The U.S. Playbook
How to Hire Top Talent in the U.S.
Frontline Library » The US Playbook » How to Hire Top Talent
CONTENTS
- Introduction
- When to Expand
- Where to Land
- Hit the Ground Running
- Who to Hire & Relocate
- How to Hire Top Talent
- Managing Across Borders
- Summary
Hiring is arguably the most difficult thing startups have to do, and it remains an issue for even the most experienced of founders. Though you may have a fairly robust hiring process and employer brand in Europe, you’ll need to get to grips with a different legal system in the US and build up your brand awareness to attract talent. Even then, inbound candidate flow can often be poor quality in the US, so recruiters will be necessary for you to secure high-quality candidates.
But while the process of finding talent can be time consuming and costly in a new market, the principles you’ve learnt from hiring in Europe will largely stay the same. There are four key areas where we feel hiring in the US differs from Europe, so in this chapter, we’ll cover the basics of becoming an employer in the US, how US compensation packages differ to those in Europe, and how to attract and assess top talent.
Frontline recommended recruiters:
- Daversa
- Glenborn
- Scene Recruitment
- Strive Recruitment
- True
For senior positions and Chairs:
- SpencerStuart
- Heidrick & Struggles
- Russell Reynolds
- Egon Zehnder
- Korn Ferry
Want to see all of our recommended suppliers for
U.S. expansion?
Fill in the form and we’ll email you the full list, from finance and legal to HR and consulting.
An Overview of the Complexities of being a U.S. Employer
Before you even think about starting the hiring process, you need to get to grips with the process of setting yourself up as an employer in the US. This is no easy task – the law is complex and the culture is highly litigious, meaning the consequences of getting things wrong are a lot higher in the US than in Europe, potentially landing you in some very hot water before you’ve even brought someone onboard.
The processes and culture around firing employees is particularly distinct from Europe, and as a fast-growing startup hiring slow and firing fast, you’ll need to be prepared for the inevitability that some recruits won’t work out.
It’s imperative you work with a qualified US attorney early on in your expansion plans, and ensure that all of your paperwork is compliant with employment law. While not legal advice, here are five differences to European employment processes to give you a taste of some of these intercontinental nuances.
Most states are “at will” employment jurisdictions
This means you can fire someone at pretty much any time for any reason (or no reason) – but not for a discriminatory reason – and employees can break the relationship without giving reason or notice. This dynamic, alongside a more competitive hiring market, generally means that employee loyalty is thinner in the US than in Europe.
It is not uncommon to see hires jump ship after 6-12 months if given a better offer elsewhere. On the plus side, there is generally a shorter activation period for new hires, meaning even senior candidates rarely have more than two weeks notice.
You may need an “offer letter”, not a contract
Differences in employment law mean that, in most circumstances, you should be using a US-style “offer letter” – a short form document that outlines the basic terms of the arrangement, including the initial title, salary, benefits, equity, vacation, location etc.– instead of a European-style employment contract.
Employees may need to sign an IP agreement
Because formal employment contracts are uncommon, your lawyer will likely suggest that your employees sign an “IP and Confidential Information” written agreement as a complement to the offer letter. This will provide you with the assurances you normally get through an employment contract in Europe.
Non-competes are not enforceable
Not all staff are classified the same way
You can outsource much of your HR administration
Professional Employer Organizations (PEOs) are outsourcing firms that offer human resources services to small and medium-sized organisations. Also known as “co-employment”, the PEO performs employee admin tasks on behalf of a business. This includes payroll, benefits management, tax filing, workers compensation and compliance. If you are making a serious investment in your US presence and plan to create a legal entity, acquire customers, seek US funding and hire more than a handful of people, we would recommend a PEO.
Two examples of PEOs are Justworks and TriNet, which both provide ‘big company HR’ for small businesses, giving you access to better-priced health plans and other perks at a more affordable price. They handle all necessary registration and tax responsibilities depending on which state you want to operate in.
Employer of Records (EORs) operate very similarly to PEOs but are often used where the company doesn’t yet have or doesn’t intend to establish a legal entity. The EOR takes on full legal responsibility for your employees and, to put it plainly, they act as the employer.
This means that you can provide all standard HR services to your employees without the need to have a legal entity, local bank accounts, register for tax filings or worry about compliance. However, it does mean you have less control and flexibility in the sense that you will need to work within the framework of the EOR and can only make limited changes to paperwork and process.
You should also be aware that using an EOR means your US employees won’t receive the same ’employee experience’ as their European counterparts, which can be a forcing function for establishing an entity and switching to a PEO.
There are a number of companies that provide this service: Remote, Deel, Oyster HR, to name a few. All of these offer the basic HR services you will need to employ a person legally if you are not planning to establish a legal entity from the off set. However, there are slight nuances in their offering which will also affect pricing. We suggest you contact a few of them to see which will best suit your specific situation.
Admittedly, some PEOs and EORs are massive corporations and you will be one of thousands of customers. However based on our experience the benefit greatly outweighs any smaller issues.
How U.S. and European compensation packages differ
It’s common knowledge that talent in the US is more expensive than in Europe. But founders are often unaware just how much more expensive it is to hire in the States. These are the three key areas where US and European compensation packages differ so you can set your expectations early.
Salaries are more expensive, and there is a different culture around them
You can expect American talent to cost 2-3x more than their European counterparts, though salary will of course depend on which function you’re hiring for, and which city you’re looking in. We see the largest variances in sales, marketing, product & engineering, and for all senior execs regardless of function. Use tools like Pave alongside speaking to recruiters and other businesses, to find compensation benchmarks.
Salary transparency on job postings (including internal postings) is a legal requirement in many states, including New York and California, so be prepared to have a good justification for whatever salary you state on an open job description. Remember that they’ll also be visible to European employees, who may take issue with the discrepancies in salaries advertised. We advise you to handle this head on and educate your employees on why there are differences, with a good rationale for when packages are not equal between countries.
You should also be aware that many States have a ban on asking for salary history. Instead, ask candidates about their salary expectations, rather than what they have previously made.
There are greater expectations around benefits and equity
Alongside a higher salary, the default package for US-based talent will be different. Candidates will expect:
- Health insurance (including dental and vision): This is a non-negotiable – costs can run up to $1,000 per month per employee for good coverage, and should be between 4-7% of total salary.
- Retirement savings: A 401(K) (US pension plan) is a tax efficient savings plan that you can set up through your PEO (professional employer organisation) to enable your employees to save. There is no requirement for you to contribute from day one, unlike in parts of Europe, but employees may still expect some kind of company match.
- Stock options: These are the key currency for startup talent recruiting and retention, particularly when you lack the brand equity of the big tech firms. Stock options are more appealing from a tax standpoint in the US, and they’re culturally a more compelling incentive than in Europe. To grant stock options, you need to obtain a 409a valuation. Typically, stock option grants vest with a one-year cliff and a four-year vesting schedule.
There are more public holidays, and startups often give unlimited time off
The statutory holiday (vacation) requirement in the US is low, 10 days plus public (federal) holidays. It’s customary for tech businesses, especially those coming over from Europe, to give more than that. In reality, many tech businesses in the US offer unlimited personal time off. We recommend no less than 15 days.
How to Attract Top U.S. Talent to a European Startup
Hiring is just as much about selling the vision of your company to candidates as it is about them selling their skills and experience to you. You’ll broadly know how to do this from hiring in Europe, but there are some differences when hiring in the US.
Know “your story” – what differentiates you from other companies
Be prepared to answer questions about how you stack in comparison to competitors. Have a compelling backstory on the company’s history/ founding. Be very clear on the USPs (unique selling points) and why this is a great opportunity for candidates. Make sure that everyone from your side in the interview process knows this story and feels comfortable selling it.
Money raised > revenues
Potential candidates want to see trust from respected and prestigious investors. If your growth rate or amount raised to date is impressive, then those will resonate with candidates. And be prepared for any questions about specific metrics. It’s not unusual for interviewees to ask about MRR, retention and churn rates, CAC, etc.
Know what your compensation package is before the interview
As mentioned earlier, American compensation packages look different to those in Europe. Make sure you are able to answer any questions about pension (more often referred to as “retirement contributions” or, more simply, as a 401k) and health insurance contributions before you meet with a candidate, as well as commission structures for sales roles.
Play up the international factor
Ambitious American candidates love the chance to work for a fast-growing foreign company and the potential for international travel. Make sure that they are mature and responsible enough to work independently and navigate cultural/time zone differences.
Leave a good impression
Remember that every interview, senior and junior, is a potential brand building exercise which is crucial in a market where maybe not many people know you. Even if the interview doesn’t lead to an offer, leave a good impression that will encourage the candidate to recommend you to others or write a positive Glassdoor review.
No matter how much prep work and vetting you may do in advance, things may still not work out with a promising candidate. Even if you are confident in your hiring success in your home market, expect to have a much lower success rate in the US.
How to Assess U.S. Sales Talent
Cultural differences can play a role in the hiring and firing process. Be prepared for US candidates who are more confident and better at selling themselves than their European counterparts.
It may take you a while to really understand what ‘good’ looks like, especially for sales talent who know how to ‘talk the talk’. We’ve collated the following questions from our networks which have proven useful for assessing US sales talent, and compiled a list of green and red flags during the interview process.
“What were your previous quotas, and where did you finish against your peers?”
Strong performers will be more than happy to chat about their sales history and will name drop customers and deal sizes, but listen with a healthy dose of cynicism and don’t be afraid to really drill into the numbers.
Glenborn
Create exercises or projects to test their skills
A presentation or 30/60/90 day scenario are common. Whiteboarding sessions based on a business challenge or situation where you can see the individual in real time action are also super valuable – it’s harder to prepare for and you are more likely to see how the individual approaches and solves a problem.
Fractional Chief People Office
“What demand generation support have you had in the past?”
Their experience should align with the GTM motion of the company. Have they been focusing time on 200 cold emails a week or have they been warming leads up? Are they used to hustling or have they just been along for the ride at previous positions? Without local brand recognition behind them, they’re going to have to put in a lot of leg work to build their pipeline.
US Expansion Partners
“Talk me through your favourite deal”
Get them to walk you through exact details: Who did they talk to, how did they personally get the deal done, what were the challenges and how did they overcome them? Top talent will do this convincingly, others will trip up over details and inconsistencies.
Scene Talent Consultancy
Green and Red flags when assessing U.S. sales talent
| Green Flags | Red Flags |
|---|---|
|
Previous experience or explicit interest in working with European companies and international teams. |
Only worked in big tech where they have the benefit of a big brand name and lots of resources. |
|
A builder / hustler approach – not only will they be a hard worker, but they won’t be disheartened to work for an unknown brand. |
Previous experience does not match the expected deal velocity and value of your company’s sales. |
|
They show interest by engaging in a slightly deeper interview process and actively drive the process forward (sending agendas ahead of meetings, good follow ups, champion building within the org, leveraging their network to gather intel etc.) |
Three or more short stints in a row – yes, employees are less loyal to their employers in the States, but a sales person can’t achieve much in less than a year, so three in a row is a bad sign. Candidates can also hide short stints under the umbrella of consulting – a background check can verify this. |
|
They voluntarily go into detail about specific deals and processes, especially complex ones, and back themselves up by offering customer references and data points. |
Multiple examples of poor performance to quota. |
|
Demonstrates commitment and discipline through high-performance achievements outside of work, such as sporting achievements or even becoming a grandmaster at chess! |
A bad attitude towards previous poor performance (passing blame, making excuses). Be forgiving for those who show accountability and have learned why they may have missed quota. |
|
Shows a deep understanding of the US market and suggests strategies for successfully entering the market. |
Doesn’t acknowledge the contributions of other team members when discussing past successes |
|
They openly discuss times when things did not go to plan and the steps they took to address and correct the situation. |
Background checks are a standard step in US hiring processes and candidates will expect one. You can use an external provider that will run a range of background checks from criminal to education and employment verifications, and others depending on your requirements. Two suppliers that cover the US are Checkr and Zinc.
Who to Hire & Relocate
Managing Across Borders
