What Does an Executive Search Actually Cost And Why Retained Is Different

What does it cost?

The question comes up in almost every first conversation with a new client. They ask what it costs. And then before I can finish answering, they ask the second question. Why is retained search priced differently than contingent search.

Both are fair questions. Here is the honest answer.

What retained search costs

A retained executive search is typically priced at one third of the first year total compensation of the role being filled. That includes base salary, target bonus, and any guaranteed compensation.

On a role with $300,000 in first year total comp, the fee is $100,000. It is paid in three installments. One third at engagement to start the work. One third when the finalist slate is presented. One third at placement.

The first installment is what makes a search retained. You are paying me to work exclusively on your role, as a committed project, for a defined number of weeks.

What contingent search costs

A contingent search is typically priced at 20 to 30 percent of first year base salary. You only pay if a hire is made. If no placement happens, you owe nothing.

That sounds like a better deal. For a lot of roles, it is. For senior leadership, it almost never is.

Why the structure matters more than the price

A contingent recruiter is incentivized to send as many qualified candidates as possible to as many open roles as possible. The math only works if they spread their time across many searches at once. That is not a criticism. That is the business model.

A retained search inverts the incentive. Because I have been paid to start the work, my job is not volume. My job is the right candidate for your specific role. I do fewer searches at one time. I go deeper into the market. I make the calls that contingent recruiters do not have time to make.

For a VP or C suite role where the wrong hire costs you a year and hundreds of thousands of dollars in lost momentum, the difference in approach is worth far more than the difference in price.

What you are actually paying for

You are not paying for resumes. You can get resumes from LinkedIn for free.

You are paying for the conversation with the VP of Operations at a competitor who is not actively looking and would not have returned a recruiter's call without a trusted introduction. You are paying for the reference check that asks the question nobody wrote down. You are paying for someone who has spent thirty years learning how to tell the difference between a candidate who interviews well and a candidate who performs well.

The bottom line

Retained search is more expensive up front. It is almost always cheaper in total cost of hire when you factor in time to fill, quality of match, and retention at eighteen months.

If the role matters enough that a bad hire would hurt the business, retain the search. If the role is a generalist position and speed plus volume is what you need, contingent is fine.

Pick the tool that fits the job.

Philip Lamb is Managing Partner of PRL International, a retained executive search firm based in Canonsburg, Pennsylvania. PRL places leadership talent across manufacturing, energy, aerospace, technology, and financial services throughout Pittsburgh and Western Pennsylvania.

Reach out at prlinternational.com/contact