In our last webinar, How to Build a Performance-Based Compensation Structure, we teamed up with Nolan Church, Co-Founder & CEO of Continuum, and Al-Husein Madhany, Head of People at Moveworks.ai, to take a deep dive into this tricky world.
Our discussion included actionable advice on how to navigate the tricky issues companies face when designing and implementing a performance-based compensation plan. We had several particular areas of interest that our panelists and participants engaged around:
- Executive Performance: To Parity or Not to Parity?
- Measuring Individual Performance in Different Departments
- When to Start Building Levels to Employee Comp Growth
- How to Scale Your Comp Plan As You Grow
Below we’ve pulled together key takeaways as short form video snippets, straight from our panelists themselves. Enjoy!
Executive Performance: To Parity or Not to Parity?
Language is the material of intention. Just as job titles are language signals, invented for a very specific purpose in our business culture, the words organizations use about how executives are paid are critical. Aligning your team on language from the top is an essential lever for executing a compensation philosophy.
Here’s what our panelists had to say about this issue:
- “Especially as the company scales, you have to get more specific about what performance means to the company. You have to build out the leveling framework, because employees will want specifics as the organization grows.”
- “Paying for performance is not just about years of experience. It's also about ambition, particularly in younger stage companies. That should be part of the rubric as well. Oftentimes years of experience is an easy out in terms of leveling, but if you’re under a hundred employees, it’s about ambition.”
Measuring Individual Performance in Different Departments
Each team at a growing startup, from sales to marketing to engineering to customer success, is going to define performance according to their own metrics. What’s more, depending on if you’re a b2b or b2b company, additional variables come into play.
As we discussed in our webinar, just because someone hits their quota, doesn’t mean they’re a high performer. It’s all about how you show up, too:
- “Fundamentally, performance and feedback should be perceived as a gift and it should be received as a gift and given as a gift and it should be fast but not furious. Under one hundred employees should really have a fast feedback culture that doesn't depend on quarterly or semiannual performance management, because then it's too late."
- “Are you a jerk? Are you hard to work with? Do you have a large ego? Is the customer success team tired of you because you're selling a product that they can't even build or implement? How you sell is as important as what you sell when it comes to sales and marketing functions.”
When to Start Building Levels to Employee Comp Growth
Tech startups are rife for innovation, which means founders are often entering (or creating) a new space that nobody has ever heard of before. Whether it’s blockchain to defi to comptech, building levers will eventually be important for determining employee growth
Our panelists recommended:
- “If you don’t have leveling and you have five hundred employees, I really wonder how it's going internally there. That’s often when comp decisions become more subjective and more based on politics. If you want an organization that is more specific and objective, I haven't figured out another way other than levels.”
- “If you want to get more specific and objective with comp, you have to start with levels. And as the company scales, the first set of levels won’t be perfect. It’s always a work in progress. One of the minefields that we see people stepping on is trying to have this perfect system done the first time.”
How to Scale Your Comp Plan As You Grow
As your company approaches its later stages of fundraising, you should ideally have a deeper understanding of what your compensation levers are. But setting expectations is paramount. If you raise a new round, you can’t pay people an old number. Robust internal modeling will be essential so your compensation system can evolve as your operation scales.
Here’s how our panelists reacted to this issue:
- “The role of human resources is to be highly intentional about when the company is moving from one stage to another, because everything changes. For example, there was a 700% increase in my strike price from Series A to Series B."
“When you get to Series B, you have to start being more competitive with cash because as more people get hired, you cannot offer the same amount of equity that you offered to early stage employees. That basic trend continues throughout the company's life cycle, all the way up to going public.”
Remember, your role as a people leader is to ensure that there is equity with your performance based compensation. Don't shirk that responsibility! Your team is counting on you.
If you weren’t able to attend our webinar but would like to view the recording, you can sign up to watch How to Build a Performance-Based Compensation Structure.
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