Executive Search Cost: The Price of Executive Search
Executive search prices vary wildly. It is challenging for search buyers to figure out 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.
Going Out to Search or Searching In?
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 would rather conduct executive searches themselves, research firms are often the right choice. Their unbundled search and recruiting research services are designed for supporting internal executive search and recruiting efforts, a trend that has grown in popularity in recent years.
Intellerati is one such recruiting research firm. Corporate executive recruiting teams come to us for help identifying, qualifying, and screening potential candidates. Often, their candidate sourcers and recruiters have tried for months to produce a hire. Like good search doctors, we step in with intensive executive search research, conducted by expert researchers who come out of investigative journalism. (For more, see “How to Crush Candidate Sourcing“.) We deliver profiles of viable candidates, often times coupled with org charts and talent intelligence reports.
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
- 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.
2. 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 cross over — mainly at the Vice President and Director levels — retained firms focus on executive searches, and contingency firms focus on non-executive search.
Traditional Executive Search Prices
The traditional search firm prices do 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 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.
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 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 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. But because they are set in advance, they eliminate nasty surprises of searches costing more than expected.
While there will always be firms that charge less or more, most executive search fees fall within a basic range, regardless as to 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 using internal executive recruiters and corporate executive search teams to conduct 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. Other times, they want interested, qualified candidates that they’ll usher through the interview process through to hire. Or, 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 a 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 executive search cost 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 do advanced research or to 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 firms that offer the expertise of retained search firms services, 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
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.
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 to 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.
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 a 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, 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 in league with a trusted executive search partner. I’ll address that topic in another post.
To learn more about our recruiting research pricing, check out our Pricing page.