How High Is Your Career Risk Tolerance?

If you are a staffing executive with ambitions to make it to the highest leadership echelons, congratulations! This is a great time in the industry to have bold career goals. Private equity (PE) firms continue to invest with exuberance in staffing companies, giving high performers another strong path into the executive suite, as well as impressive earnings opportunities. The question for you and your ambitious industry peers is this: “Which path will you take?” Is a high-risk, high-rewards track right for you? Or, would the corporate pathway better suit your career trajectory?

To choose the right track, consider your career risk tolerance. Are you a risk taker who is eager to be at the helm, lead assertively and take a chance on powerful wealth creation opportunities? Or, does a systematic rise to higher leadership levels and pay opportunities fit your style? In this blog, we take a high-level look at the three most common paths to attaining the CEO/President role in staffing and weigh the risks and rewards.

Path 1: Inside an established staffing firm. Choosing to cultivate your career within an established staffing enterprise might be seen as the low-risk path to C-suite. That of course depends on how you look at it. Financially, the risk is low as it doesn’t require personal investment. Established firms also offer top performers and emerging leaders rich career growth opportunities from training and mentoring to development programs. The risk of your skills declining are few. In addition, an established firm of substantial size will offer rising stars a variety of directions to choose on their way up. From operations and sales to finance, marketing and even technology, there are many ways to reach upper management levels at large firms. Many of today’s staffing powerhouses also offer leaders opportunities to work and lead globally, going beyond U.S. borders to engage in the international marketplace.

So where is the risk in established firms? Time, competition and influence. Within established firms, it can take time to move up depending on company culture and the existing leadership team. Waiting to inherit a senior opportunity can be risky if you are an executive eager to move up quickly. Competition among internal talent is also a risk. If the company grooms many high performers in house, you risk hitting a certain level where there is a glut of senior management and fierce competition for top roles. Finally, there is the risk of putting your career in someone else’s hands. Inside an established firm, you are agreeing to predetermined career paths and protocols. Depending on your personal preference, the stability and resources of an established company may well be worth risking some career path autonomy.

Path 2: Private equity firms. Today, PE firms are investing in staffing firms at record rates, which means they are often on the hunt for executive leadership. The financial rewards for these leadership opportunities are tremendous, but that is also where much of the risk lies. The expectation from PE firms in terms of compensation is that the CEO or President would take less in cash and more in equity. These equity opportunities have the potential to be extremely lucrative.

In most cases, PE firms have a defined growth plan that is linked to CEO/president payout. The formula is usually this: “We want to grow the company X times from where it is today within Y years, which will lead to a payout of Z.” As CEO, for example, you could be granted 2% equity in the company and earn $2.5 million when the company sells. At that point, you reinvest or move on to new opportunities. It’s an exciting chance for ambitious staffing leaders to take on big responsibilities and work toward a bold financial payout.

Where is the risk? First, there is no guarantee on when or if they sell, and thus the large payout, will happen. The lower salary could mean lower earnings overall if the growth goals are not met or markets change. A staffing leader considering this path must think of it as investing part of one’s earnings into the opportunity. Investments come with risk and a chance they will not pay out. The same goes with PE roles. The risk is higher but financial rewards can be very great if all goals are met.

Path 3: Starting & growing your own firm. The final path is making your own path by building your own firm. Few industries have lower barriers to entry than staffing. To start your own staffing firm requires minimal upfront infrastructure and resource investment. Not risky at all, right? Wrong. Most staffing industry entrepreneurs are risking their own personal finances (mortgaging homes, borrowing from friends/family or taking on bank debt) in order to grow a firm to a size where earnings and growth are strong. That is a high-risk investment but, when successful, owning your own staffing firm offers substantial financial rewards.

In terms of career growth, the risk of building your own firm is both high and low. As the business leader and owner, you are in the driver’s seat and few experiences fuel learning and growth more than being in charge and responsible. You are driving your own destiny and owning (literally) the opportunity to determine how, where and why a business grows. Should the startup fail, that can and will set your career back, but for most entrepreneurs that is one of the motivations. Putting your name and money on the line increases their drive to succeed and grow.

Risk Is a Constant

You can’t avoid risk in work or life, but all good business leaders know that you can, and should, decide which risks matter to you. From earnings to influence to competition, every path forward comes with risk. Decide which risk you are willing to tolerate and get on your journey to the top.

How High is Your Career Risk Tolerance originally appeared on TheStaffingStream.com.