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Contingency headhunter or retained search: what the difference means for managing director and C-level appointments

Contingency headhunter or retained search? What the difference means when appointing a managing director or C-level executive, and what to put in writing.

By David Ertler · 9 November 2026 · 4 min read

Anyone looking to appoint a managing director, a CFO or a plant director usually receives two kinds of proposal. Some headhunters work on a contingency basis and invoice only when someone signs. Others work on a retainer and are paid in instalments. At first glance the contingency fee looks like the smaller risk. For appointments at the top, I see it differently.

I know both sides: the client's, from my years as an HR executive in industry, and the consultant's, working on retained mandates. This article is written for owners, managing directors and advisory board members facing that choice.

Two models, two incentives

With a contingency fee, the consultant carries the risk. They are paid only if their candidate is hired. That shapes how they work. Companies often brief several firms at once, and whoever sends a suitable CV first is in the strongest position. Speed counts for more than depth.

With retained search, you engage one firm exclusively. Part of the fee is due when the mandate starts, and further instalments follow at milestones such as the shortlist and the signed contract. You pay for the search process, not only for the outcome.

The AESC, the global professional association for executive search, describes the difference plainly. Executive search firms are retained "on an exclusive basis in an advisory capacity". Contingent recruiters generally do not work exclusively, focus on the front end of the process and leave assessment and selection to the client. If an assignment is not gaining traction, the AESC notes, they have "little incentive to continue".

Why it matters at managing director level

The people who could run your company are rarely looking for a new job. They are successful, committed and cautious. You reach them only through targeted direct approach, and that takes time, research and a good reason for them to listen at all.

Then there is confidentiality. When an owner-led business is looking for its first managing director from outside the family, or preparing a succession after twenty years, that news should not be circulating in the market. With several contingency firms involved, nobody quite knows who has already called whom. It happens that the same CV reaches the company by two routes, and the conversation ends up being about the fee rather than the fit.

Family businesses also often have an internal candidate, and the decision rests with the advisory board. A retained consultant can include that candidate fairly in the comparison, because the fee does not depend on an external candidate winning.

What success means for a top appointment

A contingency fee measures a single moment: the signature. Whether a managing director was the right choice only becomes clear after one or two years. Until then, what counts is the work done before the signature: interviews against clear criteria, references that go beyond the formal ones, an honest conversation about counter-offers and notice periods.

A consultant who is paid only on completion is under pressure to complete. That is not a criticism; it is the model. A retainer makes a different outcome possible, and sometimes it is the right one: the message that the market will not deliver the desired profile on these terms. Nobody enjoys it, but it costs less than the wrong appointment.

When a contingency fee is enough

The contingency model has its place. For specialist roles where many candidates are actively looking, the market is manageable and confidentiality matters little, it can be quick and economical. The AESC, too, associates contingent recruiting mainly with mid-level positions.

We work only on retained mandates, and only from divisional head level upwards. That is a deliberate choice, not a verdict on the other model. It solves a different problem.

What a search agreement should cover

If you opt for retained search, the agreement deserves a close read. The AESC recommends putting the terms in writing: who leads the search, scope and timing, fees and payment schedule, deliverables, and rules on guarantees, conflicts and off-limits, meaning whom the firm will not approach later.

In my view, three questions belong alongside. Does the partner you are talking to lead the search personally? What happens if an internal candidate is chosen? And how is a replacement handled if the new executive leaves during the probation period?

How the fee is structured and which expenses are usual is covered in our article What a headhunter costs in Austria. Our own process, from the written mandate briefing to the signed contract, is set out on the page The executive search process. First qualified profiles are usually available within 14 days, and the time from briefing to signed offer is typically 10 to 14 weeks. A named partner leads every search personally.

My point: for an appointment that will shape a company for the next ten years, the contingency fee looks like the safe option. The real risk does not lie in the fee. It lies in the decision.

Frequently asked questions

Is a contingency headhunter cheaper than retained search?

It cannot be said across the board. With a contingency fee you pay only if someone is hired; with a retainer you pay part of the fee even if the search ends without an appointment. In return you get exclusivity, a structured process and reliable feedback from the market. We agree our fee before the search begins and confirm it in writing.

Can I brief several headhunters at once?

On a contingency basis that is common. For a managing director appointment I consider it risky: several firms approach the same small group of people, confidentiality suffers and the market reads the search as uncoordinated. Retained search assumes exclusivity.

What happens if an internal candidate gets the role in the end?

That should be settled before the search starts, not at the end. With us, an internal candidate is assessed against the same criteria as the external ones, which gives the advisory board a fair comparison. How outstanding instalments are treated in that case is part of the agreement.

Sources

Confidential first conversation