?? How a Killer Salary Structure is Startup Jet Fuel, with Calvin Croskey
How to establish a scalable compensation strategy for your startup: insights & strategies from Director of Compensation Advisory at Sequoia, Calvin Croskey, SPHR, SHRM-SCP .
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???How a Killer Salary Structure is Startup Jet Fuel, with Calvin Croskey
You’ve built an MVP, you’ve proven the concept can drive revenue by acquiring loyal customers, and now it’s time to scale.
The future is bright.
To do that, you need the best of the best talent to execute on the vision.
To do THAT, you need to offer competitive compensation, benefits, and equity that will lure these highly sought-after individuals away from blue-chip tech companies with deeper pockets. Much easier said than done.
Bill Campbell , the famous Silicon Valley executive coach, once said,
“It’s not about the money... It’s about the f!@#$%^ money.”
Compensating people well demonstrates love and respect and ties them strongly to the goals of the company. Doing so gets the issue of “money” off the table and allows the team to focus on the intrinsic motivators of why they decided to join a startup - your startup - in the first place.
I spoke with Calvin Croskey , Compensation Advisor at Sequoia, about what a compensation structure should look like and the value proposition for any organization.
In terms of credentials, Calvin has spent his entire career as a Compensation Consultant & Advisor, and most recently spent time as the Functional Head of Compensation at a technology startup called Jobcase before joining Sequoia as a Director in the Compensation Advisory practice, working closely with Founders, CEOs, CFOs, CPOs, and Head of Total Rewards of early stage startups and global enterprises to develop their compensation & equity practices.
He shared that the ultimate goal of a strong compensation philosophy is to reduce the friction of hiring and retaining the people you need to reach the mythical J-curve growth that startup founders dream about. If you pay folks competitively, fairly, and transparently, it should eliminate future potential problems—both fiscally and culturally— that may arise.
Why it matters: A well-defined salary structure is crucial getting the right people through the door. It ensures that your employees are paid fairly and competitively, which boosts team member morale and engagement. Plus, it promotes pay transparency and compliance with labor laws, creating a positive work environment for your employees and making their choice of “choosing your startup” to work for everyday, easy. So, what is a salary structure?
Minimum: Lowest value a company is willing to pay for a position
Midpoint:?Approximates the target market positioning for a particular position
Maximum: Highest value a company is willing to pay for a position
Take a closer look: Think of a salary structure as a framework that makes determining your people spend easy and turnkey. Not only this, but as employees climb the organizational hierarchy over time, there are guardrails in place to ensure their promotional compensation package is offered effectively and fairly compared to others currently holding a similar title. The main goals here are to:
There are direct benefits to doing this well. It adds transparency, aids in budgeting, attracts and retains critical talent, links pay to performance, ensures equitable compensation, keeps you competitive in the market, and supports legal compliance. But there are indirect value adds too:
What to Consider: Establishing pay bands is not the end of the road. It’s (hopefully) just the beginning. The leading market practice is to refresh your salary structure every 1 to 2 years, with “hot” jobs and business critical functions (e.g. Engineering in a technology/software-based company) possibly being refreshed more often.
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This isn’t to say that you should fully refresh your bands from the ground up every year. If you’re experiencing low turnover, high-offer acceptance, or have minimal cash budget for pay changes, then it’s okay to keep doing what you’re doing and be more intentional / targeted about exactly where your precious capital is spent.
For the year-end compensation cycles where time, resources, budget, etc. are limited, a common “quick-fix” is to increase bands using a blanket approach, such as increasing the midpoint by a certain percentage across all functions or even keeping the bands constant year-over-year. This saves on administration, boosts speed, and increases simplicity— but only if the salary ranges are already effective and other notable people analytics are proving OK such as turnover, offer acceptance rate for key positions, and employee sentiment around compensation (via company-wide engagement/pulse surveys).
Takeaways: 34% of early stage companies (<100 employees) don’t have a formal compensation process, which highlights the major opportunity for employers to get this right.
Next week, I’ll share an outline of influencing factors to refreshing salary structures, what the band refresh process should look like, along with some recommendations and implementation advice.
In the meantime, here’s a sneak peek into Sequoia’s 2024 Compensation Practices Report:
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?? Quick about me:
I’m Cris Cafiero, and for nearly a decade, I’ve collaborated with founders, CFOs, and people leaders of early-stage, venture-backed startups. As an ex-Zenefits, ex-ADP, and now Business Consultant for Sequoia, I help startups build scalable people management infrastructure and maximize their people investment through compensation & benefits strategies.
Based in LA, I share my life with my wife and our two dogs. I’m into NBA drama, Marvel, reading, video games, computer-building, real estate investing, and lifelong learning.
I care about helping startups build a thoughtful, people-first culture and hope you find the topic as interesting as I do.
The intent of this newsletter is to provide general information. This information/analysis does not necessarily fully address any specific legal issue or situation, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish any attorney-client relationship between any of readers with the author. Questions regarding specific issues should be addressed directly with your respective legal or tax counsel (or directly with the San Francisco Office of Labor Standards Enforcement).? Sequoia makes no warranty, whether express or implied, that adherence to, or compliance with any recommendations or best practices will result in any particular outcome.?Federal, state or local laws, regulations, standards or FAQ guidance is subject to change and the reader/listener should always refer to the most current requirements/regulations before taking any action.
The views and opinions expressed by the author are their own and do not necessarily reflect the official policy or position of their employer. Any content provided by the author is of their opinion and the content is for informational purposes only and should not be construed as legal or financial advice.
CPA (retired), Startup Advisor (CFO and Controller for early stage tech and internet companies); Highlights for Entrepreneurs newsletter
2 个月Hey Cris Cafiero, perhaps you could tackle the topic of staying competitive when you're still in the early stages and cash flow is tight. Other forms of compensation, etc. Thanks for the insights!