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Private Company Compensation Planning: 5 Essential Steps
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Transcript of Private Company Compensation Planning: 5 Essential Steps
1Copyright 2017, Advanced-HR Inc., All Rights Reserved. 1Copyright 2017, Advanced-HR Inc., All Rights Reserved.
By: Dee DiPietroCEO, Advanced-HR, Inc.
Private CompanyCOMPENSATION
PLANNING:
5 Essential Steps
2Copyright 2017, Advanced-HR Inc., All Rights Reserved. 2Copyright 2017, Advanced-HR Inc., All Rights Reserved.
Gather
information &
structure
organization
Conduct a
preliminary
executive
review
Meet with
department
heads
Build your
compensation
program
Finalize the
compensation
plan
3Copyright 2017, Advanced-HR Inc., All Rights Reserved. 3Copyright 2017, Advanced-HR Inc., All Rights Reserved.
Gather Information &
Structure Organization
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Accurate data comparisons, hiring projections,
and company hierarchy are critical for a
successful and affordable compensation plan.
WORKFORCE HIERARCHYDATA
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PRO TIP: Private company base salaries are determined by specific
labor market competition for top talent, not just market data.
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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
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
7Copyright 2017, Advanced-HR Inc., All Rights Reserved. 7Copyright 2017, Advanced-HR Inc., All Rights Reserved.
Conduct a Preliminary
Executive Review
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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
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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.
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Meet with the
Department Heads
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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
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PRO TIP: If your company values product like engineering, use the
same pay ranges, despite differences in market data.
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PRO TIP: If QA is integral to your company’s development process,
consider paying with the same ranges as the development team.
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PRO TIP: If data is scant, use ranges from other departments based
on value relative to your company.
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Build your
Compensation Program
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Create company ranges to develop a market
strategy and smooth erratic or flawed data.
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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
$
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PRO TIP: Some companies forgo a bonus plan and increase salary
ranges to address total target pay.
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PRO TIP: Consider using the same equity ranges across all departments
for employees in a single country.
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Finalize your
Compensation Plan
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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
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PRO TIP: Include a statement about strategic market position and targets for pay and equity, including refresh.
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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
24Copyright 2017, Advanced-HR Inc., All Rights Reserved. 24Copyright 2017, Advanced-HR Inc., All Rights Reserved.
Executive compensation recommendations
based on market analysis and proposed strategy:
• SALARY INCREASES & BONUSES
• EQUITY ADJUSTMENTS & RETENTION GRANTS
• CEO COMPENSATION
25Copyright 2017, Advanced-HR Inc., All Rights Reserved. 25Copyright 2017, Advanced-HR Inc., All Rights Reserved.
Detailed option pool needs for both current
employees and hiring projections:
• TOTAL ESTIMATED OPTIONS REQUIRED
• NECESSARY OPTION POOL INCREASE
• RESULTANT EMPLOYEE OWNERSHIP
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Start on your next
compensation cycle.
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Want help? Option Driver is a platform
designed specifically to guide startups through
each step of a successful compensation plan.
ANALYZE BUDGETBUILDINPUT REPORT
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Compensation plans without the consulting cost.
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FROMResources
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