Search Firm Contracts Aren't What Some Think, Researchers Find

June 17, 2016

Using a search firm to recruit a new president or provost can cost public colleges and universities the better part of $100,000 -- or more.

Research being presented Friday estimates fees called for under executive search firm contracts with public colleges and universities for the 2015-16 academic year averaged $78,769. Fees varied from a low of $25,000 to a high of $160,000. The estimate is before indirect or administrative fees. Factor in several other fees, and the average search firm contract was estimated as being worth $87,186.

That higher figure still does not quantify other hard-to-estimate costs like reimbursements, bonuses and faculty time, according to James Finkelstein, a public policy professor at George Mason University who is presenting the research on search firm contracts at the American Association of University Professors’ annual conference under the title of “Executive Search Firms and the Disempowerment of Faculty.” Finkelstein’s research used job postings seeking higher education leaders for the 2015-16 academic year, finding 82 out of 106 hunts for leaders used a search firm. Ultimately, researchers received 61 contracts to evaluate through public information requests.

Executive search firms are being used more frequently by universities, according to Finkelstein. But he thinks his research has implications beyond the number of searches or the dollar amounts involved. Outside search firms can directly affect which candidates are being recruited, whether candidates’ needs are being met and how the search process plays out. Finkelstein thinks they are an important topic under university governance.

“Is the use of a search firm, in particular in hiring a president, essentially a governing board outsourcing one of their most important responsibilities?” said Finkelstein, who on Thursday presented another batch of research examining the salaries and benefits public college and university presidents receive.

Under their contracts, search firms are not bound to provide all the services many might expect, Finkelstein said. Of the contracts reviewed, 51 percent included on-list reference check services and 46 percent included off-list reference checks. Some contracts included other due diligence services -- but many of those services came with an additional fee.

Degree checks were included in 23 percent of contracts but could be added for an additional fee in another 20 percent. Media checks were included in 20 percent of searches and could be added for a fee in 2 percent more. Credit reports were included in 12 percent of contracts and available for a fee in 20 percent, criminal record checks were included in 10 percent of contracts and available for a fee in 21 percent, and checks with departments of motor vehicles were included in 8 percent of contracts and available for an extra fee in 16 percent.

Total estimated fees -- including indirect or administrative fees but not other fees like travel reimbursements -- varied widely between two-year and four-year institutions. Fees averaged $53,536 at two-year institutions and $101,607 at four-year institutions. Differences weren’t as pronounced between presidential and provost searches, however. Lumping two-year and four-year institutions together, presidential searches came with fees estimated at an average of $88,194. Provost searches had an average estimate of $84,833.

Most contracts called for calculating fees based on a fixed-price model or a percentage model. The fixed-price model was used in 52 percent of searches, while a percentage of a leader’s base salary was used in calculations in 25 percent of searches. That percentage of base salary used to calculate fees varied from 30-33 percent -- and 22 percent of searches included bonuses in their calculations.

Finkelstein’s research also showed that a majority of contracts, 57 percent, were prepared by search firms, instead of the hiring colleges or universities.

There are backers and detractors of universities using executive search firms. Some have argued that spending on university searches is an investment that pays off, with the right university presidents able to boost donations and improve standings.

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