Tuesday, September 1, 2009

Think of your Salary Structure Now

I saw a recent workforce.com article talking about the key compensation issues facing small private companies.
Revenues, market capitalization and net income for companies going public are at their highest levels in years. Now more than ever when preparing for a public offering, companies need to ensure their compensation programs are consistent with public-company standards.
It made me think of HR's role in shaping a start-up that is primed for a public offering, starting with basic salary planning.

Many start-ups shoot from the hip when they bring in someone new. They rush to fill an immediate need and pay varies widely as salaries are based on what's needed to recruit. Stand back and it looks sloppy. It's not ready for prime time. What's needed to be more together?

Well, I'm glad you asked. To start with, you should have basic job specifications (even when employees do multiple jobs), salary ranges, and a plan for bonus and increases.

Once you've detailed the job, you need a market-competitive salary range. Use info from similar companies, craigslist, salary.com, professional salary surveys, etc... There is lots of free information out there. Consider your location (New York pays more than North Carolina), the amount of equity offered, the whole benefits package, your competition and desired retention rates. Some companies have a strategy to pay a bit under market and are comfortable with more turnover and increased recruiting efforts.

Without discussing employees who regularly performs multiple roles, are senior or junior players, or other strategic factors - here is a sample salary range. I propose once you nail down your midpoint target, you go 20%-30% on each side to complete the range. There are more complexities here, I know. For example, there might be a situation where you go a bit above or below the range. Maybe there is more than one range per position/function.

Certainly, I'm not saying you can't still be creative and flexible when compensating. But if your exit plan has the possibility of going public, you need to consider a proper pay foundation. You don't have to publicize this info, but you need to use it to drive your decisions and have it in place when you are building your organization.

1 comment:

  1. A great insight for startups , thanks

    Regards
    Rohit

    ReplyDelete