12 Jan What Do Executive Search Firms Charge?
Understanding executive search firm pricing is vital for choosing the best partner for your company.
In this blog, we’ll cover the three most common executive search fee structures, their pros and cons, and explore a crucial question you might have forgotten to ask yourself during your hunt for an executive search firm.
How Do Executive Search Firms Work?
Executive search firms specialize in securing top-tier talent for companies with vacancies in crucial leadership and specialist roles.
Executive search firms leverage global networks of innovative, impactful, and inspiring executives along with niche, hard-to-find specialists that are perfect fits for the role, company, and mission at hand.
Their unique access to corporate leaders and selective talent pools across a variety of industries and functions allows executive search firms to take advantage of passive talent – specifically, those currently excelling in their current role and not officially looking.
The best executive search firms also use data-backed search, screening, and selection methods that allow them to present carefully curated short lists of candidates with special focus on diversity, motivations, cultural fit, and leadership.
Executive Search Firm Fee Structures
Understanding the differences between popular executive search firm fee structures is key to choosing the right executive search partner.
In this section, we’ll break down the three most popular types of executive search agreements, so you can make an informed decision for your search.
1. Block/Flat-Fee Recruiting Agreements
Flat-fee or block executive search firms require an upfront payment before launching their search.
Some flat-fee executive search firms require their entire fee upfront, while others require an initial “launch fee” plus a percentage of the role’s first-year compensation. This percentage usually falls between 20-25% before additional fees. The primary benefit of flat-fee pricing is the convenience and simplicity of its structure.
Block or flat-fee fee pricing has historically been more common among conventional recruiting firms (particularly for filling high-volume, seasonal roles). However, it is becoming more popular in the executive search industry due to its convenience and simplicity.
2. Contingency Recruiting Agreements
Unlike flat-fee firms, contingency executive search firms only get paid when they finish the entire search, selection, and placement process. Average contingency fees range between 20-30% of the role’s first-year compensation.
The non-exclusive nature of contingent recruiting agreements encourages contingency firms to rely on casting wide nets quickly and often to find active candidates. While this often makes contingency search firms excellent partners when recruiting intermediate and mid-level positions, their business model doesn’t always offer the attention, discretion, and commitment to a search required to reliably place high-level executives and niche specialists.
The reliance on speed and upfront volume at these firms often generates a flurry of early interest from active candidates. Unfortunately, this model prioritizes easy-to-fill opportunities and these firms can spend less time or simply stop working on roles that become challenging.
Even more, their non-exclusive nature allows contingency recruiting firms to introduce the candidates to multiple companies including competitors. If your role proves time-intensive for a contingency firm to fill quickly, they may move to other projects that represent faster wins.
3. Executive Search Retainer Agreements
Executive search firms that use retainer agreements represent an evolved take on the traditional role of executive search firms.
Much like management or strategy consultants, retained executive search firms seek to build long-lasting, exclusive partnerships with their clients that equip them with the insight and access needed to generate top-tier executive and specialist placements.
Instead of “playing a numbers game,” retained executive search firms devote their time, efforts, and resources toward pursuing relationships with passive talent that represent the perfect fit for your company and culture. Retained executive search firms typically charge an upfront fee to begin a search with total project fees 25-35% of a role’s first-year compensation.
The Cost of Not Retaining an Executive Search Partner
While many organizations are (unfortunately) intimately aware of the consequences of relying on general recruiting teams to fill niche specialist and high-level executive roles, they don’t often recognize the cost of not working with a qualified executive search partner.
Let’s look at three common costs companies face when they don’t optimize their executive search:
- Lack of Interest:The market for crucial leaders that can deliver top results has never been more fierce. Without access to a global network of passive talent across industries and functions, most companies fail to generate the interest required to drum up a pool of high-value candidates. The market for highly specialized and niche candidates can be just as competitive.
2. Lengthy Time-to-Fill: Did you know 60% of hiring expenses are due to wasted departmental head and managerial time? Partnering with a skilled executive search firm can drastically cut down on your time-to-fill while requiring little involvement from the rest of your team.
3. Executive Churn: Failing to retain an executive or specialist that took months of effort and tens of thousands of dollars to recruit is unfortunately a common experience that many companies go through. Without a fine-tuned, data-driven, and objective process for ensure the new talent’s success, an unfortunate number of businesses suffer cyclical churn that limits growth and harms morale.
Want to Learn More About Executive Search?
Medallion Partners stands out in the world of executive search firms, with 98% of the candidates that we place staying in the role for at least two years. If you need help finding the right candidate for a difficult-to-fill role, contact us today. We are happy to answer any questions you may have.