CNA International Executive Search Blog

A New Way of Pricing For Retained Executive Search Firms

[fa icon="calendar"] 05-Jan-2016 13:00:01 / by Azamat Erzhanov

Azamat Erzhanov

Hourly rate in executive search firms

Pricing in Executive/Direct Search

The commonly used pricing model for the services of the executive & direct search firms is based on total compensation for the given position. I do often challenge my current colleagues about the pricing model we are using. I came into executive search with 20+ years of public accountancy experience, and hourly rates pricing model became the second nature to people like myself.

Is our pricing model helping attract clients?

I believe that the traditional fees model, which we are using in the executive/direct search, is highlighting the fundamental conflict between what we are trying to sell and how we are pricing our offerings.

As any other similar organization in the industry, we are positioning ourselves as service providers. We sell our skills to the clients, our knowledge and experiences on how to search for, identify, select and attract the right and best talent. We are selling the process, i.e. time of highly skilled experts.

But the pricing model we are using is not necessarily linked to the skills, knowledge and experiences of the consultant. It is not linked to the complexity of the assignment, team and resources utilized by the firm, and the length of the project. Our fees are linked to the salary level of the placed/hired person. By using such pricing model, we are making huge emphasis on the end delivery. In other words - We are saying to our clients that this is what they are buying – the end result, the CV, the Candidate. Aren’t we?

It is then quite logical for the clients to treat our relationships as “A CVs sale/purchase transaction”. Thus it is harder to convince that we are selling the process and services, that we are offering our knowledge, experiences, best of the art of the search and selection methodology, etc., etc. – damage is already done and done by ourselves.

Are we well positioned to be seen as a trusted advisor?

Latest trend in the recruitment/headhunting is to position the industry as a professional service. Big efforts are made to reposition recruiters/headhunters in the eyes of clients – to be seen as trusted advisors. We no longer like the words recruitment and headhunting, but prefer consultants, search consultants, executive search consultants, trusted advisors …

In my view, first and most important thing we need to do is to start moving out from “selling CVs perception”, and make a bigger effort to explain to everyone (internally and externally) that we are selling and offering our knowledge, skills and expertise in the area of search, identification, selection and attraction of needed talents. We should be honest (i.e. professional) in our relationships and openly discuss what client is paying for – not for CV, not for successful placement, BUT for the time of consultant to conduct the necessary work to effectively and efficiently search, identify, select and attract the best talent for them. No less and no more than that.

Do we owe transparency to our clients?

One of the hardest topics of discussions with the client is negotiations of fees and payment conditions. My experience tells me that it is hard due to the non-transparent fee structure we are using. We are not clearly correlating our fees to our business. We are not linking our fees to the actual work to be done and time to be spent by us.

Will the move to the hourly rate basis help us to demonstrate open and transparent fees? I think it will. Fees will be linked directly to the experiences and skills of consultant and/or team involved in particular project. We will be forced to show greater details of work/tasks to be performed, hours to be spent, relevant hourly rates and fees estimates – greater transparency!

As the result, clients will be more comfortable with the whole process. They will better visualize and understand the work that needs to be done by executive & direct search consultants. Clients will better understand how much, for what, when and why the fees are paid.

Azamat Erzhanov

Managing Partner CEE & CIS

Phone: +421 (2) 326 617

Mobile: +421 (91) 807 646

Topics: Insider, consulting, hourly rates

Azamat Erzhanov

Written by Azamat Erzhanov

Managing Partner for CNA International CEE/CIS region overseeing 10 offices

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