Retained Executive Search Vs. Contingency

A retained executive search is generally conducted by accepting a “retainer” which is a payment that is received before the search begins.  The payment is usually equal to 1/3 of the amount of the candidate’s estimated starting compensation package.  That payment is then applied to the total cost of the executive search.

The total cost of a traditional retained search is typically around 30-40% of the candidate’s estimated first year earnings. As discussed previously, the retainer is  equal to 1/3 of the total fee amount. There would also be two additional payments, with one being about half way through the search and the other coming at the end.  Both of these payments are also equal to approximately 1/3 of the total fee.

So, as an example – if you have a $300,000 CFO Position with a 30% total fee, the retainer would be $30,000, the 2nd payment would be $30,000 and the final payment would be $30,000.  The total executive search fee of course would be $90,000.

A contingency executive search firm generally charges a fee ranging anywhere from about of 20% to about 30% of the candidate’s total first year compensation. There is no money to be paid up front and a payment is only made if the candidate is hired.

Both of these types of executive search have advantages and disadvantages.  Many people believe that retained executive search is better and/or more prestigious and this can certainly be the case in some situations.

A reputable and experienced retained executive recruiting firm could certainly do a better job than an inexperienced contingency firm that doesn’t specialize in high-level positions. Likewise, a contingency recruiting firm that offers a high level of service and that has an extremely experienced team of recruiters working on executive level roles would also potentially deliver better results than an inexperienced or less than exceptional retained executive search firm.

A retained executive recruiter will get paid something regardless of whether or not they fill the position.  The retainer is typically non-refundable and then the second and third payment may or may not be depending upon the specific contract.

A contingency recruiter only gets paid if he finds the absolute perfect candidate for the hiring company. If the company does not hire the candidate, then the contingency recruiter walks away with nothing.

Both the contingency recruiter and the retained executive recruiter have some strong incentives to find the best candidate and fill the position.  The contingency recruiter takes on all the risk essentially, while the retained recruiter shares the risk with his or her client.

My recommendation to any company looking to hire a CFO, VP of Finance, Corporate Controller or any other accounting or finance executive is to talk to several recruiting firms, both retained executive search firms and contingency executive search firms and simply see who has the highest level of experience recruiting finance and accounting executives.  Find a firm that you can trust and one that you feel very comfortable with.  Whether it’s a contingency CFO firm or a retained CFO firm, ultimately when you are trying to fill the top financial spot, the relationship is a partnership where you will both be working together closely with a common goal in mind.

At CFO Search, we offer retained executive search, contingency executive search and a modified contingency search with an engagement fee.  Feel free to contact us directly if you would like to discuss these options or if you have more questions about how we might help fill your top financial spot.  You can reach us a 1-888-417-1113, or send us a message below.

Please visit our CFO jobs page, for an up to date listing of the finance executive jobs that we are currently recruiting on.

We also recruit on CEO positions and other c-level roles.