Return to site

Compensation to accelerate your company goals

When it comes to compensation of your biggest asset, your staff, your business goals should drive the compensation strategy you set and plan for, and provide a framework to make sure you are fair, transparent and consistent. Compensation is a big expense for high growth companies but there are also many options available to get creative with how you attract and retain the right talent, and motivate employees to jointly achieve company goals. Remember compensation should be thought of holistically, as everything which provides value to the employee from base salary, to performance based payments and stock options all the way to non-financial benefits like work life flexibility, awards and recognition.   

If you are going to grow revenue and scale fast, use incentive plans to align pay and performance to those goals and include all employees, not just sales staff. This is necessary to focus the efforts of employees and should include both long term and short term incentives. To provide long term incentives, startups commonly give equity stock options. It is a good way to conserve cash and still attain high quality individuals who are aligned to growing the value of the company. Certainly, investors would expect you to have one in place to avoid diluting their ownership. On the other hand, you are giving away a share of all future profits, so minimize risk by spreading out over 2-4 years and in small increments like half to 1%. Similarly, vesting should be spread over time, such as a 1 year cliff, where no vesting can happen, and then 4 year vesting period.   

But a company's valuation growth will occur in the future, hence having short term incentives which are annual or quarterly is also important in order to achieve the outcomes you need from your employees. Performance metrics should be data driven, objective, simple to calculate and track and should align with areas waithin the employee’s control. Metrics should be stretch goals, meaning they are achievable but also challenging, as overachievement and excessive payouts will upset your investors. Also becareful unintended incentives and behaviours, such as putting a ceiling on achievement, lack of team work, even fraud,   

Offer valuable perks which cover expenses on a pre tax basis such as parking, public transport passes, lunches and snacks, laptops, grocery store gift cards – all of these could be high value benefits if they are paid frompre tax earnings.   

Never underestimate the value of non-cash compensation. Things like time off, flexible work hours, coaching and training opportunities, recognition and awards are all valued by employees. Use these to entice the right employees who will significantly contribute to scaling your company.