A Private-Sector Job Primer for FSOs and Other State Department Denizens
This piece is a distillation of advice I’ve given to Foreign Service Officers considering jobs in the private sector. A few new folks have reached out this week, so I thought I’d start by writing down some basics for a wider audience. A couple of caveats: this is focused on the private sector, not non-profit roles. It addresses some common blind spots I see rather than trying to be a comprehensive guide. It covers two paths: taking a full-time job, and consulting or going into business for yourself.
Part One: Getting a Private-Sector Job
Get your resume right: use your actual titles
Use your actual titles, even if they don't mean anything to the private sector. Translating roles to private-sector equivalents tends to end up looking silly (most of the time): calling a DCM a "COO" or a PAO an "SVP for Public Affairs." You also risk getting it wrong and looking like you haven't done your homework. You're better served by focusing on the fundamentals: how many people, teams, and resources you managed, what your areas of responsibility were, and what the key results were.
Remember that the private sector has the same title-leveling problems that we do. A PAO leading a section of 4 and a PAO leading a section of 100 can be superficially similar in title. The same thing happens with Chief Marketing Officer and other titles, too. This is part of why being detailed about what you managed and what you did matters.
Understanding P&L, cost centers, and advisory roles
In most firms, most of the time, there are three types of roles. Roles with profit and loss (P&L) responsibility are the main line of most organizations: they exist within a revenue center and they have responsibility for bringing in money. Cost centers are parts of the business that provide essential services but don't bring in revenue directly: global affairs, legal affairs, public affairs, and management are all cost centers. Marketing is an interesting case; it's traditionally been classified as a cost center, but some organizations count it as a revenue center. Roles with a P&L are considered the heart of most organizations. But in many cases, they are the hardest to jump to from government, because government jobs don't have a true revenue-generation function.
Similar to my advice on titles, you shouldn't try to conflate convincing the Department or Congress to fund something with generating revenue. It's more akin to asking the C-suite or the board to fund an investment: a worthwhile skill, but not the same as external revenue generation. Overstating the claim here hurts you.
Companies sometimes create one-off advisory roles for new entrants. Be careful to understand the terms. One version of advisory role sits in a cost center, providing advice to leaders on strategy or risk. Another version sits in a revenue center, where advisors are essentially in sales or growth roles: people intended to build and sustain relationships in the market, make introductions, and help close deals. Before you take an advisory job, you should understand what the terms of success are.
Understand equity versus cash compensation
In government, essentially all of our compensation is in cash and benefits. Not so in the private sector, where stock or equity make up a significant part of compensation. Before you take a job, you need to understand what the total comp is, what part is equity, and what the fair and plausible value of that equity is.
Equity in publicly traded companies takes the form of stock or stock options. Stock can be a grant (delivered now) or it can vest over time. Stock options permit you the ability to buy stock at a certain price (either now or in the future), while Restricted Stock Units (RSUs) are granted typically once you achieve particular service milestones. Equity in non-public companies follows the same patterns with slightly different terminology: equity granted now or equity phased in at service milestones.
A fairly typical vesting plan is a 12-month cliff (i.e., no equity at all if you leave before a year), with full vesting at 4 years and monthly or quarterly vesting in between. This is a moving target, though, so do your research.
You need to be brutally honest with yourself about equity in non-public companies. The vast majority of employees' equity shares in non-public companies are worth very little. You also need to understand, up front, whether the company is venture-backed or not. Many term sheets for venture backing give seniority to investors if a company is sold, which often leaves employee equity worth little or nothing.
Be realistic
Some real talk. State tends to cultivate the idea that as generalists, we can do anything, and that we can trust generalists to figure it out. Most private employers want to know that you can do the job, not that you can figure it out. Many elements of our State Department experience are nice-to-haves or enhancements, but they aren't adequate substitutes for core experience.
Most people don't jump from State to senior P&L or operational leadership roles in the private sector unless they have extensive prior experience that includes that. Going from being a DT DAS to a head of cybersecurity or IT operations? That's sensible. Going from being a political, econ, or PD officer to a partner at a firm? Quite a bit less likely.
That means making some trade-offs. If you're looking to have a full second career, you might consider taking an advisory role with the potential to move over to P&L, or taking a slightly more junior role than you might think is logical so that you can gain the right experience and catch up quickly. State cultivates us to learn quickly. So absorb some of the risk of that yourself, rather than asking a new employer to take it all on.
Ask for what you want
With that dose of realism, my final advice here: be really clear with people about what you're looking for, and be open to their feedback, advice, and referrals. In general, the private sector (especially professional services) is much faster than State to talk about people's parameters of employment: working part time, preference for direct hire versus 1099 hiring, rates per hour, work locations, and more. Don't be a jerk; don't act entitled. But do know that people are likely to be happier to get straight to the point faster.
It's also worth being realistic with folks about job fit. Short story time: a number of years ago, I did several interviews for a senior private-sector job, and I thought to ask about the mix of U.S. lobbying, overseas regulations, and marketing the job would entail. After a bit of back and forth, it was clear that they needed someone with lobbying and domestic regulation experience, not the sort of overseas work I did. I told them that, gave them a few referrals of people to talk to, and we moved on amicably. I've stayed in touch with them, and I think we are both grateful that we were direct in the conversation.
Part Two: Consulting and Going Into Business for Yourself
One path that people ask about in particular is hanging out their own shingle or joining one of the many consulting firms. This deserves some specific advice.
What is consulting?
What people call consulting is better described as "professional services," a larger field where you are selling professional (i.e., white-collar) work to another company. My advice? If you haven't run a business before joining State, you should consider first working through an existing professional services firm rather than starting your own. As you read on, you’ll see a number of reasons why.
People want to start their own firm so they can control their schedule, services, and pricing, as well as take home most of the money themselves. The first three are all doable working through someone else. And the problem with the last one is that you are likely to make mistakes that cost you more than any firm's share would be. Running your own business is an expensive way to learn, with limited short-term upside and nearly unlimited financial and professional risk.
Rate setting — or, how to make sure you aren't paying to work
Two of the most persistent problems I talk about with former State people are that they undervalue their time and they neglect to account for unbilled costs.
First, on costs: you need to fully account for your own costs of taxes, benefits, and overhead. Even if you are employed as an individual 1099 or working through a single-person LLC, you have operating costs that you need to account for in your hourly rate: email and document storage, accounting and tax preparation, incorporation costs, and much more. If you are working through another corporate structure, you may have to pay corporate taxes as well. People underestimate the costs, often by 50%. You need to map out, conservatively, the full range of business expenses at the beginning and build that into your hourly rate, because no one is going to grant you an adjustment if you got the math wrong.
Second, you cannot bill your customers for your time preparing proposals for them, doing business development, managing your LLC, and so on. That is, however, overhead. You address this by raising hourly rates enough to account for the overhead costs you need to sustain. For most people starting out, it's fair to assume that about a third of your time is going to be unbilled if you are actively pursuing multiple opportunities. If you've got a single large customer, it may only be 10%, but it's rarely below that.
The reality is that there is a floor on how much time it takes to cultivate and close a business deal: a small project may take you 10 hours, while a project ten times larger may only take 40 or 50 total hours. The more smaller projects you pursue, the more unbilled time is going to be involved. If you're at a larger business, they'll ask you to assiduously track both your billed time and your unbilled time. There are two reasons why: to better understand and model the overhead, and to actually track what the real project margin (aka profitability) is.
Contract types
There are fundamentally two types of professional services contracts: an hourly contract, and a fixed-price contract for delivery of work. Professionals build estimates for both the same way: you project how many hours of work you anticipate needing for each task, and you multiply that by the cost per hour for each person working on it. The benefit of hourly contracts is that the time worked is what it is: you get paid for actual time worked. The benefit of a fixed-price contract is that you get paid when the work is completed, and you invoice accordingly, regardless of how long it took you to complete it.
Who to work for? Government vs. non-government consulting
There are no right or wrong choices in working for the government or working as a consultant for businesses, but there are trade-offs.
Government contracts
Historically, a lot of State Department folks have targeted U.S. government consulting after retirement. Working for the government is attractive on its face: you know the systems, you often know the people, and you may even know the way contracting happens. If you are doing so while working for a larger company, you’re in luck: there are myriad opportunities available. My advice would be that you transition as quickly as you can to avoid needing a new security clearance.
If you aspire to work for yourself and consult for the government, I’d encourage you to be very thoughtful about what you want to get out of it. If you plan to do it for less than five years, you’d be best served by doing it via an existing firm. If you plan to do it for more than five years and want to work for yourself, you should think carefully about your strategy, because it’s quite a bit harder than it seems. Not all opportunities are open to competition; many services are pre-contracted under contracts of five or more years. Many government contracts are small-business set-asides, requiring you to qualify as a Veteran-Owned Small Business, a Women-Owned Small Business, or one of a number of other categories. Getting a prime award (aka working directly for the government) also includes a huge amount of compliance overhead: IT security, accounting standards (and establishing approved rate cards), maintaining security clearance, and much more.
There’s one more hurdle, too. Many of us know things that the government needs. That doesn’t necessarily mean that they have the desire or the money to buy them. Yes, you could spend substantial time trying to convince them, but that’s more unbilled time that you will have to account for somewhere.
If you want to go this route, I’d recommend one of three choices: (1) work directly for a larger company that has already won work; (2) sell your services through a larger company, better known as subcontracting; or (3) plan to invest several years in mastering government contracting while pursuing other opportunities in tandem. The first two will probably mean lower rates, because you are a subcontractor and you are likely going to be selling work for which the price has already been negotiated. The third means that you’ll be investing considerable time and effort up front.
Private-sector contracts
The private sector has a completely different cycle for buying professional services: fewer procurement rules, quicker decisions, fewer compliance costs, and more buying from people they know. It’s a much more forgiving market for new and solo entrants. The big challenge here is that most private-sector contract opportunities are never posted publicly anywhere. You have to have relationships that you can draw from to surface the opportunities.
This is a place, too, where you need to be very clear up front about what you do and don’t do. It’s very easy to end up in a position where you thought you were providing advice on investment risk but instead are expected to use your relationships to lobby in the United States or abroad on policies or regulatory matters. That may be what you want to do, but if it isn’t, it’s worth being clear up front.
Wrapping up
There’s more advice to offer on what kinds of jobs make sense to exit to, but that’ll likely need to be a different piece.
My goal was to give some basic framing thoughts for thinking about the transitions. It’s worth remembering: there are no right or wrong answers here, only good and bad fits for you. As we wrap up, I want to come back to two points. First, the private sector tends to reward people who do their homework. A big part of that homework is understanding how business works and how your goals can fit into it. Second, a large part of this is about risk tolerance: there are higher reward opportunities, but you’re likely going to need to absorb some of the risk yourself. Only you can decide what the right choice is for you.