Salary and Compensation Roadmap Tips
You don’t build a product without having a product roadmap. Now apply that simple reality to your company to ensure you have a consistent roadmap for talent recruitment, retention and compensation, according to Shannon Schiltz, the head of a16z’s People Practice.
Schiltz and Than Nguyen, a compensation expert, shared those and other thoughts during an a16z podcast. Many of the tips are designed for Silicon Valley companies in start-up mode. Others pertain to companies focused on long-term IPOs. But plenty of the comments can help IT service providers to get their compensation strategies in order.
Here are some paraphrased comments from the podcast:
1. Be David, Target Goliath: Think about how you’re going to pull people from big companies — both short term and long term.
2. First Hires: Use market data to hire your first employees to build your first products or services. At that stage you may not need an overall compensation philosophy. Because most of the hires are equity-minded.
3. Growth Stage: Once you’re in the growth phase you’ll be hiring in diverse ways — chasing multiple directions and talent areas. It’s not about being equal on all levels of pay — it’s more about being consistent especially in terms of how much each person contributes to the organization. Or how strategic the person is to the company.
4. Compensation: Keep it simple at first — focus on your salary and bonus rates; and equity. Keep in mind the size of company, the market fit, etc., and be thoughtful as you compare your company to salary data from the broader industry. That way, when making job offers, you can more clearly articulate the thought process behind your pay rates.
5. How to Stay Competitive With Rivals: Describe to the candidates how you are building out, and how you’ll be consistent about rewarding top performers.
6. Don’t Confuse Philosophy with Process: Is your philosophy for your engineers to pay in the 75th percentile vs. the industry — or are you paying at the 50th percentile rate? Decide for each area of the business, based on tangible industry data.
7. Life Is Different Now: The IT world has been shifting to an “open source’ mindset on compensation, with employees comparing notes more frequently with peers. Be point blank with candidates: No matter what the candidate is trying to negotiate, offer clear reasoning why the best candidate for the job will get the stated compensation for the job.
8. More than Money: The opportunity to work with great talent in a hot market.
9. Equity: For founders, it’s important to sell the candidate on the long-term company vision — and on long-term equity — rather than short-term incentives. And sell the candidate on their potential role in that long-term outcome. Don’t sell the candidates on unrealistic short-term gains. Describe where your company is today — at today’s value — and describe the milestones the company needs to get to in order for the value of stock options/equity to increase. Be genuine and authentic about what that growth is going to require in terms of talent and company execution.
10. Remember, Think Long-Term: Overall compensation needs to support the overall long-term direction of the company rather than short-term, front-end issues.
11. How Does Compensation Change Amid Market Shifts?: Sure, compensation could drop a bit and employees could stick around long-term. And during market corrections, employees become far more focused on salaries (cash) rather than options. But really, if you build your compensation strategy appropriately — and look at the right data — you’ll be able to focus on long-term retention.