Recruiting for a start-up in Germany: the essentials
Although known for its large corporate conglomerates, Germany’s business climate is increasingly accommodating to foreign and local start-ups. In fact, StartupBlink ranks Germany as the fifth-best country in the world for start-ups, and the second-best in Europe, behind only the United Kingdom. Thomas Hartenfels, Director at Robert Walters Düsseldorf, discusses the opportunities and pitfalls of recruiting for start-ups in Germany.
How has the start-up scene developed in Germany over the last few years?
Hartenfels: “The start-up scene in Germany is constantly growing. Where initially foreign investors and foreign funding institutions were leading the charge, we now also see increased funding by German investors and we expect this trend to continue.
There are certain aspects where improvements are necessary. Currently the German tax system is not ideal for start-ups as shares are taxed in an unattractive way. And the German law for hiring freelance professionals is relatively restrictive compared to some countries around us. But my expectation is that in the near future the environment for start-ups will become even more attractive.”
Has German talent become more interested in joining start-ups instead of the traditional large companies?
“Definitely, especially those professionals who are willing to take more risks, are intrinsically motivated and have a hands-on and entrepreneurial mentality. Working for a start-up might be less stable than working for a large multinational, but you are rewarded with more responsibilities, a flat organisational structure and a much steeper learning curve. Where in a large corporation you might be limited to only do work from A to F, in a start-up there is a likely chance your work ranges from A to Z.
Taking up such a role requires a certain mindset from professionals, and it is very interesting to see that this ‘start-up qualified candidate’ seems to be becoming the preferred talent to hire. Every company in Germany now mentions that start-up mentality in their job postings, even the big conglomerates. And the really resourceful companies even encourage people founding their own start-up. Because working part-time for one's own start-up develops and sharpens skills that can also be particularly interesting for the employer. The start-up as a training institution, so to speak.”
If everyone is looking for these entrepreneurial professionals, can start-ups compete with larger businesses in the war for talent?
“They can, both on executive level and for the more general workforce, but both require professionals to think long term, and start-ups need to communicate this clearly.
The pay gap between start-ups and large conglomerates can be substantial, with the first sometimes being able to offer a third less salary for executive positions than the latter. But by rewarding executives with for instance shares packages every year, if all goes well, moving to a start-up can still be a lucrative endeavour in the long run if the organisation is eventually sold or becomes listed.
For other professionals the pay gap is significantly smaller, with ten or fifteen percent less salary compared to a large corporate being a realistic number. But working for a start-up can seriously prop up your market value in the future. It is the same as doing a study while working; you’ll learn a lot and will be much more experienced after a few years than when you started, especially as you will take on many more responsibilities than you would at a large organisation. Working for a well-known and well-respected start-up can make professionals the ‘Google candidate’ of the past, with a plethora of jobs to choose from in the future. And that large demand can, in the long run, even mitigate the pay cut that you took when initially choosing to work for a start-up, as larger business will be willing to shell out higher salaries in order to hire you.”
What else should start-ups do to attract talent in a tight labour market?
“Move away from only communicating those poster boy stories of start-up founders who became successful entrepreneurs, and rather focus on internal careers. Think of stories about a professional who started as an intern and is now a team leader. It can make a big marketing difference to point out the career path within start-ups themselves.”
For start-ups in Germany, which roles should be filled first?
“International start-ups that are opening a branch in Germany usually already have the technology and product in place, so for these start-ups the priority is usually client-facing roles such as sales and customer service.
For start-ups founded in Germany, executive roles such as the Head of Technology or Head of Product normally are already in place, but we see that start-up founders rarely have the experience needed to fill a Head of Finance role. So a CFO type role is the one we normally have to recruit first.
Being a CFO of a start-up requires a lot of specific skills. It is not just about doing the numbers, but also about financial modelling and being able to make financial predictions for the future in order to attract and convince investors. It requires a very mixed set of skills.”
Which talent is hardest to find in Germany at the moment, and how do you attract this talent?
“IT talent is the hardest to find. And as to how to attract these professionals: I think it is best to play into their intrinsic motivation. These IT-professionals are often a rare group willing to spend their free time upskilling themselves, think of hackathons and online courses. So as an employer, facilitate these sort of trainings, be innovative and give them a broad scope of working responsibilities.
Regarding attracting talent in general, the trump card that start-ups should play more strongly is their innovativeness and the technological edge that is often imbedded in their core. At the end of the day, working for a start-up is more than a job, it is also a challenging and eventful training programme that will help prepare professionals for future functions. Start-ups should emphasise this unique selling point more strongly in their employer branding in order to attract talent to whom these key characteristics are a priority.”
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