How executive search consultants are paid
ByAgencies are paid on delivery or contingent on a placement, and fees can go as high as 30 percent. The fees on some lower level jobs are borne by the candidate, not the employer.
Depending on the firm, search fees usually range between 25 and 35 percent of the executive’s total compensation, including base and bonus, for the first year. Billing is in installments and the preponderance of the fee is typically paid in advance of the actual placement. Companies pay for the search.
Headhunters are on retainer and are paid whether they fill the position or not. They don’t guarantee a placement, but ethical ones won’t take on an assignment they believe isn’t doable. Not wanting to lose a client or tarnish their reputations, they naturally persevere with difficult searches. Some searches, as a result, can take a year to complete. But the client may have been unsuccessful in all other recruiting endeavors and fully realizes the difficulty. The headhunter may make hundreds of calls before finding the needle in the haystack.
A major corporation in New Jersey asked a headhunter to find a vice president and manager for its southwest regional office in Houston, and insisted the person be a Texan. The position was challenging, but the compensation was inadequate. Knowing the market, the recruiter advised his client—a very good one—accordingly. Unable to increase the package yet having a strong need for a manager, the company urged the search firm to do the assignment even though the chances of success were slim. Not wanting to rebuff a client who gave him considerable business, the consultant accepted the search. Combing the Houston market over a three-month period, he developed five candidates. A senior vice president went to Houston to see them. He was stood up by one (rare at this level), another telephoned to say he’d changed his mind, and the others were deemed too inexperienced. The recruiter spent the next three months looking in Dallas for someone who could be relocated. Three candidates were developed, but the client wasn’t interested and for different reasons: they knew the reputation of one fellow, another didn’t have the extroversion they sought and the third man earned too much. The headhunter suggested searching in smaller Texas cities for someone who would have related, if not the exact, experience and who could be comfortable in a larger city. The next three months were spent hunting in cities like San Antonio, El Paso, Corpus Christi. One man was found in Dripping Springs.
He and the client met and liked each other. He was flown north to meet more senior management. He received an offer—much more than he was earning. By the end of the ninth month, he accepted. In the tenth month, shortly before he was to begin, he (and his wife) changed their minds. The charm and beauty of their small town and their fears about living in a big city were the reasons. During the eleventh and twelfth months, the head-hunter looked in vain for another candidate. The client even raised the dollars slightly. But not enough to lure anyone who was previously intrigued by the job, but found the money light. After two hundred calls and no success, the headhunter and the client agreed to stop the search.
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