When it is clearly worth it
- The people who can do the job are not looking and will not answer a job advert. Most genuinely senior operators are in this group.
- The seat is confidential. You are replacing somebody who does not know yet, and the search cannot run in public.
- You have no network in the sector. A first hire into a market you do not know is exactly what a firm's map is for.
- The cost of the wrong person is enormous relative to the fee. For a chief financial officer ahead of a raise, a £45,000 fee against a failed hire is not a close call.
When it is clearly not
- The market is deep and visible, and you could name ten credible people yourself in an afternoon.
- The seat is part-time. Percentage-of-salary economics fit badly against a fractional engagement, which is why that work is usually better served by a flat fee or a direct hire.
- You want an introduction rather than a search. That is a different, much smaller service and it is frequently oversold as the full thing.
- You cannot commit to the process. A search run by a company that will not free up interview time fails, and you will still owe the retainer.
The arithmetic to run first
Take the fee. Compare it against what the seat being empty costs you for one more quarter, and against the cost of hiring the wrong person and starting again in nine months.
For most senior commercial seats the second number dwarfs the first, which is the real argument for search and a better one than reach.
| Direct hire from a bench | Contingency | Retained search | |
|---|---|---|---|
| Typical cost | No fee | 15 to 25 per cent of salary | 25 to 33 per cent of first-year earnings |
| Reaches people who are not looking | Only those who listed | Rarely | Yes, that is the product |
| Exclusive process | You run it | No | Yes |
| Who does the work | You | Split | The firm |
| Best for | A known, visible market | Volume and speed | Hard, senior or confidential |
What the empty seat costs, per month
Nobody puts this in a business case and it is almost always larger than the fee. A rough but defensible way to price it: take what the function is accountable for, and ask what one month without an owner does to it.
| Seat | What stalls without it | A conservative monthly cost |
|---|---|---|
| CFO | The raise, the forecast, the board pack | A slipped quarter on a raise, or the raise on worse terms |
| CMO | Pipeline, launch timing, spend efficiency | A quarter of budget spent without a strategy behind it |
| CTO | Architecture decisions, hiring, delivery | Decisions made by people who should not be making them |
| COO | Process, capacity, cost control | Growth absorbed by headcount rather than by system |
What a bad hire costs
The conventional figure is that a failed executive hire costs somewhere between one and three times their salary once you count severance, the vacancy again, the search again, and the decisions made badly in between.
On a £150,000 seat that is £150,000 to £450,000. Against a £45,000 fee, the argument for a properly run search is not reach. It is that somebody whose job is calibration looked at more than four people.
The honest counter: a search firm does not eliminate that risk. It reduces it, and only if the firm actually mapped the market rather than sending you a database. Which is why the questions matter more than the brand.
A scorecard, if you want one
Score each honestly out of five. Above twenty, engage a firm. Twelve to twenty, a fixed-fee shortlist. Below twelve, do it yourself and spend the money on the package instead.
- How hidden is the market? Five if the right people never apply for anything.
- How confidential is the search? Five if the incumbent does not know.
- How far is this from a function you have run before? Five if you could not tell a strong candidate from a plausible one.
- How expensive is the wrong person? Five if it is a raise, an exit or a regulated seat.
- How little time do you have to run it yourself? Five if nobody internal has a spare day a week for eight weeks.
What the firm does that you genuinely cannot
Reach is the usual answer and it is the weakest one, because LinkedIn gave everybody reach. Three things are harder to replicate.
- The approach from a third party. A chief executive approached directly by another chief executive has to decide something. Approached by a search firm, they can be curious without committing, and that lower threshold is why approach-led search works at all.
- Confidentiality. You cannot run a discreet search for your own incumbent's replacement. Somebody outside the company has to make the calls.
- Calibration. A firm that has filled this seat eleven times knows what good looks like at your size and stage. If you have never hired this function, you are assessing against a standard you have to invent.
What you are buying at each price point
| Spend | What you get | What you still do |
|---|---|---|
| Nothing, direct from a bench | Verified profiles, rates published | Longlist, interview, decide, negotiate |
| Low thousands, fixed shortlist | A mapped market, interviewed candidates | Interview, decide, negotiate |
| A percentage, retained | Map, approach, assessment, offer support | Interview and decide |
| A percentage plus assessment | All of the above plus psychometrics and benchmarking | Decide |
If you decide to do it yourself
- Write the target company list first. Twenty to forty companies where this seat exists at your scale.
- Find the people in those seats. LinkedIn is sufficient for this and it is the same first step a firm takes.
- Approach personally. From the chief executive or the chair, not from a recruiter address and not as a job advert.
- Expect to be refused. Twenty approaches for four conversations is normal, and a firm would tell you the same.
- Give it eight weeks of real diary time. The reason most self-run searches fail is that nobody had the hours, not that nobody had the network.
The middle option most companies miss
Between doing it yourself and a full retained search there is a shortlist service: a fixed fee to have somebody map the market and put a small number of interviewed, interested candidates in front of you, with you running the rest.
That is close to what a fractional search here is: a fixed search fee of £2,500, then 15% of annualised value on a hire. It suits a brief that is specific but not exotic, which is most of them.
Common questions
Is a retained search worth it for a first senior hire?
Often yes, because a first hire into a function you have never run is exactly the case where you cannot tell a strong candidate from a plausible one. What you are buying is calibration as much as reach.
What is the alternative to using a search firm?
A direct hire from a bench or your own network, or a fixed-fee shortlist. The first is free and demands your time. The second costs less than a percentage fee and still gives you a mapped market.
What does a bad executive hire cost?
Conventionally one to three times salary once severance, the second vacancy, the second search and the decisions made badly in between are counted. On a £150,000 seat, £150,000 to £450,000 against a £45,000 fee.
Can I run an executive search myself?
Yes, and the first steps are the same ones a firm takes: a target company list, the people in those seats, a personal approach. What usually defeats it is diary time rather than network. Budget a day a week for eight weeks.
Are executive search firms worth it for a startup?
For a first senior hire into a function the founders have never run, often yes, because you are buying calibration rather than reach. For a seat you could fill from your own investors' network, rarely.
More of them, on hiring, contracts and what a fractional engagement costs, on the fractional executive FAQ.