The psychology of compensation is an interesting challenge we face at Think & Grow when working with both our corporate and high growth customers. Understanding how candidates think about their package is an important first step for companies in building strong and lasting relationships with new employees and ensuring they secure the top talent.
Making the move from corporate to startup (and vice versa) is not straightforward. Discussing like-for-like base salaries across both scenarios fails to correctly capture the whole potential picture and total value worth creation. In that regard, many job offers can fall at the last hurdle, with many left lost in translation.
Benchmarking exercises are important for each role that we hire for in order to understand and align levels of expectations around base salary and longer-term incentives. Candidates ascribe a different weighting to each aspect of compensation, valuing certain aspects of their package more highly than others, so it is important to understand individual’s circumstances, motivations, lifestyles and values to attract and retain the right leaders to a business.
Dangers can arise when searching the likes of Seek and Glassdoor, or reading recruitment firm publications, such as Hays or Hudson, who publish basic numbers to give you a rough idea of range, as they fail to capture the whole picture. These act as a helpful guide but should not be taken in isolation.
Base salaries within larger corporations are traditionally significantly higher than their startup counterparts. Individuals who have grown up in this environment typically place a disproportionate value on the base salary component of their package, even though the potential upside longer-term could be far more significant. Their approach to all aspects of variable pay usually come with a healthy dose of scepticism and so both sides need to have an open and mature conversation about the bigger picture.
Higher risk, higher return
A huge attraction for top leaders to high risk ventures is in the equity – the more compelling, the more forgiving they can be on the initial base salary. Startups cannot afford to compete on base salary so instead offer more intangible benefits, such as culture, a seat at the leadership table and of course the longer-term equity valuation. As well, in such a scenario, members of the leadership team are wholly aligned to the company goal, with real team mission and clarity that their personal efforts will lead to the end-prize.
What to pay your employees or expect as an experienced leader is complex. Pay satisfaction, along with the many other factors discussed, is important to job satisfaction, organisational commitment and ultimately revenue/growth intentions.
Disparities in salary benchmarks are largely related to a company’s access to cash (via revenues or funding). Together with StartupAUS, Think & Grow are putting together a Founder’s Salary Guide which outlines suggested salary levels based on various factors, including their revenues/funding level, job function and level of seniority. It aims to provide a transparent guide for founders and HR teams to know how to remain competitive with companies on a similar trajectory, and provides them with a robust internal tool available to all employees to understand where they sit.
With fresh fund raises (Blackbird, Reinventure, Tank Stream), new governmental entrepreneur incentives, an investment into further education and more successful company case studies coming through, the Australian startup ecosystem is ripe for further innovation. Without top talent, this of course would not be possible.
We are currently gathering data for the Guide. To contribute, complete the survey here. The deadline is June 24.
Think & Grow partner Anthony Sochan helps Australian and international business with growth and transformation. His passion is growing early stage technology ventures, and since 2007 he has completed over 200 projects ranging from the organisational design of software engineering functions through to the search for CTOs for some of the world’s most influential businesses.