Questioning the traditional Executive Search fee schedule
In this connected world let’s start by questioning why executive search fees are calculated – for many local and international practices – as a percentage of the remuneration offered/accepted by the successful candidate. Is this logical? I think not, for why oh why is the fee for hiring in at £200k usually twice as costly at hiring in at £100k? Of course Real Estate Agents – don’t you just love them – work on a similarly outdated mode of charging.
So temptation here, for the less than scrupulous, to the short-listing of applicants with the highest monetary aspirations or even encouraging the favored candidate to make excessive demands. Hence inflating total fees billed to the client. Clients will tell you that this happens all too frequently. Also think here of house price inflation – again just peachy for the agents but for others in the transaction?
A flat and fixed fee not associated with the remuneration offered/accepted is surely the logical solution.
And why do companies readily accept, or otherwise, the fact that most often only 1/3rd of the total fee payable to the search firm is based on success. Q#6 ?
Are ethics and transparency best served with this pricing structure?
So how about a truly DISRUPTIVE PRICING MODEL where the client is required to pay NO retainer, NO short-list fee and all on a non-exclusivity (of instruction) basis? This means NO payment from the client until the successful candidate has been appointed to their temporary or permanent role. And then only a fixed flat sum. To be able to do this for global cross-border appointments is surely where the sector as a whole should be headed. If it’s thought that this can only work for a candidate database matching service or wishful thinking then delivery of a ‘full-service’ global executive search operation is already operating with increasing success for the last decade across 70 countries.
Then just think for a moment how the leading Interim Providers usually manage to fulfill their mandates in just a few days. Think how productive it would be if the time-line – from instruction to appointment – could similarly be reduced for permanent appointments to say three weeks, or less, always provided that the quality of that appointment was assured. Applying much of their excellent methodology to permanent appointments makes perfect sense (to me at least, if not to many in the less than transparent search industry).
This level of transparency and speed of execution will be, and indeed is, undoubtedly welcomed by all in the C-Suite. All made possible by a business model fit for the global digital economy in which we are all now part. ‘Digital’ has enabled these efficiencies with commensurate savings being passed on to the client – well not in all instances. But that’s for another blog on another day.
Are we seeing the old retainer model with the dice loaded in favor of the search firm or is digital disruption a game changer, a leveling of the playing-field with the client treated as an equal partner?
What will happen to those that don’t adapt is pure conjecture but I suggest the status quo is not an option.