If you think you don’t have a compensation strategy, we have bad news. You do have one. It’s doing a terrible job. It makes your company less competitive. The message it sends to employees is: this doesn’t matter. It says that in your organization, their compensation is not a first-class concern.
The good news is, you can start fixing this today. As a startup founder or CFO, you don’t take an ad-hoc approach to engineering or sales. The care and thought you put into these processes becomes part of your company’s competitive advantage. Compensation strategy just means being as thoughtful about employee compensation as you are about the rest of your business.
There’s no one right way to pay. What and how you pay is your company culture, just like what you make and who you sell to. But there is a compensation strategy that matches your company’s values. Choose from the following options:
Broadly speaking, there are three basic pay strategies:
Of course, you can also mix it up. You might have lower wages for hourly workers in a low cost-of-living geography, but you might need to pay up for salaried employees who are otherwise unwilling to leave urban centers. You might have to pay more for specific technical skills that are in short supply, but choose to match the market in business and administrative roles.
The point is to connect these choices with company values. You don’t want to unwittingly punish employees for not negotiating, or overpay poor performers. It’s not just bad business. It’s against the law.
A compensation plan can be more and do more, but getting started isn't so hard.
Even this basic a compensation plan has some great benefits for your company!