Reflections

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REFLECTIONS

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We have spent over 20 years helping technology companies grow. We have created a guide that leverages our experience and provides practical insights to help both candidates and clients to achieve successful outcomes in recruitment processes.

Although we have broken this document into sections in order to make it easy for clients and candidates to find the most relevant content, it is worth noting that it is only by understanding and empathising with the other party that one can negotiate a mutually satisfactory conclusion.

If you are reading this from:

• A hiring perspective then sections 1, 3 and 6 will be most pertinent.

• A candidate perspective then sections 2, 4 and 5 will be most relevant.

1 Attracting and assessing candidates

2 Winning the race

3 Putting together an offer

4 Getting the best deal

5 Company remuneration structures

6 Appendix – Relocating candidates

ATTRACTING & ASSESSING TALENT

Practical advice to help companies create optimal recruitment processes.

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CONTENTS

P.4

P. 6

P. 9

P.14

P.18

P.24

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4 5

Maintain momentum:

Make sure the candidates move through the interview steps

quickly. When the interview process progresses slowly, the

candidate might quickly perceive a lack of interest or an indecisive

culture, and it gives other competitive processes the chance to

overtake yours. Once this sentiment is established it is very hard

to return a search to positive momentum and a successful close.

Stay close to your candidates

Ensure that there are regular touch points between your

company and the candidates (coordinated by a key contact

internally or your executive search partner), ensuring that the

candidates understand the steps in the search process. This will

help you to build a stronger relationship with candidates and

understand their motivations.

It is much easier for a candidate to say “no” to someone they are

indifferent to. Understand that candidates buy with their heads

and their heart, and that you will close many more candidates

when you have gotten close to them and built a strong personal

bond.

Small details matter

Every interaction between the client and the candidate will

influence their perspective of the company, ranging from the

front desk to the board room, and so it is important to ensure that

these are consistently positive experiences. Going the extra mile

to make the candidate feel welcome can make all the difference.

Referencing

You should always conduct both formal (ones the candidate

provides) and informal (backdoor) references on your leading

candidates. Leverage your network (investors and advisors) to

get an honest perspective on candidates. This can be an excellent

way of getting to the heart of a candidate’s motives and skill-set.

With backdoor references ensure you are suitably discreet,

and do not approach current colleagues, otherwise you risk

endangering their employment.

Define requirements - agree a list of key, assessable criteria for

the role

Agree an appropriate list of interview questions based around

the requirements of this role

Are there technical aspects to the role? For technical roles like

VP Engineering - you need to ensure that you have a way of

qualifying a candidate’s technical competence. It often makes

a lot of sense to use a technically strong member of the team

(a software engineer - for example) to qualify the functional

knowledge of the candidate.

Prepare a consistent list of agreed questions to ask all candidates

around them. It often makes sense to ask candidates similar

questions as it makes it easier to compare and contrast between

them. Asking open questions is a great way to test how a

candidate thinks and approaches problems.

Also consider the cultural fit of your business – are you data-

driven? Are you focused on personality and internal relationships

when it comes to decision-making? Cultural fit is just as important

as technical skills when making the right hire. Try and include a

less formal interview stage as part of your approach – perhaps

lunch, or drinks with the team. This will help you to judge how

strong the cultural fit is.

Don’t include too many stakeholders

The more internal stakeholders you have, the more risk there is

of “analysis paralysis” and the longer it will take to choose and

close a candidate. It is hard to get ten stakeholders to choose

which movie to go and see, let alone decide who to appoint as

a key senior hire for the business. Try and keep the number of

stakeholders to a minimum for this reason.

Define realistic targets and objectives for the new hire

Understand how to sell your business

Consider how your company may be perceived and try to

find a way of accentuating your strengths and mitigating your

weaknesses. It’s not always easy to do this – particularly if

you’re a founder – but it’s quite possible with some thought. For

example, most VC backed companies might be seen as risky –

after all, many of them do not make a profit. Could you enrol one

of your investors to talk to the candidate and re-assure them on

company vision? Can you provide them with market data that

shows the potential of the company? It is only by understanding

these possible perceptions that you can devise effective counter-

strategies.

Be realistic

The very best candidates will always have options – whether that

is staying put, or going to another suitor. Candidates from market

leading companies like Spotify, Google, Salesforce and Facebook

get approaches from recruiters every day. Why might they want

to join your company? Why would they want to take a pay-cut to

do so? Sometimes it is better to hire a more realistic, less proven

candidate who can grow with your business, rather than a more

proven candidate who is more difficult to attract and tricky to


How you define your process, panel and requirements profoundly affects your chances of closing a strong candidate.


BEFORE THE INTERVIEW

DURING THE PROCESS

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Empathise with candidates’ motivations

Understand what really motivates your target candidate

pool, and sculpt a pitch that will appeal to that group and to

particular individuals.

Candidates will:

• Have different motivations based on their functional

backgrounds. On the whole, CTOs want to build innovative

and interesting technology, and a VP Sales wants to sell a

strong and differentiated product

• Consider your opportunity sometimes because it is time for

a change (present yourself as dynamic and interesting)

• Consider your opportunity sometimes because they have

hit a glass ceiling (stress you are keen to develop people

internally)

• Consider your opportunity sometimes because they don’t

believe in their company’s strategy or future (make sure they

understand and buy into yours)

• Consider your opportunity sometimes because they

feel underpaid (you need to understand the cause of this,

and whether you can address it or not given your financial

constraints)

CANDIDATE MOTIVATIONS

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BEFORE THE INTERVIEW

Understand the role and company

Getting a job offer usually requires fulfilling three requirements:

• Having the technical skills required to do the job (as illustrated

by career history and track record)

• Being at an appropriate level of seniority and cost

• Being a strong cultural fit within the organisation

It’s overwhelmingly likely that at some point of the interview

process, the above will be discussed, and it’s always worthwhile

to prepare an answer to the obvious questions. More on this later

in the “Pre-Interview Checklist” section.

Understand the recruitment process

Make sure you understand how many interview steps there

are and who the key stakeholders are in the process. A key

variable is whether there is a recruiter involved or not. It is often

advantageous to have a recruiter involved in an interview process

as they can qualify difficult questions on your behalf (without

risking offence) and can also help you to better understand the

client’s position. A recruiter will be incentivised to close the deal,

and can be helpful in keeping the process moving too.

If you are in direct contact with HR or the hiring manager, you will

need to think about how you balance both sides of the process,

namely:

• Selling yourself - “getting the offer”

• Qualifying the opportunity

Look at it from their perspective

Try to put yourself in the hirer’s shoes and think about how

well your experience fits with their requirements. Most job

specifications will give you a strong steer as to the key criteria

– and think about your relative areas of strength and weakness.

Think through your experience and what examples you can

provide that show you meet their criteria. If you have little

experience in an important area – you will almost certainly need

to address this question sooner or later and now is the time to

devise your approach.

DURING THE PROCESS

Pre-Interview Checklist

Here is a checklist of questions that you ideally want to know the

answer to before you meet for interview:

Who are the stakeholders in the process? Who are the most influential?

What are the interview stages?

It always pays to ask this. If the last round is a presentation stage

- better to know before the first interview so you can ask the

right questions throughout the process.

Also bear in mind that the structure of the company’s interview

process will tell you a lot about the way that the company works,

which can help in your decision-making process.

What are the 4-5 key criteria?

This is not the same as the job spec. What really matters? This

might well involve certain technical skills. Think about your

experience and where you have demonstrated the necessary

experience and characteristics. You are very likely to get open

questions about these topics, so having thought through possible

examples in advance will help you give a more polished answer.

Are there internal as well as external candidates?

Are the internal candidates real contenders or in it just for show?

How long will the process take?

If there are a lot of stakeholders, it could be a long process. You

need to mentally prepare yourself for this.

WINNING THE RACE

Helping candidates get a job offer in a competitive recruitment process.

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WINNING THE RACE

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Every step is an interview and all stakeholders matter

Lunches and group meetings are a classic banana skin. Be

conscious that you are still being assessed in every interaction

with employees of the company. Even one veto can sink your

candidature. Never think a meeting is purely confirmatory, even

if that is the way it is positioned.

You can re-use your best examples with different interviewers

If you have two separate interviews with two different

interviewers and get a similar question, you can use your best

answer each time. It’s very unlikely they will be comparing notes

on you to that level of detail.

Keep your energy and motivation up

You wouldn’t be human if a long interview process didn’t dent

your enthusiasm. The trouble is, the last interview stages are

vital to get to offer, and you need to keep your energy levels up.

Qualify your interest

Make sure you are ready to say yes (or no) before you get to

offer stage. An interview process must be a two-way street for

you to be comfortable that this is the right opportunity for you.

Don’t give yourself a very difficult decision by feeling obligated

to respond to an offer before you know whether you like the

company and role enough first.

Build Rapport

The heart is at least as important as the head when someone

chooses their preferred candidate. You need to break the ice

with your future colleagues and make them want to work with

you, not just respect you.

PUTTING TOGETHER AN OFFER

How to structure and present a compelling offer to a candidate.

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All stakeholders matter

- Even one veto can sink your candidature. Don’t just enrol the most senior stakeholders.

WINNING THE RACE

Yes!

If you don’t, they will assume you aren’t paid very much anyway.

It’s only ever candidates who feel underpaid who won’t say how much they are paid, and this can make you seem junior.

There’s no such thing as “one market rate” for a role.

Different candidates will bring different levels of experience and therefore cost. There is not an absolute figure for “what a role is worth”.

To negotiate an effective deal for yourself, you need to be able to engage in a clear dialogue with the hirer, where both parties empathise with another’s position.

We need to understand and empathise with one another’s position before we are willing to compromise. It’s much better to be open and use the realities of your situation as negotiating leverage. You can say that “I am paid x but feel underpaid” – this can be a very effective tool for getting a raise. More on this in the “Getting the best deal” section.

It is key to build trust with an employer and sharing remuneration is a key part of this process.

We have seen candidates fall out of a process due to their unwillingness to share these details with a potential employer.

SHOULD I TELL THEM HOW MUCH I AM PAID?

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Understand their recent earnings

By this point in the process the candidate should have presented

you with a clear breakdown of their historical earnings, across

base, bonus, LTIP and benefits. If they haven’t, ask them for

a complete breakdown of their compensation. Whilst these

numbers do not provide a definitive guide to future financial

package, it is helpful from a benchmarking perspective. Few

candidates look to take a pay-cut in moving into a new role.

It is also important to understand the context of these numbers:

what is the cost of living differential between two locations and

are there any tax implications to changing roles?

Understand their expectations

The candidate should be able to provide a sense of their priorities

from a compensation perspective. It can be helpful to have an

external perspective, probably from an executive search firm,

who can explore this element with the candidate on your behalf.

If you are not working with a recruiter it is important that you

invest the time to understand the candidate’s expectations

before you make an offer.

Empathise

The quantum and structure of remuneration that a candidate will

seek is likely to reflect a few factors including perceived demand

for their services in the market and their historical remuneration.

It will also reflect their interests and financial situation. There is

little point offering a low base and high equity component to a

candidate with high cash-flow requirements (e.g. a mortgage and

four children in private school). As far as possible recognise their

personal situation and flex the financial package as far as you are

able to do so.

Explain your remuneration structures

Most candidates who are genuinely interested in an opportunity

will be willing to compromise on the financial package when they

understand why an offer is being structured in a specific way. As

far as possible outline the ways in which you are constrained, and

why that is the case; candidates will understand that corporates

and early-stage businesses face very different constraints and

may structure their financial packages accordingly.

Understand their market-value:

The best candidates always have alternatives, and you need

to construct an offer that is fit for purpose. If a candidate has

another offer – then the level of that offer will likely become

their perception of how much they are “worth”, not their

current compensation. Never lowball candidates – it will burn

the credibility of your employer brand and prove ineffective in

closing good candidates.

Understand their other options

Is your candidate actively looking? Are they in other processes?

With big or small companies? If you are a start-up and your

candidate is looking at a corporate opportunity too, try to move

quickly (make them seem slow moving) and offer them exciting

equity and influence that will be much harder to achieve in a

bigger company.

Adjust your strategy if hiring directly or via a recruiter

A recruiter, who has developed a good relationship with both

parties, should have a clear understanding as to how far apart

expectations are from early in discussions. They can prepare

the ground to ensure that the parties understand where

compromises are likely to be required. The recruiter as a

middleman can ensure that the relationship between the hiring

executives and the candidate is not negatively affected during

tough negotiations.

Sometimes a company chooses not to use an executive search

firm and so direct negotiation is necessary. When you negotiate

directly, it can be more risky as the communication is direct, but

can lead to maximum empathy between the two parties and the

closing of a good deal.

In this scenario it is essential to avoid an emotional response to

negotiations. Understand that it is right for the candidate to push

for the best deal and to ask difficult questions. You must explain

your constraints and empathise with their situation.

Time is of the essence

To get to a close both parties are likely to have to compromise

to a certain extent, and during a negotiation stage both parties

feel emotionally vulnerable. Whilst details are important to both

parties it is important not to go through too many rounds of

negotiation, as one or both parties may feel burned out by the

situation and seek a simpler solution elsewhere.

Explain your offer

Don’t assume that candidates understand your company equity

structure or valuation, it can be very difficult to positively value

structures that you don’t understand.

Don’t be afraid to break structures to get the best

Whilst you will have outline structures in place that apply across

your executive team, sometimes it is necessary to break these

structures to attract the right candidate.

Be creative

Sometimes company constraints will make it feel like you

cannot reach a suitable agreement with the candidate, in this

instance think creatively. For example, where you cannot match

a candidate’s cash expectation in an earlier stage business, you

could agree an increase in the cash component as the business

hits certain milestones (revenue or EBITDA).

Check if they have any unanswered questions

Now is the time to make sure they have all the information they

need to say yes.

Finalise the process quickly

Once the numbers have been agreed with a candidate it is

important to pull together documentation in the form of an offer

letter quickly, followed by a contract. Whilst it is not uncommon

for candidates to reject an offer after agreeing it verbally it is very

rare for a candidate to pull out of an offer once they have signed

a contract. Remember that a deal isn’t closed until a candidate

signs and starts, so don’t let your process down by making this

step take too long.

BEFORE MAKING AN OFFER DURING NEGOTIATION

Empathise with the candidate Be Creative

PUTTING TOGETHER AN OFFER PUTTING TOGETHER AN OFFER

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Set your candidate up for success before they walk through the

door

Maintain the relationship

The start date for candidates can vary widely, often three or even

six months due to notice periods; during this period a candidate

could suffer a change of heart. As a result, it is important to

maintain an ongoing relationship with the candidate, if this is

managed in the right way it will also bring additional advantages.

It can enable the candidate to develop a deeper relationship with

peers and gain additional insights into the business and to hit the

ground running from day one.

Onboarding

The onboarding process should be slick and well thought out,

so that all candidates joining the business enjoy a consistent

introduction to the organisation. The process should commence

before the candidate joins the business; providing them with

information about how they will spend their early days in the

organisation and background information that will enable them

to be more effective from their first day in the business. This

process is likely to include a training programme, induction

with key members of the team and an outline of key processes

and structures in the organisation. There should also be a clear

welcome from senior members of the team in both a formal and

informal manner. Make sure your HR organisation has all their

relevant details from a payroll perspective.

Keep your promises

During the hiring process various promises will be made to the

candidate regarding their financial package, budget to invest in

building their team or opportunities for career advancement;

as far as possible you should keep these promises. Whilst it

may be tempting to offer the earth to close a candidate during

a search process, miss-setting expectations is likely to result in

candidates losing trust and ultimately looking outside the hiring

organisation. Executives understand that business situations

change and where you can’t keep your promises this should be

addressed with them frankly and directly.

BEFORE THE CANDIDATE STARTS

Until a candidate has started work in the business, there is always a risk that they will pull out of the offer and so once you have closed the deal with the candidate, an effective onboarding process is essential.

PUTTING TOGETHER AN OFFER

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Understand your priorities

Understand your preferences regarding financial incentives,

specifically the weighting of base, bonus, benefits and equity in

the broader package, as this will impact the negotiation of your

package.

Clarify your financial position

This will ensure they have all the relevant information and can

make their best offer to try to close you. Often details of existing

benefits aren’t communicated properly and candidates don’t

receive as large an offer as they might. Also consider the impact

of taxation on your income.

If you feel underpaid relative to market rates, this is an

opportunity to use that as leverage to secure a better package.

Try to explain why you feel underpaid and stress that whilst you

are very attracted to the role and company you don’t want this to

be a possible cause of future tension.

You also need to bear in mind that it is rare to get a raise of more

than 20% (in terms of base + bonus) when you move jobs. If you

have been severely underpaid, you can’t expect a new employer

to necessarily correct that in one go.

Ensure that all parties know of any extra costs entailed by the

move

A new job might mean moving house, or more travel costs. These

are all strong, solid reasons to ask for more money.

Have a sense of the market and process dynamics

If you are the only candidate who is a realistic contender for the

role, then chances are you can negotiate a raise on your current

package. Many hirers prefer to spend a bit more now to close

a strong candidate than wait for weeks or possibly months to

identify and hire a cheaper option.

Similarly, certain functions and industries experience shortages

of relevant talent and this will drive incentives up. In contract, in

a recession there is a greater supply of candidates and therefore

likely to be less wage inflation.

Understand the employer’s constraints

This is extremely important. Effective negotiation can only occur

if:

a) You ask for things that are possible

b) Both parties empathise with one another’s position

By understanding their financial constraints, this enables you to

direct your negotiation much more effectively. An earlier stage

company might be cash constrained and be more willing to offer

equity – and the reverse might be true of a bigger business. Could

you use some of your bigger company benefits (that you will lose)

as leverage to get more equity? Probably, and you’d likely have a

better chance of getting that than asking a start-up to replicate

that benefit. Demonstrating a lack of empathy in this regard,

particularly with earlier stage businesses, could act as a red flag

from a cultural perspective.

GETTING THE BEST DEAL

How to negotiate a good financial package with an employer.

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BEFORE RECEIVING AN OFFER

Understand your priorities

GETTING THE BEST DEAL

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Is it best to negotiate directly?

If you are working with a recruiter through the process, this can

be a good time to extract value. Be very open with your recruiter,

and ask them to negotiate on your behalf, once you have a sense

of what sort of offer you wish to obtain. The recruiter should

be able to have a pretty direct conversation with the hirer and

ensure there is no risk of falling out with the hiring manager.

Some hirers will want to negotiate with you directly, and it is up

to you whether you prefer to take this approach or go through

the recruiter. When you negotiate directly, it can be riskier, but

in some instances it can lead to maximum empathy between the

two parties and can facilitate the successful closure of a good

deal.

If you are negotiating directly with the hirer it’s important to:

• Reiterate your interest in the role

The hirer will emotionally feel like they want to close you, but you

must also rationally agree a good financial deal. It’s important

to ensure the emotional goodwill persists through the rational

negotiation.

• Package up your requests

Always package up your requests into one communication

if you wish to negotiate an initial offer. If you are continually

asking for more things it will rapidly burn the goodwill of the

hirer. Remember that making an offer is when the hirer feels the

most emotionally vulnerable, and if the process feels “too hard”

(after rounds of to-ing and fro-ing) they may lose patience and

terminate the offer discussions.

Here are a few things to think about after you have agreed a

package:

Agree a start-date

If this is for an external role, you need to bear in mind how long

your notice period (both on paper and negotiated) might be. It

might be impossible to tell before you resign – in which case

agree a provisional start date with your new employer but make

sure they understand it is subject to change.

Finalise paperwork

Often companies will send you an offer letter (although this is

not necessary), followed by a full contract. Make sure you read

the contract carefully, particularly any non-compete clauses.

Now is the time to try and amend them should you wish to.

If you have an equity component to your offer, ask for a copy of

the shareholder agreement and any other relevant paperwork

pertaining to equity holdings.

Start building relationships

Meet up with your new boss and / or colleagues for an informal

session to discuss plans for when you start.

Ensure that the HR organisation has your relevant details for

payroll purposes and to ensure a smooth on-boarding process.

DURING NEGOTIATION

BEFORE STARTING

Start building relationships with your future colleagues.

GETTING THE BEST DEAL GETTING THE BEST DEAL

If you are in multiple recruitment processes, early suitors

might try to pressure you with “exploding offers” – where

there is a strict time limit. Whilst we wouldn’t recommend

hirers follow this strategy (it is too aggressive and can put

candidates off), some hirers will use it. It’s never a good

idea to accept an offer because of time pressure unless

you are sure enough that it is suitably strong. If you are in

other, less developed but more attractive processes, it is

reasonable to politely decline the time limit and say that

it is an important move for you and you need to assess

your options fully. A confident hirer should give you some

space and encourage you more positively to choose them.

You can also use other search processes as leverage to

accelerate other processes.

It is also reasonable for a hirer to ask you if they are your

preferred opportunity, particularly if you are at offer

stage. You need to think about how you might answer

this question before you get it. Whilst no hirer wants to

feel that they are in second place, it is through misleading

people that relationships are broken. By all means keep

your options open but don’t massively oversell your

interest in roles.

DIFFERENT NEGOTIATION TACTICS

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Most private companies seek to reward their employees

(especially the most senior ones) with some form of equity

incentive; these can be quite different to the types of equity

structure found in public companies.

Private companies usually have a pool of stock, typically between

10-15% of the company, available to incentivise key employees.

Whilst the founders tend to hold equity, options are used as a key

tool to attract and retain other senior executives. As you become

more senior, your equity incentives tend to grow exponentially.

Mid, or even relatively junior staff within a VC backed company

hierarchy might all have stock options – but these will likely be of

much less potential value than those which senior members of

the executive management team might possess. Candidates who

join companies at earlier stages can typically expect a greater

proportion of the option pool compared to those who join later,

as the business is likely to be less valuable when they join.

Private companies typically offer equity incentives in the form of

stock options. A stock option is simply the right to buy a share at

a particular strike price (more on this later) once it has vested.

Vesting is a key concept associated with stock options - it is a

period of time that you must wait before you can use the stock

option. If stock options instantly vested when a new employee

joined a business, the risk would be that the employee could

leave and retain the options without having spent enough time in

the business to contribute to the value created.

Most private companies will offer a “four year vesting period

with a one (or two) year cliff.” A four year vesting period simply

means that it will take four years before you can exercise all your

stock options. The one year cliff means that you get the first

quarter of your options, all at once, on your first anniversary of

employment. Typically, your remaining unvested options would

then vest at a constant rate every quarter for the remaining

three years.

The reason why private companies like to have a “one year cliff”

is because most unsuccessful new hires will leave in the first 12

months – and this mechanism means that they don’t leave with

equity.

COMPANY COMPENSATION STRUCTURES

PRIVATE COMPANIES AND EQUITY STRUCTURES

New compensation structures, and in particular equity schemes, can be confusing.

5


STOCK OPTIONS AND VESTING

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A strike price is simply a fixed price at which you have a right to

buy a share once the option has vested. For example - if the share

price of a company is £1, and the strike price is 10p – then there

will be 90p worth of profit for every stock option that person

possesses. A strike price is therefore a price at which you can buy

a share – and if that price is below the true value of a share, then

it is definitely worth using.

If you have employee stock options in an investor-backed

company, you will need them to realise through:

• Vesting over time; or

• A “change of control” in the company

A “change of control” typically occurs in one of two scenarios:

The company floats on the stock market

In this instance, your vested stock options (after a lock-up period

post IPO that prevents employees cashing out too early and

sending a bad signal to the market) can now be used. A vested

stock option gives you the right to buy a share at a particular

strike price. If that strike price is lower than the price of a share

in your company on the stock-market, you will make a profit on

each stock option of the share price minus the strike price. If the

IPO happens before all your options have vested, your unvested

options will keep on vesting over time, and you can use them

once they have vested. Once public, a company may also seek to

create new equity incentive structures to motivate key staff –

but these will likely be very different in nature.

Trade sale or merger with another company

In this instance any vested stock options will have to be bought

by the acquirer on acquisition. Just as when a company goes

public, when a company is sold to another business, there will be

a price per share that the acquirer is paying. If the strike price of

your stock options is below that share price – then the difference

between the two is your profit per option. The permutations are

much more complex in this scenario when it comes to unvested

options compared to when a company goes public.

It could be negotiated as a condition of sale by the management

team of the selling company that all unvested options be paid out

by the acquirer. This would probably increase the cost of buying

the company to the acquirer – but would obviously be attractive

to the management of the acquired company. The acquiring

company might want to create a new equity incentive scheme

within the new business to keep key staff – or of course it may

also have its own staff that it intends to use for key roles going

forward.

Accelerated vesting is sometimes offered to the most senior

executives and is only common for CEO roles. Accelerated

vesting means that a proportion of your unvested options (e.g.

25%, 50%, 100% accelerated vesting) instantly vest when certain

“triggers” are fulfilled.

A “single trigger” is an accelerated vesting clause where the

“trigger” is usually a change in control of the company. This is

often unpopular with the acquirer – as they will have to pay you

out on acquisition, and may also have to re-incentivise you with a

new equity scheme if they wish to try to keep you.

Companies may therefore offer accelerated vesting clauses

to the most senior employees with a “double trigger” – where

both triggers must be fulfilled for the clause to apply. The first

clause would be a change of control, and the second that the

employee is no longer wanted in the new business. This can be a

nice compromise as it protects the employee in the event of them

being acquired and not needed anymore, without being too much

of a disincentive to the acquirer.

STRIKE PRICES

A strike price is simply a fixed price at which you have a right to buy a share once the option has vested.


USING STOCK OPTIONS ACCELERATED VESTING

How do I know whether I have an attractive strike price or not when the company is private?

Try and find out whether there was a recent funding round and what the price per share was at that time - this is a great indication if you can get it. Failing that - are there some public businesses that give some sensible comparisons?

Often VC backed companies will give quite low strike prices, in order to incentivise their staff - certainly at below “true share price value” - but make sure you have done your homework to understand the realistic potential value of your options.

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DILUTION AND PREFERENCE SHARES

VC backed companies often take multiple rounds of funding, and

will often issue new shares once new investors put money into

the business. This means that the percentage of the total shares

that an existing shareholder possesses will decrease – and this

is known as dilution. If you join a VC backed company and are

offered stock options – it is always worth asking whether there

will be any further funding rounds and therefore dilution of your

stock. However, it is of course also true that further funding will

enable the business to scale and therefore you may well have a

smaller slice of a much bigger business.

You should also find out whether there are different classes of

shares. Investors will often get preference shares in a business

– meaning that if there is an exit, the preference shares get paid

out first. This protects the investors in the case of a low exit, but

can be disastrous for employees as they are left with little of the

pot once the investors have cashed out first.

Some companies operate a “Good Leaver / Bad Leaver” clause

where a bad leaver might be defined as someone who resigns

after a short period of time or moves to a competitor. In that

instance, they might have to sell back equity they hold at cost

price, whereas a “Good Leaver” will be able to keep their equity

on leaving or sell it at a much higher price.

RESTRICTED STOCK UNITS

Restricted Stock Units, also known as RSUs are often used by

large public companies to incentivise their staff, particularly

at a senior level. Because large public companies often have a

relatively stable share price, stock options are a less effective

form of incentivisation as it becomes difficult to realise

substantial increases in market capitalization, and offering stock

options priced at below the current share price would incur taxes

at the point of receiving the option.

A Restricted Stock Unit is simply a unit of stock that is granted

to an employee when certain conditions – which usually involve

either vesting over time, or certain performance milestones

being achieved. When you are granted RSUs, you will have to

pay income tax once the conditions for giving them have been

fulfilled, but this will often be taken at source (you will receive

your net amount of RSUs).

A key difference between an RSU and a stock option is that an

RSU has worth regardless of company performance – as the

“strike price” is essentially zero – you are gaining a share. The

strike price of a stock option may be not much lower or sometimes

higher than the value of a share, and therefore of little or no

value depending on the circumstance. Smaller companies may

use RSUs too as a mechanism to incentivise employees where

company growth is unlikely to provide sufficient upside.

Make sure you understand the company valuation today and what it could be worth in the future.


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In a global economy, high growth tech-firms look outside their

domestic market to access larger talent pools to find more

experienced executives or individuals with very specific skill sets

- this means relocating executives.

Whilst this can be a great option or even a necessity for many

firms, relocation brings its own challenges – quite simply:

• c. 80%+ of candidates are likely to rule themselves out of a

relocation for personal reasons and this means you need to talk

to many more candidates to reach a shortlist; and

• There is an increased chance of the move not working out in the

medium-term, due to family or cultural issues

Be realistic

Candidates from abroad (e.g. US) often seem attractive, but

ask yourself whether you can realistically attract and afford

the candidate with high associated costs. If there is sufficient

local supply of talent, then there is probably no need to look

internationally.

Understand their situation

It is important to recognise that the decision will be made by

the candidate and their family – invest time understanding

their personal situation, stress-testing how realistic a move is

at an early stage and then if appropriate bring the family to the

new location to consider the practicalities of the move. Ask the

candidate directly why they are looking to relocate, whether

they have seriously discussed the move with their family and

where there are potential blockers.

Key areas to probe include:

• The age and situation of children?

• Educational and health requirements?

• Their partner’s situation and whether they work?

• Are there other personal factors that will tie them to a specific

location?

• What are their personal and professional concerns about

relocation?

Simply by asking these questions you will start to form a picture

as to how seriously the candidate has thought about the

ramifications of a potential move.

In our experience introducing executives into the interviewing

process, who have previously successfully relocated with the

company, can prove to be an invaluable educational and selling

tool for the candidate. Time spent exploring the practicalities of

the move with someone who has made that transition can make

the difference for both an executive and their family who are

sitting on the fence.

APPENDIX - RELOCATING A CANDIDATE

6

The lack of local supply for certain functions or experience, means that looking internationally for talent can be a great way to identify a broader pool of candidates.


26 27

Financial considerations

It is important to consider the financial impact of relocation on

the candidate’s family.

Candidates will naturally look to maintain or improve their

standard of living and as such there are a number of considerations

that should be discussed with candidates:

• The relative costs of living. Whilst some locations may be much

cheaper on the face of it, you should also consider ancillary costs

– property prices, private healthcare and international schools.

Equally where the hiring company is based in a cheaper location,

leverage this as a key sales point.

• Consider tax differentials.

• Will the candidate’s partner be able to get a job? Will the job

pay competitively to their current package?

• The cost of relocation is substantial and it is reasonable for the

hiring company to pick this up where possible.

• Even where the cost of living is markedly lower between two

locations, you may still find it difficult to persuade a candidate to

take a cut on the headline terms of their financial package.

Reducing the risks

Bear in mind whether a candidate has relocated before? How did

this process go for them? Naturally those candidates who have a

demonstrated track record of successful international relocation

and a global mind-set are more likely to successfully complete a

relocation.

Seriously probe the candidate’s view on relocation. Candidates

are much more likely to talk openly about their concerns to a

3rd party than a hiring company, particularly where they have an

existing relationship. Understand where the candidate perceives

there to be pressure points.

Support the family

It is equally important to persuade a relocating candidate’s family

that the location is a great place to live, as much as selling the

company to the candidate directly. If you can help the candidate’s

family to find a suitable home, great schools for their kids and

provide broader support, then you’ll massively enhance your

chance of successfully closing a candidate.

Be flexible

Relocation always brings complexities, are there alternative

ways to attract the right candidate without a full relocation? For

example, could you consider weekly commutes or time spent

between two locations to attract the right appointment? Could

you allow a candidate to work a day/week from home? Whilst

these solutions may not be ideal, if it enables you to make the

right appointment then potentially it is worth considering.


28

About Neon River

Neon River is a next-generation

executive search firm.

We partner with internet and technology

companies to build world-class management

teams.

www.neonriver.com

Date post:	22-Jan-2017
Category:	Recruiting & HR
Upload:	peter-franks
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