How to be a fair-pay CEO

A successful CEO must balance incredible demands; they must be experts on their customers, their competitors, their industry; they must raise money, set the vision, build a team. And they must pay their employees equitably. Without fair pay, the employer-employee relationship is fundamentally broken. But achieving fair pay is not a skill that many venture-backed CEOs have.

As CEO of venture-backed Bravado and friend of our firm, Sahil Mansuri says:

When you start a company, you are an expert on how to solve problems for your customers with a product. You are definitely NOT an expert in how to structure compensation plans across departments, build career leveling pathways, etc. These are always things you know are critical to retention and culture, but rarely get prioritized over the foundational challenges of building the product and acquiring users.

This is a mistake, because ultimately you will lose your best talent or break your culture -- both of which will adversely affect the business. Having a partner who can help build the foundation for a scalable organization is a strategic advantage for any entrepreneur. The best companies focus on equity across the organizations, even if they aren't glamorous KPIs in a pitch deck. 

At Renegade Partners, we invest during the Supercritical Stage, which is when a company has product-market fit; has a small but mighty exec team and board; and is working to scale and prep for serious growth. Shorthand for this stage is generally "the B round" or the round that immediately precedes a growth round.

This stage is an especially challenging phase for CEOs because they face the particular challenge of having to build the airplane while their flying it. And doing so without a lot of resources.

So we at Renegade spend a lot of time supporting founders through this stage on key issues we believe they must get right. One key issue in this bucket is pay equity.

The elements in a solid pay equity are fourfold:

1. Remove manager discretion from pay outcomes as much as possible. If you don't, bias is continually reintroduced. Relying solely on anti-bias training is not proven to work (more detail on this critical component here).
2. Use structured rubrics and compensation data to fairly level and promote employees and candidates. De-bias performance conversations by removing open-ended questions from appraisals; such questions often prompt vague and gendered language when women and people of color are discussed.
3. Conduct and act on annual pay studies. Even if you have just a couple dozen employees, you can and should still do this work with a simple spreadsheet. Fix issues you find.
4. Make it a board-level conversation. The public markets already have; private markets should follow suit. Suitable topics for regular board conversations include pay equity study results; and performance appraisals, promotions and terminations by gender and race.

For full article with specific how-to guidance, published in Fortune this week, go here.

And if you're a founder looking to talk about this and other challenges of scale, reach out.