How to Justify Retained Executive Search to Your Board

I now have over a decade of experience within Executive Search placing senior leaders across SMEs companies with a specialism across Healthcare, MedTech, Digital Health and Medical Devices. One of the most common conversations I have with Managing Directors is not always about the search itself, it is about the internal sign-off to start one.

Retained search fees can feel like a significant action point, especially in the SME environment where each pound is a prisoner, every investment needs a clear rationale. A typical retained search will land between 25% and 33% of the candidates first year salary, for a senior level hire this can be a meaningful number to put in front of a board or investor group without a compelling case behind it.

The good news is that the case is genuinely compelling, the challenge is knowing how to frame it but fortunately, this article can help you do just that.

Start with the Cost of Getting it Wrong

Before you make the case of investment, make the case against the alternative. I have written an article previously with figures from the Harvard Business Review that puts the cost of a failed executive hire at up to ten times the individual’s annual salary. On a £100,000 role, that is a number that can exceed £1,000,000 when you account for wasted salary and fees, lost productivity across the wider team, damaged client relationships, reduced morale and the strategic opportunities that can be missed with the wrong person being in post. You can read the full article breaking this all down on our website, under the cost of a bad hire.

The point of your conversation with the board is straightforward in the sense that the retained search fee, is a fraction of what a failed appointment costs. I honestly believe that when framed that way the investment case writes itself.

In an SME environment, the leadership teams are usually lean and every senior role carries disproportionate responsibility, a bad hire at Director level or above can set a business back by 12 -18 months. Harvard Business Review also found that 50% of all executives who change jobs or get promoted fail within the first 18 months, so this isn’t a marginal risk, at that point you are tossing a coin on one of the most important business decisions you’ll make this year. Our evidence shows that over 90% of our placement remain in post for considerably longer than this timeframe as we take the time really learn about the culture of our clients, not just the brief.

Quantify What the Role Is Actually Worth to the Business

A retained search is at it’s most justifiable when the hiring manager can articulate the commercial value of the role in question.

For example, if you are hiring a Commercial Director to open a new revenue stream, what is the target revenue attached to that objective within year one? If you are hiring a Chief Operating Officer to drive operational efficiency, what does a 10% improvement in margin represent in real terms? If you are bringing in a new CEO/MD to lead a growth phase, what is the enterprise value uplift that appointment is expected to deliver?

When you can place a number on what the role is designed to achieve, the search fee becomes a fraction of the expected return or missed opportunity value rather than a standalone cost. This reframing is particularly effective with investors and private equity stakeholders who are accustomed to evaluating every decision through a return on investment lens. Present the fee as a percentage of the value the role is expected to generate and the conversation changes entirely.

Bain and Company’s research shows that top performers are roughly four times as productive as average performers. The difference between securing the right person and settling for someone who looks good enough on paper is transformational, not marginal. That is the argument your board needs to hear.

Explain What Retained Executive Search Actually Buys

Most boards and investors seem to have a limited understanding of what a retained executive search involves compared to a standard recruitment agency, it always surprises me that the ROI hasn’t previously been made clear to them, I think most people assume they know and skip this step. I feel it is always worth the time to make the difference clear, and the distinction is significant.

A retained search firm like Collingwood commits exclusively to your assignment from the moment we are engaged. The process begins with a deep discovery of your business, your culture, your strategic objectives, and what success in the role genuinely looks like before a single candidate is approached. We will then conduct a search across both active and passive candidates, meaning we will proactively be approaching people who are performing well in their current roles and who would never respond to a job advertisement.

Every candidate presented has been interviewed, assessed for cultural alignment and benchmarked against the market. You are not receiving a stack of CVs filtered from a database. You are receiving a considered shortlist of people who have been specifically identified and engaged for your role.

A contingency recruiter, who only earns a fee if a placement is made, cannot replicate this process. The incentive structures are fundamentally different, a retained partner is invested in getting the right outcome. A contingency recruiter is incentivised to get the fastest one, I know this because I was one and lived that for several years. For a mid-level hire, speed may be the priority but for a board-level appointment in an SME, it rarely is as there are so many moving parts to consider.

Address the Risk of Confidentiality

For SMEs, particularly those backed by private equity or venture capital and operating in competitive markets, the confidentiality of a senior search is a real concern that boards and investors will immediately understand.

If it becomes known to the market that you’re replacing a Chief Executive, recruiting a new Commercial Director or restructuring a leadership team, there is a certainty it can unsettle clients, alert competitors and create internal uncertainty when you likely need a steady landscape. Within Healthcare and Medical Technology, where relationships and reputation carry weight, the reputational risk of a poorly managed search is worth noting. If you don’t have the correct company acting as an extension of your business, you are rolling the dice on this information spreading in your network.

A retained search firm manages this as a core part of the process with a level of due diligence that contingency recruiters won’t even pay a second thought to. Candidates are approached in confidence in a discreet and professional manor, the role is often presented without detailing the clients identity in the early stages to avoid this exact circumstance. The entire process is managed in a way that protects your brand in the market, you’ll be looked after in the same way as if we were doing this internally for our own company.

Bring Market Intelligence into the Room

If your board or investors are still remaining hesitant, bring that data into the conversation. One of the most effective ways to shift the debate about cost to a strategic decision about talent is to arrive with the market intelligence and demonstrate the complexity of what you are asking the business to do.

A good executive search partner will be able to provide you with that holistic view of the talent landscape before you even commit to the search. How many people with the right profile exist in the market? What are they currently earning and how does that compare to your proposed package? How long are comparable searches taking? What are candidates at this level looking for from their next move and does your opportunity genuinely compete?

This intelligence is what provides you with the opportunity to elevate the conversation. It shows your board that the appointment is not straightforward. In the current UK market everyone we speak to seems to have tried to recruit themselves first assuming it will be as simple as an advert and attracting top talent. The truth is that the right person, more often that not, will not be actively looking and that you need a structured, proactive search process to access them. It also demonstrates that you’ve done your homework before asking the board for approval, which always matters.

What Objections Might be Received?

Most board and investors are likely to raise one or more of the following objections. Having a clear, prepared response to each will significantly strengthen your position.

“Can we not do this ourselves?”

I am a firm believer that having an in-house recruitment model is essential to long-term success and growth. It works exceptionally well for volume hiring and mid-level roles. However, for board level appointments, C-suite hires and newly create leadership roles where there is no predecessor for benchmarking against it likes the market intelligence, candidate access and assessment rigour that decision demands. The question shouldn’t be whether your team is capable or not, it should be around the time, network and the specialist knowledge to runs a search of this complexity alongside everything else they are responsible for.

“Can we use a contingency recruiter and only pay if we hire?”

Of course you can, for some roles that is entirely appropriate as well. For a senior leadership appointment in an SME though, the contingency model can easily create a misalignment of the incentives to increase rather than reduce your risk level. A good contingency recruiter will present candidates quickly and either secure a fee or move on. A retained partner will craft a list that protects a long-term relationship. The fee structure drives the behaviours and for hires at this level, you want behaviours that are aligned with your best interests.

“The fee seems high relative to salary.”

Relative to the cost of getting it wrong, it is not. Harvard Business Review’s research puts the cost of a failed executive hire at up to ten times annual salary. The retained search fee, at 25 to 33 per cent of first-year salary, is the premium you pay to significantly reduce the probability of that outcome. A good search partner should only ever be seen as an investment rather than a cost and further yet, it should be seen as an investment to reduce the chances of a bad hire and ensure that you can capitalise on opportunities.

The Closing Argument

The most effective closing argument for retained executive search is a simple one.

The next senior hire you make will either accelerate your strategy or it’ll put the handbrake on and slow you down to a halt. The fee attached to getting that decision right is, in almost every case, the smallest number in the equation. I guess you should always ask yourself if you are willing to risk a clear loss of revenue, a loss of time, damaging your company’s culture and potentially missing business changing opportunities. All of these things will dwarf the cost of the search that found someone that does the exact opposite.

If you are at the stage of planning a board or senior leadership appointment and want to understand what a rigorous search process looks like in practice, have a conversation with us and we can show you the exact process we use to help SMEs make great hires and avoid bad ones.