What Does a CEO Search Cost and Why Do Mid-Market Companies Get It Wrong?

Philip Lamb
May 8
7 min read

Updated: Jun 9

PRL International | prlinternational.com

The question we hear most often before a search starts is: what is this going to cost?

It is the right question. Most companies are not asking it early enough, and most of the ones who do ask it are thinking only about the fee. The fee is the smaller number. The cost of getting the hire wrong is the number that ends careers.

In more than 30 years of retained executive search, we have seen companies spend $200,000 on the right process and fill the role with a leader who transformed the business. We have also seen companies spend $40,000 on the wrong process, hire the wrong person, pay $1.5 million in severance, and start the search again. The first conversation about cost should cover both numbers, not just the first one.

What Does a Retained CEO Search Actually Cost?

A retained CEO search costs 25 to 33 percent of first-year total compensation, which translates to $150,000 to $200,000 for a mid-market CEO earning $600,000, plus expenses that bring the all-in budget to $220,000 to $300,000.

The industry standard is 33 percent. Korn Ferry, Spencer Stuart, Heidrick and Struggles, and Russell Reynolds all operate around that number. Boutique retained firms charge in the same range with more flexibility on minimums and a different level of senior partner involvement throughout the engagement.

The fee is structured in three installments. One third is due at engagement. One third is due at 60 days. One third is due at offer acceptance. The company pays all three installments whether the search produces a hire or not.

That last sentence is the one that stops people. Here is why it is structured that way.

Retained means exclusive. When you engage a retained firm, that firm commits full resources to your search from day one and works only on your role. No competing firms. No contingency race. The firm is accountable for the process and the outcome, not just the result. That exclusivity is what the advance payment buys.

The all-in cost extends beyond the base fee. Candidate travel, executive assessments, background verification, reference documentation, and administrative fees typically add another ten to fifteen percent of first-year compensation. Companies that budget only the base retainer are consistently surprised by the final invoice. Budget $220,000 to $300,000 for a CEO search at the mid-market level and you will not be caught short.

Why Do Mid-Market Companies Use Contingency Search for a CEO Role?

Mid-market companies use contingency search for CEO roles because the fee structure appears lower risk, but contingency search completes CEO-level searches at roughly a 10 percent rate compared to over 95 percent for retained firms, according to industry research from Hunt Scanlon Media and Staffing Industry Analysts.

The reasoning makes sense on the surface. A contingency firm is only paid when a hire is made. There appears to be no financial exposure if the search fails. That logic breaks down at the CEO level for three reasons.

First, a contingency firm working a CEO search is competing against two or three other firms working the same role simultaneously. None of them commits full resources to a search they may not get paid for. The search gets a fraction of the attention the role requires.

Second, the candidates contingency firms submit are active job seekers. For a VP of Operations or a Controller, that pool can be adequate. For a CEO, it almost never is. The right CEO candidate is not refreshing job boards. They are running a division at a competitor or leading a turnaround somewhere. They need to be identified, approached privately, and engaged in a real conversation about your specific opportunity. That is sourcing. Contingency firms run matching processes. They do not run sourcing processes.

Third, the 10 percent completion figure is not an indictment of individual firms. It is structural. When no single firm is exclusively accountable, the probability of completion drops significantly. A retained firm's next engagement depends on delivering the current one.

In more than 30 years of retained search at PRL International, the clients who come to us after a failed contingency attempt at a CEO level share two consistent patterns: they lost four to six months, and the total cost of both searches exceeded what a single retained engagement would have cost.

For more on the difference between these two models, read what retained executive search actually looks like and why it is not what most companies think.

What Is the Real Cost of Getting a CEO Hire Wrong?

The real cost of a failed CEO hire is not the search fee — it is the combined impact of severance, a second search, team attrition, and strategic delay, which Dr. Bradford Smart's Topgrading research calculates at five to 27 times annual salary, or roughly $22 million for a mid-market CEO earning $500,000.

Harvard Business Review research puts the external CEO failure rate at 40 percent within the first 18 months. Forty percent. That is not a rounding error. That is the baseline probability you are managing every time you fill the top seat.

Severance for a failed CEO hire averages three years of total compensation. A CEO earning $500,000 who does not work out costs $1.5 million to exit before you count anything else. Add the second search. Add the three or four senior leaders who left during the disruption. Add the strategic initiatives that stalled for 18 months while the wrong person occupied the seat. Dr. Smart's Topgrading framework, widely cited by Spencer Stuart and other major retained firms in their executive assessment methodology, lands the total cost between $2.5 million and $22 million depending on the scale of the business.

"The best executive is the one who has sense enough to pick good men to do what he wants done, and self-restraint enough to keep from meddling with them while they do it." — Theodore Roosevelt

Roosevelt wrote that more than a century ago about what leadership selection actually requires. It remains the most accurate single-sentence description of what a CEO search is buying. You are not paying for a resume. You are paying for the right person to run a significant part of your business. The cost of getting that wrong is not measured in search fees. It is measured in what did not get built.

The $200,000 retained search fee is not an expense. It is insurance against a $22 million mistake.

How Long Does a CEO Search Take at a Mid-Market Company?

A mid-market CEO search takes four to six months from engagement to offer acceptance, with six months being the realistic budget for most companies and four months possible only when stakeholder alignment is complete and compensation authority is pre-approved before the search starts.

Companies consistently underestimate this timeline and consistently overestimate how aligned their own stakeholders are. The talent market rarely extends a CEO search. Internal process almost always does.

The pattern we see most often: the search starts with an agreed profile. At week seven, a board member who was not in the original conversation expresses a different view of the role. The candidate slate is reconfigured. At week ten, the offer process begins but compensation approval has to return to the full board, which does not meet for three weeks. A strong candidate who had two conversations with other firms during that window now has an offer in hand.

Six months is the right budget because six months gives the firm enough runway to do the work properly and gives your organization enough time to make decisions without rushing them. Four months is achievable but requires one person with final decision authority, a locked compensation range, and stakeholders who are aligned on the profile before the first candidate call is made. Every search we have completed in under five months had all three of those conditions in place at engagement.

The first interview in a retained CEO search carries more weight than most companies realize. Read why the first interview is not a warmup and how to use it to accelerate your decision process. For a deeper look at what affects the full search timeline, read how long does executive search actually take.

What Is the Retained Search Fee Actually Paying For?

The retained search fee pays for three things no contingency firm delivers: exclusive access to candidates who are not on the market, a firm committed entirely to your search from day one, and a structured process that surfaces stakeholder misalignment before it extends your timeline by months.

Access is the first one. The best CEO candidates are employed. They are performing. They have no reason to look at a job board. The only way to reach them is through a direct, private approach from someone with credibility in their field. A retained firm's network and reputation open that door. A database of active candidates does not.

Exclusivity is the second one. A retained firm is not hedging. Their senior partners are involved in every candidate conversation, every stakeholder meeting, and every negotiation. The check written at engagement is what purchases that commitment.

Process is the third one. The companies that complete CEO searches fastest are not the ones who find the right candidate first. They are the ones who do the alignment work first. A retained engagement forces that conversation before the search begins, not after the first slate lands. What does the board need from a CEO that the leadership team has not articulated? What does the current culture require that will not appear on a job description? Those questions surface in the first two weeks of a retained process. In a contingency search, they surface at month four when you realize the profile was never really defined.

PRL International is a retained executive search firm serving Pittsburgh and Western Pennsylvania, specializing in senior-level placements in energy, manufacturing, private equity-backed companies, and mid-market businesses across the region.

The companies that spend the most on executive search are not the ones paying the highest fees. They are the ones who paid a contingency fee, got the wrong hire, paid severance, and started the retained search they should have run first.

For more on how we structure and price a retained engagement, read why we lost a $300,000 search because our price was too low. For an independent view of what to look for before signing with any search firm, read does your executive recruiter tell you the truth. And for a full overview of how our mid-market search practice works, visit our mid-market executive search page. For a full breakdown of how to calculate the return on that investment, read what is the return on investment of a retained executive search.