Private Company Compensation Planning: 5 Essential Steps

1Copyright 2017, Advanced-HR Inc., All Rights Reserved. 1Copyright 2017, Advanced-HR Inc., All Rights Reserved.
www.advanced-HR.com
info@advanced-hr.com
By: Dee DiPietro
CEO, Advanced-HR, Inc.
Private Company
COMPENSATION
PLANNING:
5 Essential Steps

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.

Want help? Option Driver is a platform
designed specifically to guide startups through
each step of a successful compensation plan.
ANALYZE BUDGETBUILDINPUT REPORT

Compensation plans without the consulting cost.
With Option Driver’s automated leveling, you’ll spend time on your
analysis and planning, not data entry. Integrated market data provides
custom data sets based on employee location, level and job family.
Then build a plan tailored to your company strategy and affordability.
Get and keep the right employees for less than others charge for data.
FROMResources
Collaborative data, all levels and job families for free.
Option Impact is the largest private company database with
over 2300 current participating companies. We aggregate both
cash and equity compensation data to provide the most
accurate dataset specific to private, venture-backed companies.
Why pay when you can access for $0?

Private Company Compensation Planning: 5 Essential Steps

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Private Company Compensation Planning: 5 Essential Steps

Similar to Private Company Compensation Planning: 5 Essential Steps (20)

Recently uploaded

Recently uploaded (14)

Private Company Compensation Planning: 5 Essential Steps