ExecutiveSearchDefined: Cost Models

There are two main models of search:

Payment on Completion, a Contingency Model: a firm that works on a contingency basis is paid only when it has found an acceptable candidate. Payment may also depend on the candidate staying on past the probationary period.

The cash on delivery nature of this arrangement may well seem attractive to the prospective client but it has its flaws: working on this basis, the firm may be reluctant to accept any search that is going to present complications, or which cannot be performed promptly. They may also be unwilling to take the time necessary to find the very best candidate available

The Exclusive Contingency Agreement: A variation on the basic contingency agreement; here the client agrees to work with only one search firm, drawing, in return, a far more committed response. Since the investment of time and effort, on the consultant’s part, is now a safe investment he is liable to produce a better result.

The Engagement Fee: As in other contingent models, the main payment is still only expected once the search is complete. But, an engagement fee is sometimes added to the exclusive contingency agreement. This sum of money, paid at the onset of the search, enables the search firm to draw on additional resources in its search. For higher level placements this type of ‘contingency’ structure is strongly preferred; it has much in common with the second main model - the retainer search.

Periodic Payments, a Retainer Model: working on this model a firm will receive several payments: first, an engagement fee, known on this model as a performance retainer, then, after thirty days, a second payment and the last after sixty days. Should a suitable candidate not have been found during this time, the search firm continues its work locating one.

Payment per Stage, a Second Retainer Model: This is a variation of the basic retainer model. The search firm here too receives a performance retainer, that is a preliminary payment, but the second payment is made only once candidates have been submitted, that is, at the completion of this stage of the process. The last payment is made once the chosen candidate has begun.

Capped Fees and Flat Fees: the cost of the service, on all models, is generally calculated as a percentage of the candidate’s first year salary: this leads to difficulties when the candidate is capable of commanding an exceptionally high rate. In this kind of case, clients are unwilling to base their payment on such a percentage. With this in mind some search firms have incorporated capped fees and flat fees into their models.

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