Understanding the Retained Executive Search Model

The retained search model is traditionally favored for senior-level, critical, or highly confidential executive positions. Under this model, the client engages the recruitment firm exclusively and pays fees in installments throughout the search process, regardless of whether a hire is ultimately made.

Typical Fee Structure: Fees are usually calculated as a percentage of the hired executive’s total first-year compensation (base salary + bonus). Common percentages range from 25% to 35%, though this can vary based on firm reputation, search complexity, and specialization.

Payment Schedule: The total fee is typically divided into installments:

• An upfront retainer fee (e.g., 1/3 of the estimated total fee) paid upon engagement.
• A second installment (e.g., 1/3) paid at a specific milestone (e.g., presentation of candidates, interviews underway).
• A final installment (e.g., 1/3) paid upon successful placement.

Alternatively, some firms use a flat fee structure agreed upon upfront, also paid in installments.

Advantages for the Firm:

• Guaranteed Revenue: Provides predictable cash flow, reducing financial risk.
• Client Commitment: Signals a serious commitment from the client, leading to better partnership.
• Exclusivity: The firm is the sole agency working on the role, allowing for a more focused search.
• Resource Allocation: Allows firms to dedicate significant resources, including extensive research, sourcing, assessment, and candidate management time.

Disadvantages for the Firm:

• Higher Client Expectation: Requires a high level of service, communication, and expertise.
• Payment Tied to Milestones: Cash flow is dependent on hitting search milestones.

Example: A firm is retained for a VP of Operations role with an expected $250,000 salary + $50,000 bonus (total $300,000). At a 30% fee, the total fee is $90,000, potentially paid as $30,000 upfront, $30,000 at candidate interviews, and $30,000 on placement.

Exploring the Contingency Executive Search Model

In the contingency model, the recruitment firm is only paid if and when their referred candidate is successfully hired by the client. Payment is contingent upon placement.

This model is more common for mid-level roles or positions where multiple agencies may be competing to fill the same role. While sometimes used for executive roles, it’s less typical for the most critical or highly sensitive positions compared to retained search.

Typical Fee Structure: Fees are also commonly based on a percentage of the hired executive’s first-year compensation, often ranging from 20% to 30%.

Payment Schedule: The entire fee is paid upon the candidate’s start date or a set number of days after they begin (e.g., 30 days).

Advantages for the Client:

• No Upfront Risk: The client only pays if a hire is made.
• Potentially Faster Results: Multiple agencies may work on the same role, increasing the volume of candidates quickly (though not always the quality).

Disadvantages for the Firm:

• No Guaranteed Revenue: Significant time and resources can be invested with no financial return if no hire is made or if another agency makes the placement.
• Lower Client Commitment: Clients may work with multiple firms simultaneously, reducing exclusivity and potentially leading to less responsive communication.
• Less Control: Firms have less control over the process and may not receive full details or commitment from the client.
• May Prioritize Speed: Recruiters may be incentivized to present candidates quickly to secure the placement, rather than focusing solely on the absolute best long-term fit.

Example: A firm works on a Sales Director role with an expected $150,000 salary + $50,000 bonus (total $200,000). At a 25% fee, the total fee is $50,000, only paid if the candidate presented by the firm is hired and starts.

Key Differences: Retainer vs Contingency Executive Search

Here’s a direct comparison of the core differences between the two models for executive search:

Choosing between retainer vs contingency executive search depends heavily on the specific needs of the search and the client relationship.

When to Choose Which Model for Executive Roles

Selecting the appropriate pricing model is critical for both client success and your firm’s profitability. Consider the following factors:

1. Role Seniority and Impact: For C-suite, VP-level, or mission-critical roles with high impact on the business, a retained search is almost always the better choice. The complexity and importance warrant the dedicated resources and thoroughness a retained model provides.
2. Confidentiality: If the search is highly confidential (e.g., replacing an incumbent, entering a new market), the exclusivity and discretion of a retained search are essential.
3. Search Difficulty: Is it a niche role? Is there a limited talent pool? Are specific, hard-to-find skills required? Difficult searches benefit from the committed resources and extensive headhunting involved in a retained process.
4. Client Relationship & Urgency: For trusted, long-term clients seeking a critical executive role, retained search reinforces partnership. For less critical, slightly lower-level executive roles where speed is paramount and the talent pool is more accessible, contingency might be considered, but understand the trade-offs.
5. Need for Strategic Consulting: Retained searches often include significant consulting, market mapping, and in-depth candidate assessment beyond simple resume screening. If the client needs this level of strategic partnership, retainer is the way to go.

While contingency can be applied to executive roles, it’s generally reserved for positions where:

• There is less strict confidentiality needed.
• The talent pool is reasonably accessible.
• The client is willing to work with multiple agencies simultaneously.
• The role’s impact is less critical than a C-suite position.

It’s crucial to educate your clients on the value proposition of each model and why you recommend a specific approach for their particular search needs.

Presenting Executive Search Pricing Models Effectively

Clearly communicating your pricing, whether retainer vs contingency executive search, is vital for closing deals. Moving beyond static PDF proposals or confusing email chains can significantly improve the client experience and clarify your value.

When presenting options, consider:

• Transparency: Clearly outline what’s included in the fee (e.g., research, sourcing, assessment tools, background checks - specify what is not included too).
• Value Framing: Don’t just state the fee; explain the value and process that justifies it. For retained search, emphasize the dedicated resources, depth of search, and higher likelihood of a successful, long-term placement.
• Structuring Options: If you offer slight variations within a model (e.g., different levels of retained search with varying included services), present these clearly as tiered packages.

For executive search firms looking for a modern way to present pricing, tools designed for interactive pricing can be very helpful. Instead of a flat document, imagine a client clicking through options or seeing how fees are calculated based on salary ranges.

A tool like PricingLink (https://pricinglink.com) is specifically built for service businesses to create interactive, shareable pricing links. While it doesn’t handle full proposals with e-signatures, it excels at presenting complex fee structures, retainer schedules, or tiered service packages in a clear, dynamic way. Clients can often select options, understand costs instantly, and submit their preferred configuration, acting as a powerful lead qualification step.

If your needs extend to comprehensive proposal generation that includes e-signatures, contracts, and project scope details alongside pricing, dedicated proposal software would be more suitable. Tools like PandaDoc (https://www.pandadoc.com) or Proposify (https://www.proposify.com) are industry leaders in this space.

However, if your primary challenge is making your retainer vs contingency executive search fees and service levels easy for clients to understand and interact with before needing a full contract, PricingLink’s focused approach offers a powerful and affordable solution (starting at $19.99/mo).

Regardless of the tool, ensure your pricing presentation reinforces your professionalism and the value you bring.