By Caitlin Allen, Jan 31, 2022 10:50:00 AM
While founders and CEOs of high-growth companies have many competing priorities, it’s hard to argue that attracting, hiring, and retaining exceptional talent is not high on their list.
Realistically, the way to accomplish these mission-critical tasks is through extending attractive and fair offers, whether that be cash, equity, or a clear path for growth and career development. The challenge lies in balancing the priority of paying employees competitively with the priority of carefully managing cash and equity burn. Because of this, CEOs know they must be thoughtful when it comes to compensation strategy and hiring. Executing an intelligent compensation program can aid founders in hiring well and safeguarding their businesses against things like dilution and excessive burn.
All of these decisions are a part of a larger effort, known as compensation intelligence. Compensation intelligence is the practice of making the absolute best decisions for your business—anywhere compensation is concerned. Compensation touches many aspects of an organization, including recruiting, retention, diversity, equity, and inclusion (DE&I), and performance management. Due to its sweeping impact, founders and CEOs need to be especially clued into this practice.
Compensation intelligence is the practice of making the absolute best decisions for your business—anywhere compensation is concerned.
Here are five ways we see CEOs and founders benefit from compensation intelligence most.
Attract and retain top talent
In the early days of a business, hiring rockstar employees is a critical piece of ensuring high growth. As a founder, you may want to hire the major-league talent found at Big Tech companies, but often cannot come up with the cash to compete with those salaries. Offering compelling equity is one way to compete and entice the right talent to join you on your mission, but how you position that equity — as well as how to craft offers in the context of what your peers are offering — are important to consider as well.
With compensation intelligence, you can holistically understand what others in your industry, and of your company size and funding stage, are paying. With that full picture of the market, you have hard data to confidently compete. You’ll know what combination of cash and equity to provide, as well as the most you can reasonably afford to offer them, while maintaining the health of your business.
Deploying a smart compensation strategy can ultimately increase offer acceptance, employee engagement, and retention, while minimizing attrition and endless candidate searches.
Because many startup leaders (understandably) lack human resources expertise, diving into the complex world of compensation strategy, equity, and investor relations may be new and challenging. Too many missteps could mean squandering cash and ultimately diluting your option pool.
Having compensation intelligence positions founders to accurately develop hiring plans and understand how many shares you should award your new and future employees. It allows you to stay on track with goals and demonstrate to investors that you are making smart decisions with their money.
Protect investor interest
To that point, investors invest in your business when they see an opportunity and when they have faith in you as a founder. Protecting and scaling their investments is core to retaining their trust and potential future investments. Again, compensation intelligence helps — assisting your team in crafting hiring scenarios, extending highly-accepted offers, and keeping high-performers longer.
When investor money is at stake, CEOs need to do more than hope that publicly available market surveys aren’t too off-base. When building companies and making comp-related decisions, accuracy is key, and the only way to ensure accuracy is to invest in targeted compensation strategy tools.
Additionally, many investors live by the mantra, “Invest in people, not companies.” Most founders intuitively know that if you invest in a talented team and give them the resources, freedom, and guidance to build something great—they often will. Because investors want you to cultivate a team of top talent, they will ultimately support any tool you need to attract and retain the best of the best.
Plan for the future
Compensation intelligence provides you with the ability to assess different future-looking scenarios for your business, and make the best decisions possible based on those insights. On the people side, you can see what promotions or new hires may be required down the line, and what the cash and equity burn will be for each scenario.
On the business operations side, you can determine what fundraises may be needed to reach your goals, or what particular acquisition scenarios might mean for the future of your company. Harnessing a tool that enables you to accurately budget and understand your future cash needs can help you and plan accordingly.
Build cultures of trust and accountability
At a certain scale, every high-growth company that lets the market dictate salary and equity distribution develops a gender and/or ethnicity-based pay disparity. When this information becomes exposed, employees leave, and culture and trust suffer.
Compensation intelligence allows for systematic checks on equity while operationalizing progress and fairness within an organization. Founders who invest in this type of practice build their companies on equitable, trustworthy, and transparent foundations. Those that admit they are behind are able to show concrete steps towards wide-spread and individualized resolutions.
For example, let’s say you want to ensure pay equity across your workforce. Compensation intelligence tools with an emphasis on DE&I can identify differences in pay equity across gender and ethnicity, so you can act quickly and efficiently to close the gaps.
The ways in which founders or CEOs manage their companies needs to evolve to enable strategic decision making that powers growth, and how one manages compensation strategy is a primary example of that. Operating in the dark, or allowing your teams to operate that way, will only lead to disappointing outcomes for yourself, your employees, and your investors.
All of these benefits are reasons why modern employers and employees rely on OpenComp to confidently make the best business and career decisions. The Compensation Intelligence Platform by OpenComp offers the only reliable compensation data, benchmarks, and insights for high growth employers and employees, from seed to pre-IPO.
Caitlin Allen is VP Marketing at OpenComp and has served in similar roles at Happy Returns, Lyft, and Andreessen Horowitz. She also writes about topics including marketing, sales compensation, and happiness. Connect with her on LinkedIn here.