Top management search – how much does it cost?
There is a common perception that executive search is expensive, but it is difficult for companies that rarely change top level management to estimate the average cost of an executive search service in the market. As with any purchase of goods or services, price alone is not a decisive parameter when it is not clear exactly what the price is being paid for. The services of different executive search firms can vary considerably. The main differences between executive search packages are 5:
1.Guarantee
Executive search firms usually offer a guarantee for their services, but both the terms and conditions of the guarantee may vary. In terms of the terms of the guarantee, some executive search firms may refund part of the price paid for the service in the event of an unsuccessful executive search, others may offer to carry out a new executive search and replace the executive free of charge, etc. It is important to consider both the duration and the terms of the guarantee, as a partial refund guarantee is financially attractive, but does not completely solve the problem of a company needing to replace a manager. As regards the duration of the guarantee, companies that normally recruit top-level executives can offer a guarantee of at least six months. A three-month guarantee in an executive search project should be treated with caution.
2.Testing
Candidate testing can be included in the overall executive search package or provided as a separate service. It is important to assess the cost of testing in advance, as often executive candidates are tested on a number of different tests, which can account for between 5 and 10% of the total cost of the executive search. The best practice would be to choose an executive recruitment company that already includes the cost of testing in the cost of the management search project, as it is a necessary part of any such project and will need to be carried out anyway.
3.Publicity
Some executive searches are conducted in confidence, so publicity costs are not important, but for those executive searches that are conducted in public, publicity costs need to be included. Typically, executive search firms will include these costs in the total cost of the executive search project, but you should always check what publicity is provided and whether there will be any additional charges for any additional publicity you may wish to provide at the time of the selection.
4.Reputation
Every executive search firm invests in its reputation, which then helps it to attract better candidates for the selection process. It is this reputation that should be assessed when comparing the prices of different executive search firms, as a potentially cheaper executive search service from a lesser known firm may not be able to match the service of a more expensive, but more positively known management search firm. This is not a purely technical parameter, but the services of more reputable executive search firms are typically 10 – 15% more expensive.
5.Experience
Perhaps the most important parameter for assessing price is the experience of the executive search firm in carrying out the same level of projects for other companies. A review of an executive search firm’s client list provides a better understanding of the level of business trust the firm has earned, and can justify a more expensive service from an executive search firm that has a more successful track record of working with established clients and recruiting top-level executives.
So how much does an executive search service cost?
Bearing in mind that the service may or may not include additional guarantees, testing, publicity, etc., the cost of a top level management search typically ranges from 10 to 15% of his/her annual salary before tax. A price below 10% of the annual pre-tax salary may often, but not necessarily, lead to poor quality services, so if you receive an offer below the market average, you need to take a good look at what additional services are included in the overall executive search package.
