Executive Search Cost
Executive search prices vary wildly. It is challenging for search buyers to determine exactly how much an executive search will cost. Further complicating matters: most search firms do not list their pricing on their websites.
However, you can estimate the executive search cost once you understand what most companies spend on different kinds of recruiting services.
Do You Want to Use an Executive Search Firm?
To determine executive search cost, the first question a company needs to answer is whether it wants to use a search firm or manage the executive search in-house. For companies that prefer to conduct executive searches themselves, research firms are ideal partners. Their unbundled search and recruiting research services are designed to support internal executive search and recruiting, a trend that has grown in popularity in recent years.
Intellerati is one such recruiting research firm. Corporate executive recruiting teams come to Intellerati for help identifying, qualifying, and screening potential candidates. As an executive recruiting research firm, Intellerati delivers robust executive search research conducted expert researchers who come out of investigative journalism. (For more, see “How to Crush Candidate Sourcing“.) In doing so, Intellerati delivers a competitive advantage, consistently uncovering viable candidates others miss. Moreover, Intellerati is one of the few firms to offer custom org charts of target companies and competitors, an expert form of talent mapping.
Of course, most companies are not big enough for an in-house executive search. For that investment to pay off in saved search fees, you need a good dozen-and-a-half to two dozen searches a year. That is why so many companies hand off their searches to executive search firms.
Executive Search Firm Pricing Models
For companies that want to go “out to search” there are two traditional executive 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 tend to concentrate on recruiting senior executives who are passive candidates — those who are not actively looking for the next job.
- 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. While there is some crossover — mainly at the Vice President and Director levels — retained firms focus on executive searches, and contingency firms focus on non-executive searches.
Traditional Executive Search Prices
The traditional search firm prices do not give clients an opportunity to save. Employers pay a full fee regardless of whether the search takes a week, a month, or half a year. That’s because the executive search cost is not based on the amount of work involved, the time spent searching, or the difficulty of a particular engagement. Rather, it is usually based on a percentage of annual compensation. That rule holds true whether the firm offers contingency or retained executive search.
Percentage-Based Pricing
When executive search fees are based on candidate compensation, the more a candidate is paid, the more a search firm makes. Some contend that is a conflict of interest. Percentage-based executive search pricing provides a financial incentive for search firms to negotiate higher salaries for the candidates they place, which is not in the best interest of the client.
Despite that inherent conflict of interest, most firms charge a percentage.
- Retained search: 30-33% of the total first-year cash compensation of the candidate placed, plus expenses
- Contingency Search: 20-25% of the first-year base salary of the candidate placed
Flat Fee Pricing
A handful of search firms charge a flat fee, including Egon Zehnder, one of the leading retained firms in the world. (Full disclosure: our boutique firm The Good Search also offers retained services by a flat fee.)
Egon Zehnder maintains a fixed fee 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. But because they are set in advance, they also eliminate nasty surprises of searches costing more than expected.
Most executive search fees fall within a basic range, regardless of how the firm does the math.
Average Full-Service Executive Search Prices
$50,000 – $300,000+
Executive Search Cost: In-House Services
At large corporations, the do-it-yourself executive search model has grown in popularity. Employers use internal executive recruiters and corporate executive search teams to conduct executive searches 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 an employer wants is a list of potential candidates for their internal executive recruiters to call. Other times, they want interested, qualified candidates that they’ll usher through the interview process to hire. Or, they want a firm that flexes to serve as an extension of their corporate team.
Executive Search Research and Unbundled Search
Executive Search Research firms and search firms offering unbundled services typically charge by the hour, by the project/search, or by a monthly retainer. Research firms offering name generation services also charge by name. Name-gen research produces lists of target candidate names. Typically, the lists are comprised of information gathered from the Internet and from calling companies, a practice that is known as phone sourcing.
The wide range in executive search pricing depends on the services offered and on domain expertise, access to top talent, consultative abilities, 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. They typically do not have the skills needed to conduct investigative research or communicate with C-level executives, position offers, assist in negotiations, and close the candidates. So choose your recruitment research firm wisely.
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 firms that offer the expertise of retained search firms, but a much more flexible model. designed for in-house search teams. Frequently, these firms work by monthly retainer as a natural extension of 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. Research firms do make it a practice to guarantee the quality of their research.
Risks to Consider
By-the-Name Risks
The risk of by-the-name pricing is paying for names you don’t need. Another weakness is it is a quantitative approach. A name doesn’t tell you who is good. Moreover, a name does not a candidate make. Someone still needs to do the work of recruiting, converting all those names into viable candidates.
By-the-Hour Risks
The risk of by-the-hour pricing is that it gives the illusion of comparing apples to apples when that is rarely the case. A company with a lower hourly rate may be a terrific bargain but often, it can cost you more per engagement when research has to be corrected and redone. Often bargain research firms lack the necessary expertise to do serious research. In other words, if the hourly pricing sounds too good to be true, it probably is.
Another risk of by-the-hour pricing is that the meter is always running. The risk can be mitigated if it is possible to set a flat project fee, so you know what the work will cost. The challenge of setting a project fee is that most expert researchers simply can’t tell for certain how long candidate mapping and org charting will take until they do it. Companies vary far too much in size and structure. Consequently, most project estimates are simply educated guesses based on the firm’s experience.
By-the-Month Risks
The risk of by-the-month pricing is that an executive search cost can be higher than expected if the search drags on for more than a couple of months, compared to retained or contingency search. However, that risk is mitigated when companies have the option of switching the firm to another search. Also, the monthly model works better when a company can commit to four or more searches a year. Doing so enables the firm to assign a specific team member to serve the client for concierge-quality service.
True Cost of Executive Search
Last, the price is not the same as the total cost of a search, a figure that is the one that I’ve found 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 ultimately 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 with a trusted executive search partner. I’ll address that topic in another post.
FAQs on Executive Search Cost
1. Why are executive search fees often not listed on firm websites?
Many executive search firms customize their services based on the specific needs and challenges of each client. Because of this high level of customization, firms typically prefer to discuss fees directly with potential clients to provide a tailored quote rather than listing generic prices online.
2. How do retained search firms justify their fees?
Retained search firms charge a fee for the comprehensive search process, not just the successful placement of a candidate. Their fees cover deep market research, extensive candidate vetting, and often access to passive candidates who are not actively looking for new opportunities but could be the perfect fit for the role.
3. Is it more cost-effective to conduct an executive search in-house?
For companies with a high volume of executive searches (around 18-24 per year), building an in-house team could be more cost-effective in the long run. However, this approach requires significant upfront investment in talent and resources. Smaller companies or those with fewer searches may find external search firms to be more efficient and cost-effective due to their expertise and networks.
4. What advantages do flat fee pricing models offer over percentage-based models?
Flat fee pricing provides transparency and predictability in costs, helping clients budget more effectively. It also eliminates the potential conflict of interest in negotiating candidate salaries, ensuring that the search firm’s motivations are aligned with finding the best candidate rather than the highest-paid one.
5. Can the choice between a contingency and retained search firm impact the quality of candidates?
Yes, it can. Retained search firms typically have deeper resources to engage passive candidates and conduct thorough assessments, often leading to a higher quality of candidate. Contingency firms, focusing on active candidates, might fill positions faster but may not always reach the same depth of candidate pool.
6. How do unbundled executive search services work?
Unbundled services allow companies to select specific aspects of the search process they need assistance with, such as candidate identification, vetting, or market research. This can be a cost-effective solution for companies with in-house capabilities that need supplemental support in specific areas.
7. What factors should I consider when choosing an executive search firm?
Consider the firm’s expertise in your industry, their track record of successful placements, the depth of their candidate assessment processes, their pricing model, and how well their approach aligns with your company’s needs and values.
8. How can executive search costs vary so significantly?
Cost variations are influenced by the complexity of the search, the level of the position being filled, the industry or sector specialization, geographic location, and the search firm’s reputation and success rate. Additionally, the pricing model (retained, contingency, flat fee) significantly impacts the overall cost.
9. What is the risk of choosing a lower-cost executive search firm?
Opting for a lower-cost firm may seem financially advantageous, but it can come with risks such as a limited search scope, less thorough candidate vetting, and potentially a lower quality of candidates. This can result in longer search times, increased likelihood of a mis-hire, and ultimately higher costs in terms of both money and time.
10. How should I approach budgeting for an executive search?
Consider not only the direct fees of the search firm but also the broader impact of the search on your organization, including the opportunity cost of a vacant position and the strategic value of the role to be filled. Engage in detailed discussions with potential search firms to understand their services, pricing models, and the value they can bring to your search effort.
To learn more about as an executive search research buyer, check out our recruiting research pricing page.
Thanks. It is a good insight indeed