Jimmy's blog

My notes on salary and equity

May 29th, 2015

Managing is about making decisions quickly and more importantly, correctly. Every decision I need to make, I can discuss with my team except for determining their salary and equity numbers which is a solo endeavor. This makes it all the more important as a VPE or manager that you get this process right to do justice to your team. It all comes down to benchmarking, a salary/equity formula, and logistics. Here are my notes.

Research benchmarks to determine bands. Here are some resources I’ve found useful:

The best resources are the ones that can sort by company size, stage, location, discipline, etc. Startups can not and should not compete with big cats like Google or Facebook. Most resources only talk about software engineering but Option Driver for example also tracks hardware engineering.

Decide on a formula to be clear to yourself on what you find important rather than just straight away making a discretionary judgment call. This makes discussion easier with your reports, let’s you give some amount of transparency in the process, and makes you more objective. I like Buffer’s formula: Salary = job type X seniority X experience. They provide a good explanation here.

Establish and communicate clear logistics to have this be the smallest distraction possible in your team. This is a company-wide decision and I’ve been part of both focal and anniversary based processes. Focal is where you review everyone at one time rather than at everyone’s anniversary date. I strongly prefer focal so you can batch process and only have to think about salaries once or twice a year rather than many times a year. This also makes it fairer because management tends to be more generous when we’re doing well and we tighten up our purses when we’re facing a short runway. Some writing on this here and how to deal with the edge case when someone starts right before the review date when doing focal.

Buffer has an open salary policy. That’s pretty progressive. My gut tells me that it introduces more distraction than it is worth and sometimes you do need to make an exception to make that crucial hire at the right time. I put the burden on myself to be fair between team members by doing my homework and with a rule of thumb that I won’t be embarrassed and can justify the numbers in the hypothetical situation that they are leaked.

You can’t really make everybody happy. Just try to make the protocol as fair and objective as possible. In the end, if you’ve really thought this through, you can be confident and firm and don’t need to do much negotiating. Negotiating is a distraction and talented engineers don’t have a lot of patience for negotiating. So if you find yourself spending a lot of time negotiating you’re doing it at the disservice of those talented engineers that don’t. Be willing to let people walk away because they are not happy with their numbers. Even if it’s over as small an amount as $5K difference or 0.001% equity.

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