Private Company Compensation Planning: 5 Essential Steps

1Copyright 2017, Advanced-HR Inc., All Rights Reserved. 1Copyright 2017, Advanced-HR Inc., All Rights Reserved.

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By: Dee DiPietroCEO, Advanced-HR, Inc.

Private CompanyCOMPENSATION

PLANNING:

5 Essential Steps

mailto:[email protected]?subject=More Information - Slide Deck

mailto:[email protected]?subject=More Information - Slide Deck


Gather

information &

structure

organization

Conduct a

preliminary

executive

review

Meet with

department

heads

Build your

compensation

program

Finalize the

compensation

plan


Gather Information &

Structure Organization


Accurate data comparisons, hiring projections,

and company hierarchy are critical for a

successful and affordable compensation plan.

WORKFORCE HIERARCHYDATA

5Copyright 2017, Advanced-HR Inc., All Rights Reserved.

PRO TIP: Private company base salaries are determined by specific

labor market competition for top talent, not just market data.


25th

50th

100th

75th

$145K - $170K

Public Company Labor Market Data

$175K - $200K

Apple, Facebook, Amazon, LinkedIn

Estimated at the 75th to 100th ++ Percentile

$190K - $225K

Google

Estimated at the 95th to 100th ++++ Percentile

Market Data Percentile

Mid-level Engineer’s Base Salary (>8 years experience)

Q3 ’17 Private Company

Median Base Salary 3% higher

than Public Company Data


Conduct a Preliminary

Executive Review


Present preliminary market analysis and

discuss high-level topics to align expectations

for company compensation strategy:

1. DATA USAGE

2. COMPANY OWNERSHIP

3. EXECUTIVE COMPENSATION

4. STAFF COMPENSATION

5. HIRING PROJECTIONS

6. LOGISTICS &ADMINISTRATION


PRO TIP: When significant equity is not offered, compare staff-level cash

compensation to public company data to remain competitive in the

broader labor market.


Meet with the

Department Heads


Review employees with the head of each

department to assess function, identify key

talent, and make necessary adjustments:

1. JOB FAMILY SELECTION

2. EMPLOYEE LEVEL

3. CRITICAL SKILLS

4. MARKET POSITION


PRO TIP: If your company values product like engineering, use the

same pay ranges, despite differences in market data.


PRO TIP: If QA is integral to your company’s development process,

consider paying with the same ranges as the development team.


PRO TIP: If data is scant, use ranges from other departments based

on value relative to your company.


Build your

Compensation Program


Create company ranges to develop a market

strategy and smooth erratic or flawed data.


Staff-level ranges are generally constructed with

~10% differentials between midpoints. Combine

or link ranges to create as few as possible.

EXECUTIVE TECHNICAL BUSINESS SALES

$


PRO TIP: Some companies forgo a bonus plan and increase salary

ranges to address total target pay.


PRO TIP: Consider using the same equity ranges across all departments

for employees in a single country.


Finalize your

Compensation Plan


Present high-level overview including budgets,

strategies and messaging for approval from

the necessary parties:

1. PROJECT OVERVIEW

2. EXECUTIVE BUY-IN

3. BOARD OF DIRECTOR APPROVAL


PRO TIP: Include a statement about strategic market position and targets for pay and equity, including refresh.


Staff compensation recommendations based

on market analysis and proposed strategy:

• RETENTION / PERFORMANCE STRATEGY PROGRAM

• CASH NEEDED FOR MERIT, ADJUSTMENT, & BONUS

• EQUITY NEEDED FOR REFRESH & ADJUSTMENTS


Executive compensation recommendations

based on market analysis and proposed strategy:

• SALARY INCREASES & BONUSES

• EQUITY ADJUSTMENTS & RETENTION GRANTS

• CEO COMPENSATION


Detailed option pool needs for both current

employees and hiring projections:

• TOTAL ESTIMATED OPTIONS REQUIRED

• NECESSARY OPTION POOL INCREASE

• RESULTANT EMPLOYEE OWNERSHIP


Start on your next

compensation cycle.


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designed specifically to guide startups through

each step of a successful compensation plan.

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With Option Driver’s automated leveling, you’ll spend time on youranalysis and planning, not data entry. Integrated market data providescustom data sets based on employee location, level and job family.Then build a plan tailored to your company strategy and affordability.

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FROMResources

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Option Impact is the largest private company database withover 2300 current participating companies. We aggregate bothcash and equity compensation data to provide the mostaccurate dataset specific to private, venture-backed companies.

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Recruiting & HR

Private Company Compensation Planning: 5 Essential Steps