Transition to the Private Sector, Part III

Don't Sell Yourself Short

Action: A) If you’re an A-player, stay. B) If you’re an A-player and leave, do great things on the outside and return to government service at some point. C) Send me your transition questions and let me know if you’re interested in a seminar on the below topics.

At least a few times a month, people looking to jump ask about my transition, which has led to me consolidating my comments below. Some of what I write will be controversial and all of it is biased. This is Part III of III.

• Part I addressed the basics of how & where there are differences between the Agency and the private sector, an assumption of what aspects of government you’ll miss based on my own nostalgia, as well as how to characterize old skills to new roles, job hunting advice, and resume missteps.

•  Part II addressed criteria for choosing your next role, the most common types of business roles that formers go into, and how to think about big vs small company risks and current markets.

•  Part III, below, is about title, compensation (base salary + equity + bonuses), and resources you can use.

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1. How should I think about my first job function & title?

First role on the outside

You might hear advice like “your first job doesn’t have to be your forever job.” Yes, that’s true, but as the mantra goes, “it depends.” Take caution against taking any job as your first job as a way to get your foot in the door in industry. Your first title, role, and salary will be the basis from which future titles, roles, and salaries are set. Even if you’ve had all the accolades internally, you can’t prove any of it to anyone outside. Industry doesn’t know you, so your first outside title/function can serve as a pathway to faster credibility. You’re essentially hitting a reset button, so choose your starting point well.

Your experience likely includes roles of significant responsibility and authority, at times, life or death, which often enhances critical thinking skill sets, judgment, and EQ. So, don’t sell yourself short.

The underlying sentiment of “your first job doesn’t have to be your forever job” is accurate, however. Many of us are “loyal” to one job. You may only stay in your first jumping off point for a year or two, and that’s okay.

Titles:

Titles can vary greatly according to companies and sectors. For example, it’s useful to know that a VP title in the financial world is fairly ubiquitous and not necessarily an indicator of seniority. I’m not going to cover the technical role titles, which are also different, as this post is focused on those with my background and primarily geared toward startups.

For someone coming out at a GS 14/15 level, a “manager” title is likely as senior as you’ll get at a large, public technology company. If you’re more senior, and in a tech-related and public-facing role and you would like to work (not simply advise), you can shoot for a Director or Senior Director role at a public company. It’s possible you could get VP or higher at a public company, but that’s usually saved for former heads or deputy heads of agencies.

If you’re retiring and pulling a pension, your age, situation, and desire to climb yet another ladder may be quite different, of course. And you run into the fundamental question of how you want to spend your time at different stages of life. Some companies will be wary of hiring very senior government and military officials into daily/salaried company roles, because there are stories of senior officials taking a “pontificate and delegate” approach, rather than rolling up their sleeves. Or you may be hired into a more ambiguously-titled role like “VP of National Security,” which can be the equivalent of hiring you for your name, advice, and the introductions you can make, not managing people, actual programs, and revenue. (I suspect after years of doing just that, this would be a nice break.)

Like with the GS scale, many companies band salary to rank (pay bands), though there are some exceptions and variance according to industry vertical. Titles in tech start-ups generally go from Individual Contributor (IC; but often not titled as such), Lead, Manager, Director, Senior Director, Vice President, President, C-suite executive (CEO, CTO, etc), with a number of variations that are company dependent. An individual contributor could be quite senior and influential in a company, and you’ll often see this for those with deep technical expertise. We don’t want to shackle some people with the responsibility of managing others because their day-to-day contributions from a technical side are so important. The government does this as well, but I think less effectively.

Some companies opt for “Head of” roles and make many people in the company “Head of” something, so it can be difficult to determine the actual level of seniority and who reports to whom. LinkedIn is your friend in determining where a job might fall, and you should research a number of employees and executives within a company and look at their backgrounds to try and determine their structure. In the interview process, you should simply ask about the reporting structure and what career progression looks like at the company.

At smaller technology companies around 100-200 people, rough estimates are 5-10 years of experience is a Manager, 10-15 years of experience is a Director role, 15-20+ is a VP role, but keep in mind, unlike in the government, years of experience is not always a precursor to seniority and there are many senior technical folks in individual contributor roles. These ranges are for you leaving government service assuming you want a management track role. The smaller the startup, the higher the title you can pursue.

Reporting structure:

You may report to someone younger than you or equal in age. You’ll be tempted to think that you know better on how to lead and manage by virtue of age and “real world” experience. Though you may well, be careful here. There are some brilliant young technology leaders who are good at leading people, creating (and staving off) process, and planning strategically for the future. Usually this is in direct proportion to how much personal accountability they’ve shouldered as they rose through the ranks and resulting resilience. You’ll be surprised at what you can learn from them, but you have to be open to this learning in the first place.

Just like some will dismiss you as a bureaucrat based on your government affiliation, don’t make the same mistake and dismiss an industry person because you’ve become accustomed to time in grade. Ability matters more than experience. At the same time, there usually is value in years of experience, but I mean actual experience where someone faced challenges and overcame them, not years of simply occupying a seat. Industry doesn’t tolerate someone simply occupying a seat in the same way government does, so you tend to find less of “those” people.

The attitude and competence of your direct boss is, obviously, critical. Make sure you’ve met them if they weren’t already involved in your hiring process (in a small company, they should be involved in the interview process; if not, it’s a red flag.) Ask them their own reporting chain up to the CEO.

“General Manager” or “Managing Director” often denotes added seniority & responsibilities, such as managing a P&L (profit & loss centers). Sometimes you will see a title like “VP and GM of X Division,” which means they probably have more of a prominent voice in the company.

Non-revenue generating business units are referred to as “cost centers.” The executives running those units aren’t accountable for bringing in money directly (ie, VP of Government Affairs). Obviously, these are critical roles too that indirectly drive value, but just like at the Agency, there is an implied hierarchy for those who bring in revenue or other forms of investment, rightfully or wrongfully, and it pays to know it.

Promotions:

You all have seen it happen. A mediocre to poor performing GS-15 is selected to run a program, and sent home short of tour after a long stint of chaos, when it would have been a better choice to select a GS-13 who, over the course of two tours, demonstrated the discernment and capability to take on a more consequential role. But, bureaucracy craves stability over growth, and it’s a safer bet to stick with the status quo. The powers that be won’t get in trouble for putting a GS-15 in a role who messes up, but they risk their own next assignment if they install a GS-13 who makes mistakes. In industry, however, growth and innovation are critical, which makes industry’s risk calculus different. You’ll see young CEOs of technology companies running organizations far larger than a government agency and doing it well. (There are, of course, others who clearly need “adult” supervision.)

The Good News:

Time in grade doesn’t apply! In industry, your value can be a bigger determinant of upward mobility. Generally, you’ll still be promoted rung by rung, but this can move at a more rapid pace in industry. But, just as in government, a “good old boys’ network” can exist and it pays to know how the network operates. Relationships matter. Your work won’t always speak for itself. Find champions and self-promote without being “that guy/girl.” More good news: unlike in government, there aren’t layers of paperwork and bureaucracy to cut through in order to hire, fire, or promote. This gives industry two added levers: incentives and the (real) threat of termination. Some companies cull the bottom 10% or more yearly.

Negotiating:

It is common to negotiate title. The smaller the company, the more flexibility you’ll have in crafting your own title, because they’ll have less process in place, fewer employees whose expectations they must manage, and the more they’ll hope that someone like you can come in and supercharge their efforts. As they grow, companies will want to avoid title and salary inflation by becoming more standardized.

Remember:

While I don’t recall where I read this quote, I think it’s appropriate here and it’s also a word of caution on title obsession, “There is a difference in being given a title and mastering the art of command. One can happen overnight, the other may take a lifetime.”

2. How does salary work on the outside?

It’s possible to make 2-3x your government salary on the outside over the course of a few years. Moreover, you could become truly wealthy in financial terms if you join a startup that goes public (via an Initial Public Offering or “IPO”).  However, an IPO with a startup is rare. The decks are stacked against you and so are the markets. But, it’s at least it’s an option on the outside.

If you’re like me, you may have had large portions of your Agency career when you didn’t even know what your salary was until you filed your taxes, only to be forgotten again until the next year. While you track what’s deposited into your bank account every other week, and know how you need to regulate your spending based on it, the total salary amount isn’t a status symbol for you. (Status wars are reserved for assignments!)

 But on the outside, your ego will not only be susceptible to roles/titles as a status symbol, but also salary and bonuses. While taking caution not to fall into the trap of conflating your self-worth with net-worth, you still should advocate to be compensated according to what you actually bring to the table, which is quite a lot. Industry refers to how you’re compensated with the term “total compensation.” Salary, alone, isn’t the end all be all. The basic equation is:

Total Compensation = Base Salary + Equity + Bonuses

First, none of what I write here should be taken as financial advice. Startup pay-structures usually offer less base salary and more equity (stock options) plus some bonuses. Startups that have raised a Series A round with reputable investors usually can match the salary you’re making in government. You should negotiate up their offer. Be the first to throw out a salary number because that is the anchor number they’ll work from. The challenge is to not come in so high that you seem naive vs selling yourself short.

Market research will help you get a sense of what is appropriate. It’s like in training when learning how to ask uncomfortable questions “going through yellow lights” until you hit a “red light.” Talk to people on the outside that likely are your equivalent and simply ask. Ask them what their sense of a salary is for someone with your background going into “X company” (choose a company similar to, but not the same as their own). They’ll likely answer based on their own compensation and it will give you a good data point.

The more mature a startup, the more likely they can increase your government salary from the start by about 20% (include an approximate amount for overseas housing added into your government salary). Don’t forget that you can move up in salary much more quickly than in the government, and they often have bonus schemes depending on the seniority level. The chains of the GS system do not apply! The more you bring value, the more you can earn.

Sales roles usually have lower salaries but higher bonus schemes to incentivize selling. Bonuses can be pegged to hitting certain metrics for non-sales jobs, too.

Ask for a hiring bonus pegged to about 15% of your base salary. You can offer that you’re turning down an alternative overseas position worth quite a bit in mortgage/rent payments. If the job is remote, ask for an initial office stipend of $5,000 to purchase a desk, monitor, printer, basic office supplies, etc.

Equity:

Equity aka “stock options” aka “options” is essentially offering you an ownership portion of the company. Ask how many “total shares outstanding” the company has. (Divide that by the number of options you’re offered and that’s your ownership percentage). The earlier the stage of the company, the larger percentage you should be offered because you’re shouldering more risk and you have more ability to make (or break) the company.

Ask if their option amounts are pegged to different title/pay bands and generally what those options bands are. Ask for the current 409A valuation of the stock price. A 409A is a third-party assessment that places a financial value on the stock done as part of financing rounds that is pegged to the low end of value (reasons here begin to get complicated so I won’t get into the details in this post). Ask about the strike price. The strike price is how much you’ll pay to exercise (“buy”) your options in many typical compensation packages. In some cases, a company won’t share this information with you out of sensitivity concerns, and you should offer to sign an NDA to get this information if you’re serious about joining them and they’ve given you an offer.

For me at first, options were utterly confusing and I spent a lot of time Googling. On top of it, there are different types of options and various tax implications. While Google is your friend, I suggest hiring an accountant and lawyer to translate the legalese in a lengthy employee stock incentive plan. I eventually did so and found the peace of mind worth it.

Here is a quick, typical example not laden with additional HR/legal language that gives a basic overview:

Congratulations, Frank! We’re pleased to offer you $200,000 in annual salary, a $25,000 hiring bonus to be paid out after six months of employment, $25,000 yearly bonus potential, and 100,000 options at a $.05 cent strike price, which have a four-year vesting schedule with a one-year cliff. -Julie from HR

Let’s walk through the equity portion. The numbers given here are meant to be easy from a calculation standpoint.

25,000 options (1/4^th representing one year) out of your total 100,000 will “vest” or “become purchasable by you” at a price of 5 cents per option (“share”) after one year of employment. This is the one year “cliff” which means that if you leave before a year, you get zero. You can choose to “exercise” your options (ie, purchase them) at a $1250 cost to you after one year (25,000 x .05), or you can let them accumulate in their own virtual bucket. Many startups use the website/service Carta as a way to track your options. Many people wait to purchase options as they see how the company performs, but there can be tax complications as you go. Again, it’s worth talking to an accountant.

The remaining 75,000 options will vest in equal monthly increments after the one-year mark for the next three years. So, 75,000 divided by 36 = 2,083 options vest monthly for the next three years.

The startup may choose to grant additional options at any time as an equity “bonus” or at certain milestones such as a promotion. Let’s say that you’ve been with the company for a year and helped them target new customer sets that led to massive revenue, which allowed the company to build more products and begin to scale. So, you’re promoted, and you get another 50,000 options awarded to you.

At the same time, however, the company still needs to bring in more outside investment (such as venture capitalist money) to truly scale the company because the sales revenue alone isn’t enough to expand quickly and hit all the target sets they know they could hit if they simply had the money to expand and do so.

As a result, the investors get even more excited about the prospects of the company and they put more investment into it. As they put more money in, the investors agree on a new, increased valuation (total value) for the company (ie the company was worth $20 million dollars before, but now they think it’s worth more). So now, the strike price for future options issued has increased from 5 cents per share to 15 cents per share. Let’s say that your promotion occurred right after the valuation of the company changed, so any new shares you’re awarded will now be at a 15 cent strike price. So while the 5 cents per share price continues for all the old shares you were granted (even if you haven’t exercised them), for the new batch of shares, you’ll have to pay more to buy them at the 15 cent price. Ultimately, you want the company to go public at a very high per share price and you make money on the difference. This is the financial value of getting in a startup “early” among other things.

When you end your employment with the company, you’ll have around 90 days or some set time frame where you must decide whether or not to exercise (purchase) all options that have vested up to that point. If you don’t purchase them, they’ll go back into the pool of options to be given out to employees.

The Bottom Line on Equity:

Equity is always a gamble. It’s very possible that you’ll pay for your shares in your company and they will not amount to anything and you’ll be out of pocket never to recoup any of that value.

But, if you choose the right company with the right product/service and at the right time, and you do everything in your power to make it successful and it IPOs, you could walk away with a substantial amount of money and experience.

Remember:

If you’re a case officer, by virtue of the correlation of wealth to power to access, you’ve probably recruited some of the wealthiest people in the world who were also some of the most miserable. Beware of jumping from one hamster wheel of achievement to another. As Nassim Nicholas Taleb wrote, “The three most addicting things are heroin, carbohydrates, and a monthly salary.”

3. What are some other practical tips for talking with prospective employers?

Storytelling:

Tell a story about the future, not the past. Don’t say why you’re leaving the Agency but, rather, why you’re interested in a particular industry vertical, role, and company. Be able to tell at least one good story from your past that encapsulates your personality and your goals and your work ethic. Don’t forget humility. Sometimes we C/Os forget. I recently did a mock interview for a former USG employee looking to transition and he told an amazing story about why he joined the military, why he then joined the USG, how he deployed to Africa, what his day-to-day was like on the ground, and how and why he founded a company while there. He linked it back to his values and his character, and his story felt like a front row seat to his journey. It was a great example of storytelling.

Good storytelling lets someone in on a small aspect of your life. Make the story count and link it to what you’ve already done, and make the person you’re talking to feel like they can help you achieve what you’re setting out to do next. It’s human nature to want to feel useful. Helping someone else feel useful is a way to give away some of your own power to others. People like those who share power. As you craft your story, I recommend reading about the hero’s journey as a storytelling arc.

Networking - LinkedIn:

LinkedIn should be your best friend. Everyone will have a different situation, but the more you can put in your profile, the better. A few tips:

• Try to translate what you’ve done into business terms. And to do that, you need to do a lot of research on LinkedIn about how other formers characterize themselves. Simply ask some formers for their suggestions.

• A professional headshot is worth the couple hundred bucks; reach out to me for a photographer recommendation.

• If you’re outside of middle age, don’t put the year you graduated from university in your LinkedIn profile. Ageism in both directions is sadly alive and well.

• Get a bio cleared that you can put in the bio section (more on that below).

• Have the headline section filled out with something appropriate for the industry/type of company you’re interested in.

• Don’t put the open to work banner across your profile picture. With human nature being the way it is, you risk coming across as desperate, when really you’re the catch.

• Take a look at my own profile to the degree that it’s helpful.

• Like and reshare posts relevant to the industry or type of job you’re seeking. Potential employers absolutely look at what you like and post.

• In the interests section, choose individuals, companies, and groups to follow which will show up in your profile. Basically, try to fill it with something to account for the gaping holes in your bio.

• If you’re trying to get in touch with a senior person in a company, find their EA or Chief of Staff and start there.

Networking - Introductions:

Try to leverage your existing network for “warm introductions.” This is the surest way to get a meeting. Assuming the person who introduces you is liked and respected, that’s really all you need as far as initial validation. A former IC Agency head introduced me to the then-CEO of my company because they had previously served together on a separate Board, and that’s almost certainly the single largest reason why I was hired.

If you must, send a cold email or message people on LinkedIn. It’s normal to do this via LinkedIn, though not everyone responds. I spent a lot of time thinking about the content of a first message to people. I probably had around a 50% response rate. See if there is another way to reach them outside of LinkedIn if you don’t get a response. I receive a lot of inbound on LinkedIn these days, to include a lot of spam/recruiter messages, and it filters into a different message area. If I don’t know someone or they don’t state who we know in common, I rarely respond. If you have someone in common, make sure to mention that.

Don’t go for a generic title of a message. Anecdotally, I found that referencing something they’ve written or something their company did had the highest likelihood of a response, followed by name dropping a common contact. The problem with the common contact, however, is they’re going to question why you didn’t just go with a warm introduction.

You can usually guess someone’s email address at their company, especially if you can find the addressing scheme by a few google searches online (ie, firstnamelastname@xcompany.com). You can pay for an online service like RocketReach to get their email addresses. Be careful with this. Don’t try and trick them into clicking on your email by titling it something like “Re: Meeting tomorrow.” Most everyone in industry gets tens to hundreds of spam emails a day just like that. Also, don’t be creepy and send a cold email to a personal email address.

Getting a resume cleared can take a significant amount of time, especially if you’ve served in a lot of positions outside your home base because it’s double the coord chain. It takes even longer if you have other paperwork you have to go through first. One tip is to get a short bio cleared while the resume is in process. The less you put in it about specific assignments, and the more general you keep it, the faster you’ll get a response. Mine was very generic. It covered how long I had been employed, that I was a C/O and had been a CMO, that I had served abroad, had served in various leadership positions, and my general leadership/management skillset.

This was important because I copied/pasted the language from it in almost every message/email I sent and put it in my LinkedIn bio (yes, it felt very weird at first openly emailing people that I worked at CIA). For what it’s worth, I find the PRB to be exceptionally fast on the outside, but this is much different than the paperwork to process out of the organization, which takes significant time.

4. What are some good resources as I look to leave?

• Contact me for more info on an alumni group.

• BreakLine – a couple people I know have done this and speak highly of it.

• Mission-focused tech companies I’d scout as potential jumping off points who will have an easier time understanding your value. I have a much longer document on this; if you’re interested, reach out. Feel free to add your own suggestions in the comments section.

• Infleqtion (obviously we get it!)

• Anduril

• Second Front Systems

• Strider

• HawkEye 360

• Flashpoint

• Primer

• Epirus

• Enveil

• Adarga

• Varda

• Palantir

• SpaceX/Starlink

  *This list is by no means exhaustive nor have I done significant diligence on any of these companies except my own.

• Learn about basic private vs public companies. If you’re going the startup route, you should educate yourself on the basic fundraising process: pre-seed, seed, Series A, Series B, etc. It will give you good context for the maturity of the company and what the company will be facing. Educate yourself on what an “exit” for a startup means: IPO or being acquired. I plan to do a post on this eventually if there is interest.

• During most of my time at the Agency, I read many business books because they contained excellent lessons I could apply to my CIA work. As I was leaving, they also helped me translate (somewhat) what I had done to business lingo. The most useful books were:

• Only the Paranoid Survive by Andy Grove

• Venture Deals by Brad Feld

• The Four Steps of the Epiphany by Steve Blank (all his books are good, and he also teaches and makes available content from a course on dual use national security technology on his website linked above, though one can debate how this approach is applied to new technologies and markets)

• High Output Management by Andy Grove

• On Grand Strategy by John Lewis Gaddis

• Zero to One by Peter Thiel

• Any book by Jim Collins

• Masters of Scale by Reid Hoffman

• The Platform Delusion by Jonathan Knee

• Lead and Disrupt by Charles O’Reilly

• Seeking Wisdom: From Darwin to Munger by Peter Bevelin

• Zone to Win by Geoffrey Moore. *If you’re an Agency senior reading this post and you plan to stay and want to change things still, please read Zone to Win. It’s about how to reform an entrenched institution and make it competitive again.

  *Keep in mind that in autobiographical accounts, people easily misremember their pasts and what led to their failures and successes. We tend to attribute our successes to keen intellect and our failures to random events not under our control. Or we virtue signal humility by acknowledging certain failures but not others. Most of us want to be the hero of our own story, so that lens is useful when evaluating recollections or the contents of any advice.

• Specific industry case study books that are engrossing reads that can be leveraged anywhere and give you a sense of how industry battles were fought, won, and lost:

• Hard Landing

• Flash Boys

• Bad Blood

• Blitzscaling

• Box: How the Shipping Container Made the World Smaller

• Barbarians at the Gate

Others books to read: Mission Transition (written especially for the IC), Organizational Physics, Designed to Scale, Your Next Five Moves, How to Decide, Reboot by Jerry Colonna, Working Backwards about Amazon, Mistakes Were Made (but not by me), Be 2.0, The 15 Commitments of Conscious Leadership, Crossing the Chasm, The Founder’s Dilemma, The Lean Startup, The E Myth Revisited, The Score Takes Care of Itself, Thinking in Bets, Good Strategy Bad Strategy, The Innovator’s Dilemma, The Courage to Be Disliked, Exactly What to Say, The 48 Laws of Power, Start with Why, Players First by Coach Calipari, High Growth Handbook, CEO Excellence, Boyd: The Fighter Pilot Who Changed the Art of War, and all of the Incerto series by Nassim Nicholas Taleb

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