The search firm pricing model traditionally has called for clients to pay a fee equaling one-third of the first-year cash compensation for a placement, but flat-fee pricing is now becoming more common as industry salaries rise for high-level executive jobs.
“You are seeing flat fees coming into play in C-suite roles,” said Tracy Murdoch O’Such, managing partner at Diversified Search. She added that most large global search firms will have a six-figure minimum for a search for senior-level jobs.
Compensation is defined as base salary, bonus and signing bonus, so in that model, if the total first year compensation is $600,000, the firm would receive roughly $200,000 for the completed search.
Typically, search firms will bill clients in three increments with a third of the fee paid when the search is launched, followed by a third billed 30 days later and the final third installment billed after 60 days. Increasingly, however, the final third is paid after a successful placement.
The rising number of boutique firms is also affecting the pricing structure, lowering fees for more junior searches, generally considered to be jobs under a VP level with base compensation under $200,000.
“The boutique firms can be more flexible,” O’Such said.
— John Lombardo
