily in developing personal and professional connections that span industries to better position them to make one-in-a-million placements for their clients. 

How Are Executive Search Firms Compensated?

Now, on to the question of the hour. How do executive search firms make money? It might surprise you to discover that, despite common misconceptions and misunderstandings, executive search firms have used the same business model (more or less) for decades.

Executive search firm fees include a portion of the first year’s annual compensation of the candidate – typically between 20-35%. Executive search firms charge this fee to the company (never the candidate!) for services rendered during the search, discovery, acquisition, and placement of its new executive talent.  

Retainer vs. Contingency Compensation Structures

When and how executive search fees are collected depends on the search model of the executive recruitment agency. There are two common options here – retained executive search firms and contingency executive search firms.

How do retained executive search firms get paid?

Retained search firms partner with clients for a contracted period (typically between 60-120 days) and bill their clients on various timelines. Executive search retainer agreements typically include billing at milestones like launching the search, finalizing your candidate shortlist, and post-placement. 

Retained search firms prioritize building solid partnerships with a smaller number of clients, allowing them to provide specialized and attentive service during searches, as they generate recurring business.

How do contingency executive search firms get compensated?

Contingency search firms compete for non-exclusive search contracts from numerous clients. Unlike retained search firms, contingency firms receive zero search fee until their proposed candidate is identified, vetted, and successfully placed. 

This model pushes contingency search firms to cast wider nets, move faster, and work with larger client bases to keep revenue coming in consistently while they compete for new contracts. 

The low-risk nature of working with contingency search firms can be appealing at first glance but often leads to subpar outcomes for companies seeking exclusive executive candidates with niche experience, knowledge, or skills. 

Contingency search firms’ reliance on speed and volume to generate profit can discourage them from investing in contracts that don’t represent a quick and easy win. 

How Medallion Partners Stands Out in Executive Recruitment 

Our tried-and-true talent acquisition strategies, diverse networks, specialized resources, and attentive, personalized client experiences elevate Medallion Partners into a league of its own within the executive search industry.

Our executive recruiters blend “Big 5” resources, strategy, and performance with boutique-style market insights, candidate access, and client experiences. If you’re looking to fill a niche or senior level role in your company, reach out to us today to discuss your options. We’d love to answer any questions you might have about the executive search process.