As a leader in your organization's Human Resources department, you may face the prospect of helping your employer find new executive talent. The notion of farming this function out to an independent search firm might seem tempting.

But the process of choosing an executive search firm is difficult to negotiate, and nowhere is this more evident than in the fee element of the equation. Your company certainly has a say in determining the fee it ultimately pays, but that amount is usually set at what the market will bear.

What exactly does the market bear right now? Fees in the Executive Search Industry: What Search Consultants Charge for Their Services, a new research report from Kennedy Information, Inc., sheds light on the answers to this question. (http://www.kennedyinfo.com/executive/recruiting/research/fees)

First, let's define some nomenclature. Executive search firms primarily fall into two categories: retainer and contingency.

A retainer firm, which receives its “consulting” fees from you regardless of the results of its search, will focus primarily on high-level positions that offer salaries of $100,000 or more. Contingency firms, conversely, will ask for their fees only when a candidate is actually hired. Firms that operate under contingency typically place mid-level executives in roles that generally feature salaries less than $100,000.

Search firms usually base their fees largely upon a percentage of the new hire's first year of compensation. For retainer firms, 33% has been the industry standard for many years; historically, contingency firms have commanded less (25%).

However, a number of factors may be contributing to an overall trend away from these mainstays. Web 2.0 technologies programs do some of the executive search firm's basic sourcing function for much less money. The barriers to entry in executive recruiting are very low and as a result competition is increasing rapidly. Potential customers of search services are consolidating their purchasing power. Even the Sarbanes-Oxley Act has an effect.

It is a general statement, and exceptions do exist. These exceptions occur most notably among very large firms and niche, boutique players, whose fees remain above 30% (with some pushing the envelope even higher in very tight markets). You can still expect to pay more than twice as much for a retainer firm's services than for a contingency firm's, however. But Kennedy’s report suggests that a major shift underway, with retainer and contingency firms alike charging smaller percentages and even offering hybrid fee arrangements that combine elements of retainer and contingency.

Fortunately, the market for executive search services—and, by corollary, the fees purveyors of these services can command—continues to normalize. In the meantime, however, a sage understanding of the landscape would benefit any corporate HR department.