The Two Types of Executive Search Firms & Fee Structures

There are two types of executive search firms to consider when selecting a firm to fill a leadership position in your company — retained executive search firms and contingency search firms. The differences between contingency versus retained executive search firms lie in:

• How they conduct their searches
• The fee structure when conducting a search
• The incentives behind what quality of candidates the search firm provides for you

Here we have outlined the two types of executive search firms and corresponding fee structures.

Contingency Search Firms

Contingency search firms are only paid once you hire a candidate they have presented to you. Thus, their pay is contingent on selecting candidates to fill positions as quickly and efficiently as possible. They also tend to take on as many clients as they can to maximize revenue. Therefore, contingency search firms typically direct their efforts towards mid- to lower-level positions.

Contingency Fee Structure

These firms will charge roughly 20-30% of the candidate’s first-year salary. But because they only get paid once the search is completed and the candidate is hired, companies must keep in constant contact with the search firm and express a strong desire to continue through the entire process.

Retained Executive Search Firms

Retained search firms work hands-on with the company, developing a close relationship to conduct a focused search for a candidate over a specific period of time. Retained executive search firms usually:

• Charge more than contingency or container firms
• Specialize in placing upper-level management, C-suite positions, and roles where deep, very specific qualifications (both professional and personality qualifications)
• Invest valuable time into their client companies, making sure to align the company culture, values, and purpose with the best-fit candidate(s)

Retained Executive Search Firm Fee Structure

1. The first payment, one-third (1/3) of the total fee is paid to begin the search.
2. The second third is paid 60 days into the search.
3. The final third is paid upon hiring the chosen candidate.

1. Both are fully committed to the process.
2. Both are in a strong partnership to find the right leader for the company.

Take a Deeper Dive into Executive Search & Recruitment Topics

• 2022 Executive Search Trends
• How Do Executive Search Firms Find Candidates?
• Why & When to Hire an Executive Search Firm

You can also get answers and information right now from one of the nation’s top executive recruiters.

Top 10 Reasons Why Retained Search Is the Most Effective Recruiting Method

1. Executive search consultant (retained search professionals work with their clients on an exclusive basis).
2. They are dedicated to following best practices and doing the job right. They work very closely with the client to develop a methodology, action steps, and a realistic timeline that match the client’s needs.
3. They are truly management consultants; you’re not alone.
4. Remember that contingent recruiters are in a race to provide resumes as quickly as they can. It’s your job alone to evaluate the resumes and assess if they fit your position and company.
5. The goal of the executive search consultant is to present four to five high-quality candidates with the skills, fit, salary, and other criteria you, the client, desire.
6. Intelligence is provided through exhaustive research on the industry, competitors, and ideal candidates.
7. Candidates are screened and assessed using modern assessment tools and are pre-qualified to fit the position and your company culture.
8. Cost-wise, executive search (retained search) fees range from 25% to 35%, while contingency recruiters often charge the same amount but provide much less value.
9. The contingency executive recruiter model works on a “No-Win, No-Pay” basis. So, their dedication, as shown by their actions, is very limited. They are not set up to provide the same level of professional services as a retained executive search firm.
10. With a retained executive search consultant, you will receive full briefings on the search process, competitors, the market, and the talent pool.

In conclusion, for best practices and the most effective executive search service, the retained search model for middle to senior-level positions is the choice of champions.

Why Cowen Partners Executive Search is the Premier Executive Recruiting Firm Across the U.S.