Pat Caldwell - Navigating Compensation at Startups & Scaleups
As startups go through different business stages, organizational structures change. One we don’t talk about enough is compensation. Getting compensation right is essential for startups and yet not always straightforward. Wanting to dive deeper on compensation, I talked with Pat Caldwell, Chief People Officer at Send, an InsurTech company headquartered in London with a global reach. Pat has worked at several startups in Global People and COO roles so he had a wealth of experience to draw from.
We talked about:
The importance of being transparent about pay
Compensation philosophy by business phase
Why comp structures break
The challenges of global expansion
Ensuring comp structures grow with the org
Can you introduce yourself?
Australian by background, that's the accent, although I found myself floating between the UK and the US for the last seven years. I found a home in Austin, Texas. The first half of my career was within BHP, a huge global mining industry. I was in the coal mining part of that,
don't hold it against me. (chuckles) I had a whole variety of different roles, operational roles on a mine site, corporate office roles, getting to work on major change projects, restructures, some M&A stuff. And then floated, I guess my final role in BHP was then getting to step in and be a chief of staff, which at the time was code for, I have absolutely no idea what I'm doing, but let's just roll with it and see how it goes.
And then finally made the jump out of the big 50,000 person business world and landed in London for personal reasons. And I've been floating around the startup scene ever since. Very heavily leaning towards B2B SaaS. That's my jam. Typically the first people, sometimes ops person that's brought into these companies. Real mix of bootstrapped and VC backed companies and a mix of operator roles, board roles and advisory roles here and there, getting to see through a few different lenses across the business. Home at the moment is a company called Send. We're an insurtech company. It's a platform for underwriters. Been here just over a year now. And the same jam as the similar companies, first chief people officer hire, building a lot of that people ops infrastructure from scratch, building out the team and pushing us towards probably a series B next year.
How big is the company now?
85 people across the UK, US, India and Poland.
And how big is your team?
We are a team of two. We're going to keep it that way for a little bit longer. Liam heads up all of our recruitment activity. I get to play around with everything else.
Send is at Series A right now. This is good context because we’ll be talking about compensation by phases. I’ve said this before, but we don’t talk about leadership by phase of business. Leadership is really different as series A or B versus Series D is a completely different kind of leadership. This also includes compensation strategy.
Compensation, like pretty much everything in the People operations remit, tends to break itself every little while, especially if you’re going through stages of growth where your revenue and team is doubling or tripling in size.
I’ve lost count of the number of times I’ve had to say, “That thing we worked on last year is no longer fit for purpose. We need to do it again.”
Yep. Can you say more about what you mean about comp breaking itself? Some might be surprised by that statement.
It’s the layering of complexity that comes into startups that continuously proves compensation needs to be done again. It’s everything from the first time you think about comp. We’ve done that at Send recently because nothing really existed. It was very scrappy. We started to build the first version. What do our levels look like? What is our philosophy? Where are we positioning ourselves in the market?
You do that the first time and you think you’ve got something that works for the business. Then the business does something like what Send did and expand into the US. We built a team in India. We’ve introduced all these new roles. We’ve introduced a sales team, sales enablement and customer success functions. When I dig out the first iteration of my comp framework, it doesn’t really solve it. So each time the business grows and there are layers of complexity, comp tends to break itself and you need to go back to revisit and iterate again. You have to be comfortable doing that.
Compensation, like pretty much everything in the People operations remit, tends to break itself every little while, especially if you’re going through stages of growth where your revenue and team is doubling or tripling in size.
It reminds me of my conversation with Jacob Smith, who was the founder of Packet. We talked about GTM strategy and having to change incentive and comp structures as they added roles to that team.
I never see a company do it the same way. Each time I’ve built one, I’ve never done it the same way. There’s this deep contextual requirement. Where is the sales team at in their growth? What are you trying to incentivize? What behaviors are important? Early on I thought, I’m going to do this once and then I’ve got a playbook. I can just rinse and repeat. That was a terrible assumption on my part because I’m yet to be able to bring anything from a playbook. I just keep having to redesign new things from scratch.
It’s so true. In the startup and scaleup world, those playbooks are often specific to the company, context, industry, people, values of the business and organizational strategy. You can’t grab and carry or set and forget.
Yep. You also have to watch when you’re hiring execs into startups to understand how much of what they bring or propose is based on what they’ve done elsewhere vs how much do they want to get under the skin of this business and why the solutions need to be different.
I think there’s people who really love the building phase, especially at startups. Not having the playbook is ok and maybe even preferable. They like building new things and have to rethink. Is that true of you?
Yeah, 100%. It's what drives me to go join the next startup to build something. There’s an element of taking the lessons and mistakes and having a chance to do it differently and see if you get a different result. Relearning everything you thought you learned about sales variable compensation structures and applying it to a different setting and with different people who have different opinions and backgrounds is the eternal challenge. It’s painful at times but it’s also half the fun.
When doing compensation structures are you mostly driving that process? How involved is the CFO or CEO or does it really vary a lot?
I think it varies by who's in there and what they bring to the conversation. When I came to Send, I was one of later execs that was brought in so the CFO and I have worked together on quite a few different things because I look at things from a systemic and human element and how it’s building our culture but there’s also a commercial challenge and runway we’re managing. We are VC backed and the CFO's input to that is critical.
In previous companies, it's been different. It varies by the order of the people who come in and how involved the founders, CEOs and board wants to be as well as their stage of maturity. At each startup it sits with me to build but I’ve built things in isolation before and they are terrible. There’s also the opposite case too. I’ve tried to get the whole committee involved and got nothing done for a very long time. So there’s finding a balance if it’s my remit to push it forward or not. It's also my responsibility to make sure that people come along with that journey and that people who are smarter than me can also weigh in and help inform that.
That’s the trick of organizational leadership, right? Knowing what I own vs what I work with others on is critical. Knowing when to collaborate vs having autonomy. It sounds like you've gone too much autonomy and then too much collaboration.
Yeah, I've gone both ways, made mistakes both ways. There's a happy balance somewhere in the middle. I feel like you have the real experience of his and can enlighten me on this one. When you introduce the COO role into the organization that seems to add a different level of complexity in terms of what they own and drive. I’ve had the P and O in my title before and it was a very heavy people role but that in itself becomes this remit to work as much across the organization as you are within it.
I never see a company do it the same way. Each time I’ve built one, I’ve never done it the same way. There’s this deep contextual requirement.
Where is the sales team at in their growth? What are you trying to incentivize? What behaviors are important?
Early on I thought, I’m going to do this once and then I’ve got a playbook. I can just rinse and repeat. That was a terrible assumption on my part because I’m yet to be able to bring anything from a playbook. I just keep having to redesign new things from scratch.
Yeah, it’s true. I’ve also gotten it wrong both ways. We think leadership means more autonomy but in some ways it means less. When do I show my plan? Who do I involve? How much? Because involving too many could mean management by committee and you don’t move forward fast enough. You alluded to that.
100%.
The problem with committees too, with compensation is that it's a deeply emotional topic for people. It seems to bring out incredibly strong opinions. It deals with our sense of status, our worth, our livelihood.
I've done compensation work in various businesses for over a decade and I still feel like I'm a novice. I'm having to learn. When everyone’s asking me what we should do I’m like, I don’t know. I’m just trying to work it out as well. But for compensation, everyone’s an expert because everyone’s got an opinion. When you open it up to a committee, there’s good things from having that input but also, sometimes the right compensation decisions for an organization are going to piss a few people off and that’s ok.
I’d love to talk about your thoughts on compensation philosophy by stage of business. The first one is the “good enough” pre-seed stage.
I've been in a couple of startups at this stage. In the good enough phase, compensation feels so far down the list of priorities and probably for good reason. When leadership team discussions are around trying to find product market fit, trying to find traction, trying to find revenue, trying to find the path to be self-sustaining or enough performance to get that next round of funding. Compensation feels secondary to all that because if the business is not there in a year's time, it doesn't really matter what you paid people and how mature your compensation was.
There's a weird dynamic at that stage because the people who join at seed stage often more often than not, tend to have deep motivations and incentives around what they're building and who they're building it with. They're trying to prove something to the market. They may already have some ties in with the founders or investors. The financial motivation, often the conversation becomes more about how to grow the value of the company and the equity than what the cash compensation looks like.The good enough phase isn’t perfectly around pre-seed or seed but it’s a good way to think about it. You don’t need to focus a lot of time on compensation. It just needs to be enough so that people on the deck feel like what they’re working towards is going to be rewarded. If that's deep enough pockets to be a bit more cash rich, that's great. If it's not, it's more equity rich, that's great as well. It’s enough to get through that point. Anything more is probably, I feel like spending your time on something that feels like you're planning too far ahead.
Let’s talk about the late seed stage.
There's a weird little stage that pops up. I've seen it in a few startups in a row now. In this weird little interim phase founders recognize that comp is gonna be a priority. They wanna be better at it, but then they're looking in their bank account saying, well, we can't yet. They’d like to bring up the cash comp of our early stage employees to be more in line with the market. They’re starting to think about the first sales team and what commission structures look like which can be a little bit easier to do at this stage.
So it gets deferred. It's like this deferred compensation stage. It happens in every other stage of funding too. Runway becomes important. There's like an opportunity cost to those compensation decisions as the team gets bigger. So that decision then gets deferred. We're gonna hit X million in revenue or we're going to hit our series A. Then we’re going to go back and do all of these corrections.
This weird little interim phase is risky for a business because if the phase goes on too long you lose institutional knowledge that your early employees have. It’s often the equity that’s still keeping people there, especially if that valuation is predicted to go up at Series A. I don’t envy founders who are looking at their bank account and not being able to make the numbers line up with the good they want to do from a comp perspective.
The transitions between these stages can be quite tricky like that late seed stage.
Mm-hmm. Comp is one of those things that isn’t fully appreciated to the extent that it is in practice. It’s really a pain in the butt to reverse decisions. In some countries you can, in some countries you can't. As a general principle of how you should be treating people, it's very difficult to say, “You know what, those comp decisions we made, those uplifts we did six months ago, now we're trying to extend our runway out.” How do we go and take them back? There's an implied no take backs rule around comp. That applies for all kinds of elements of comp.
So that transition piece is really tricky for founders. I don't envy them at all because they want to do more than what they can. But they're also blatantly aware that if you make this decision now, what are the repercussions of that in six, nine, 12 months time? Are we going to regret that?
How do you weigh keeping your existing team in a great place with needing to also give yourself some capacity to keep growing and not lose customers? It's an eternal balancing act (with compensation).
Right. They have this ember that they’re trying to stoke into a fire for the business. So every single one of those financial decisions plays into it. How do we invest our time? Our money? All of that really matters at that phase.
Yep. And it's entirely opportunity cost, too. They're weighing up, we can do x amount of money into uplifts to bring our team up, or we can divert x amount of money to bringing on a new developer because our team is screaming there's so much work to do at the moment.
How do you weigh keeping your existing team in a great place with needing to also give yourself some capacity to keep growing and not lose customers? It's an eternal balancing act (with compensation).
For sure. Let's talk about the next one, which you call the, “Oh shit, we need to fix this” phase.
This is when I like to join. I often have that weird conversation with founders where they say, “You know what? We probably could have done with this role a little bit earlier, but hindsight is great for making better decisions”. It's the old shit, things have broken phase.
This phase lands in the growth cycle. There's something that seems to happen from 20 to 50 people. It's somewhere in the, in the middle of that. By 50, all this stuff's broken. By 20, it is loosely held together with a bit of sticky tape. Something happens during that period. The team starts to build out further. New managers are in place, sometimes very inexperienced. That often lines up with revenue starting to get up towards the seven figure range and investors start to talk about what a Series A looks like. Series A is probably the best descriptor. Some companies can defer this for a long time; other companies hit it very early. There's something in that 30 to 40 person mark where a whole bunch of stuff happens that creates the oh shit moment.
We had that when I was a COO. I joined around 55. We’d outgrown structures.
It's exactly that. Some is not even stuff you can plan for. Even when you’ve joined at an earlier stage, it’s a balancing act. If things aren’t burning or an immediate priority, it’s not going to get much attention. That’s ok at that point.
In this phase, when the team starts to build out to be 30, 40, 50, or Series A if it’s VC backed, there's a whole bunch of stuff that typically makes the founding leadership teams say, “We need a COO, we need a people person. We need someone to own this because I don't want to.” It's the early employees who now obviously need (comp) corrections, especially if they've come in under market.
As they almost always are.
Yep. Always are. If you join a company and you see senior developers with 1%, 2% equity grants, you can almost guarantee that their salary is nowhere near what they can get on the market. The counter to that is also the same. If you starting to hire in people on higher salaries, you probably also want to be looking at the equity side of comp for not, you're not going to be in the same position, bloating your cap table with huge grants.
So cash compensation generally tends to go up. The equity starts to fade off a bit. Sales teams start to get built. There’s nothing better in my experience for lighting a fire in the world of compensation than sales teams needing the right incentive structures. They’ll be the first to tell you if they're not correct, which I see as a good thing.
It's usually the point where businesses run their first engagement survey, to get feedback from the team. You get questions around, “I just left this company and I had a 20% bonus, can you give me a bonus?” So bonuses, what does that even look like?
It’s this spaghetti web of stuff that culminates in the oh shit moment. Compensation has now just gone from number 200 on the list to top 10. If we don't fix this, the poor COO who comes in at 55 people is going to have to deal with a lot of broken stuff.
Uh-huh. I was that COO. It felt like a lot of digging. No shame, no blame. This stuff is hard to get right. It’s hard to time. Do it too early and you could endanger the whole startup. Bring in a leader too soon at too high of a rate, bring in the wrong leader, bring in a big compensation structure. I mean, it's really tricky stuff.
Yeah. The people who say it’s easy haven’t done it before. Even though I’ve built out compensation for four or five different startups, I always look back and go, “Geez Pat, you did a shit job. You could have done that a lot better next time.”
Your philosophy around compensation is similar to mine around leadership. People say leadership is easy and I’m like, have you been a leader? It may seem complicated, but there are answers. You go through these 50 steps and you get the right answer. No, it’s complex. There’s lots of detours, moving parts, uncertainty, ambiguity. With compensation and leadership, from the outside it looks easy but it’s a lot more complex than it looks.
Yep, totally. It’s tied together. As the business grows, compensation infects every single leadership position. Every manager is suddenly having conversations about it. Most managers who step into their first role aren’t really taught anything. They’re just sent out there to do their best job. Compensation is the ultimate test of a manager, right? How on earth do you have a conversation with somebody who might have been your colleague not that long ago? You're now their manager. You're now talking to them about their pay. As the team grows, it just infects and spreads into more and more management roles. So it increasingly gets more complex.
It gets more complex with things like titles. We’ve all seen title inflation because we couldn’t compensate someone because our framework can’t accommodate them. So compensation, titles and career progression all come together. It’s gets really complex.
Right and then how it plays into progression. It's the new roles you introduce, the people who want to move up and take on bigger roles, all of it is spaghetti.
Exactly. I just wanted to pull that out because we see it all the time. Org stuff is so connected, it can have a domino effect. We might get it conceptually until we hit the “Oh shit phase” which I think of as the org debt phase. Org debt is normal, you just need to dig out.
Yeah. I like that. It's every CTO sitting there nodding, thinking about their tech debt and their organization at the moment.
It’s a spaghetti web of stuff that culminates in the oh shit moment. Compensation has now just gone from number 200 on the list to top 10. If we don't fix this, the poor COO who comes in at 55 people is going to have to deal with a lot of broken stuff.
All right, let's talk about your fourth stage, “the iterate and iterate again” phase.
Yeah, it's what we covered a little bit earlier with comp breaks itself. There's just this almost comfort that you need to build as a muscle. I feel like I'm still building it. I need to go to the comp gym a bit more often. The muscle is knowing that if your business is successfully growing and you're building out new teams, new roles, you're bringing in new customers. There's going to be a comfort and a muscle you need to use to constantly be unsatisfied with what your comp looks like and to be happily unsatisfied with it. This is motivation to go look at it and do it again.
In one of the first startups I was in, I had a labeling convention to remind people that it's never complete. They must be up to reward 5.0 now or something. It's been a couple of years since I left, but it started off as, you know, this is the first reward framework, first benchmarking. Then we started growing. We launched reward 2.0 and then the pandemic hit. Everyone worked remote, all of our New York, US employees disappeared to other states. That’s when comp reward 3.0 came in. Before I left it was reward 4.0. I am a hundred percent aware that reward 5.0 will need to happen and then 6.0. These titles remind people about iteration. It’s not aimed for perfection. This is aimed to be good enough for what we're trying to build in terms of our culture and our people and our ambition for the next six to 12 months. And so that iterate again phase is series B series C-plus in the sales world. You start to hire more customer success people, rev ops people, all people that you want to be incentivizing around revenue growth and retention, but you wouldn't use a typical new revenue commission model for, so all of a sudden your commission plan breaks. Even more broadly than that, it starts to become more governance in the organization. Depending on where you're based in the world, you start to get asked to put your salary ranges on job descriptions or have to report your gender pay gap reporting.
Sunlight is a beautiful detergent on some of this stuff. When it’s all out in the open, you can finally fix it. The iterative model is the only one I’ve seen, or at least that I’ve been capable of building. It’s just getting comfortable with the fact that if you do well, you’re going to need to do it again next year.
Right, you can't just say, okay, it's done now. Set that over there, focus on other things.
Yep. New things come in, comp breaks itself all the time. So the final phase is every other iteration you have to do until the business at least can get to some form of stability, which could be a decade away.
Let’s talk about ensuring comp structure goes along with org design.
It’s one eye on what you need now and one eye on how it evolves. Variable compensation is often a really good way of starting to do it.
At one of the startups, we built a customer success variable comp structure. We said, within your portfolio of accounts you’re looking after, if you can achieve revenue retention rates of X or above, you can get 20-25% of salary as a lump sum bonus. We were trying to incentivize the right sorts of behaviors. In hindsight having an eye on how customer success shapes up when you add more customers, you start to split out more formal implementation – account manager, customer success roles – you start to realize that kind of model is not necessarily going to grow particularly well with the organization.
We had to fix it. We fixed it the best way we could – we tried to make people whole again in their base salary. We took out the comp side of it. The learning that I keep coming up against in every organization is build for now. It has to work for now. If you’re building for what the business will be in three years time, don’t bother. It’s a waste of time. But cast your mind forward a little bit to think about how will this team reasonably shape up? If you’re going to hire a VP of Sales, is that person going to be a CRO? Are you going to have to hire on top of them? How is that going to change how your commission structure works for sales leadership? There’s a lot of things that if I’d had my time again, I might have made a slightly different decision. If I’d had one eye on reasonably predictable things that you could foresee happening to that team and how that might influence the comp decision knowing how irreversible it is or how painful it is to rectify.
It’s a really good point. Three years things could look really different. You might not even be in business. What’s the time scale you think about?
I don't think it's specifically a timescale. It's more evolution of that specific team. I'll give you an example. We've just built out the first makings of a sales team at Send. We've been able to grow to be a multi-million pound business with very little of a sales team. I don't know what that says about us or not, or if it's a good thing or not, but when the founder listens to this, he can tell me what he thinks afterwards.
We're working towards a series B next year. We've got some ambitious goals in place. We've got a very small team who I want to be hyper incentivized to outperform their targets. So I'm comfortable accruing a little bit of debt. It's comfort on the basis of knowing what our next horizon is going to be, the shape of our sales team now. Then reasonably, if we take on a Series B investment next year, we're gonna be expected to build out our sales team even further, which is a natural place to revisit some of those commission structures, our territories, how we support the enablement functions too. So my horizon at the moment for our sales team is looking ahead 12 to 18 months, but it's not because of it being a clear rule.
It's more that it needs to work for us for at least 12 to 18 months. Otherwise we're not going to be in a great position come series B. The comfort with that is also not trying to do anything that would be so terrible to reverse. This is a nitty gritty detail, but we often think of commission for salespeople as either being a broad OTE model you can earn up to a certain amount. It can be uncapped based on your base salaries, where you get the double OTE. At least, I assume that translates across outside of B2B as well. Or you can do it in terms of new deals that you bring in. It’s a lot easier to scale up the broader OTE model to a larger team than it is to be able to constantly make changes to the percentage of new revenue deals that come in where pipeline should increase, territory should increase, and deal size should increase. Therefore you want to reduce the percentage to somehow balance that all out. So it's looking ahead 12 to 18 months to try and make sure it works for us now. We need to perform well, and I think we will over the next 12 to 18 months. It's incentivizing the right things. Most importantly, our sales team are feeling pretty good about it, which is always, you know, tick tick. (makes a checking the boxes sign)
But still doing it in such a way that if we needed to evolve, if we needed to shift to a different model, how hard would it be? So we've taken the more sensible option of how to structure commission that gives us a bit more flexibility down the line.
I love that you think about what’s happening at the organization or event-based. A funding round, a certain revenue or we bring in a leader for a function. It’s looking at the context of what’s going on inside the business.
Yeah. One of the great things that happens when you receive that injection of money, you’ve seen this with sales teams you’ve worked with, they then go and build out the team, try to poach really high performing sales people to the organization. If a salesperson is high performing in one organization and you've just got a very basic commission model, which you will typically do in that “oh shit stage”, you're essentially asking a salesperson to take an earnings gap.
They're already ramped. They're already operating at the top capacity. They're probably closing against target, hopefully, you know, 100% or, or above, if they're a real high performer. You're then going to bring them in where they have to learn a product. They have to learn the people. They might have to learn the industry. They've got to understand the TAM. Unless you have something nuanced in your commission to recognize ramp up, you're going to be asking a high performing person to take an earnings dip for three or six months with the hope that they're on board with where that goes in the future. One of those beautiful comp breaks and breaks again, is that when you then go out and start to poach people from other organizations, your basic, you know, per deal comp plan is going to look pretty shit to them when they're evaluating the offer.
It goes back to who are we? Who do we want to hire? Based on our compensation structure, what can we reasonably offer them? We always want to go after the big dog, the best one but is there a match between what they can do and where we are as an organization? Comp structure really plays into that.
Yeah, 100%.
(Global expansion) needs to be a deliberate approach. It needs to be thoughtful about how we want to tackle this because what you were doing last funding round is going to break very, very quickly if you start to go from one to 10 countries.
As an org development person, I love that. This brings me to global expansion. It depends on how you start but global expansion can change your org and comp in big ways.
It can't not change it. I'm yet to find a model for which you can expand globally without (changing comp structure) unless you've prematurely built this in. It's one of those really strange variables that opens up a whole bunch of considerations that often aren't part of comp philosophy in the “Oh shit” stage.
It's also one that seems to be gathering a lot of opinion at the moment around the broad topic of the future of work. We ended up post pandemic where lots of people moved internationally. If I wanted to go and hire a recruiter in my team in, I don't know, March this year, I could probably have somebody based in South Africa, in Australia, in Spain. There are models now to do that. Then you've got to decide what to pay them. There's a real growing chorus of opinion around how we create greater global equality around wages. I can't shake the ‘strong opinion weakly held’ on this, but as much as I believe in it from an ethics perspective and philosophically, I'm yet to find a path to actually make it work practically.
I'll give you a really simple example. At the moment, we’re based in the UK, the US, India, and Poland. All four markets are incredibly different when it comes to thinking about comp structures. The view around trying to create more global equality around that basis is that wherever you are in the world, you can get paid that wage. That works in principle. If you're paying a wage that is going to be high enough to be able to cater for everyone in the world. So if we were to go in and say, okay, well, we're going to use our UK wage. We're headquartered in the UK. Our first comp framework was the UK. Here's what we're going to pay a developer in the London market. If I was to then flatline that across the board I'd probably find some really great talent across Europe. I'd find some great talent across most of Asia and Asia Pacific. With the exchange rate, surely go into Australia and find some great developers. If I go take a London wage and go into New York or go into anywhere in the Northeast, anywhere on the west coast of the US and offer a wage that is equivalent to London, we've just denied a huge, huge chunk of talent in the market.
So it becomes, well, can you level up the wage and be able to do that? I ran a model at a previous company. It was, let's take our highest. We had three reward frameworks. I took the highest one and ran a quick financial model. I sent it to the CFO to get his reaction. I still don't know how he reacted, but it wouldn't have been positive. I basically ran our North American model across the entire business and calculated what the uplift would be and we’d no longer have been profitable. That was the impact. So I ended up trying to find a middle ground which is not necessarily the right strategy but we tried to create a level playing field where it felt reasonable to do so.
We started using comp frameworks across all of North America that were based upon our benchmarking within the Northeast. So if somebody then moved out of New York and took somewhere in Houston, Texas, they had the mobility and the safety and security of knowing that we weren't going to drop the pay because the cost of living drops. Similarly, though, you know, people move between they've got some of that comfort. The same within Europe. If we had folks, we were across six countries in Europe. If we had folks move from the UK to Spain, again, we can bring that London market salary across the board, and we felt it was applicable enough. The human behavior that drives this is that when people move into higher cost of living locations, they want an uplift to reflect that, which is human and correct.
When people move out of high cost of living into low cost of living updates, they want the surplus to go back into their pocket. That's also human too. I was living in New York during the pandemic. All the people who left New York, but were looking to keep that New York wage and live with their family in a lower cost of living state, that’s very human. I would do exactly the, exactly the same thing. That human behavior makes this difficult. We want the gain, but we don't want the loss because humans don't deal well with loss from a comp perspective.
So we created one for North America, which covered all of the Americas in the end. We created one for Europe, which covered all of Europe, Middle East. And we created one for Asia. We had offices in Singapore. As we grew out there, it would apply to Australia and Japan as well as that team grew. So we could run three reward models that gave us the ability to still give mobility and stability, but also get access to the right kind of talent.
Now at Send, we’ve struggled to be able to do that. We have a US one, we have a UK one, we have Poland, which are also under contract arrangements, not under employment models. And we have an India team. We've had to go hyper localized. So we do it on a country basis. We have a US framework, UK, Poland, and India because we don't have the financial resource available to be able to level up everything to the highest possible point and create global equality. But we're still trying to make sure we can access good quality talent in that local market. So it's this really tricky comp variable that gets thrown into the mix – the more countries you end up in, the greater need there is for a deliberate approach to what global comp looks like.
My way is not the correct way. It's just the contextual thing that I did for that business at the time. And I'd probably make changes to all of them if I had my time again.
(Global expansion) needs to be a deliberate approach. It needs to be thoughtful about how we want to tackle this because what you were doing last funding round is going to break very, very quickly if you start to go from one to 10 countries.
The earlier that you can embed principles of transparency into comp, the easier it is. The longer you wait before you do it, the more painful it becomes. The more you can get out into the open, hold yourself accountable for building something that is fair and equitable and transparent to the team in a perfect world, it happens before the “oh shit” moment.
Once you have that in place, it also gives a much deeper sense of change management for compensation as it evolves. You can have an educational conversation with the team around how the option scheme works. Now we’ve outgrown it and this is how we’re thinking about the next option scheme. Here’s what’s different.
Yeah. How we build out our orgs really influences those compensation structures. It’s not just hiring anywhere. There’s a lot of good reasons why we can’t hire everywhere. Employment laws, contracts, parity…
And that's just cash. You can imagine what happens when you then throw equity on top of it. Equity between a UK EMI structure, where you can get basically 10% or 20% capital gains tax on equity incentives for growing companies in the UK is very different to what you do if you then start to build out a team in most of Europe. It doesn't exist again in Singapore.
The US is the whole different set of requirements and structures around how options work. So there's complexity that you add on top. We run US and UK equity schemes. They are standardized for the employee-centric provisions, how we think about good leavers, how we think about vesting, but they're localized in terms of being compliant with how they operate within each of those countries. So we can't achieve equality from an equity basis nor are we trying to. We're trying to be fair in how we think about equity across borders, but most importantly locally compliant to make sure that you know if an exit does happen one day that you know they can get the best possible proceeds out of it.
Is there something that we haven't talked about related to compensation that we should?
There’s one thing, given that Adam Horne introduced us, would be nodding his head about.
The earlier that you can embed principles of transparency into comp, the easier it is. The longer you wait before you do it, the more painful it becomes. The more you can get out into the open, hold yourself accountable for building something that is fair and equitable and transparent to the team in a perfect world, it happens before the “oh shit” moment. Once you have that in place, it also gives a much deeper sense of change management for compensation as it evolves. You can have an educational conversation with the team around how the option scheme works. Now we’ve outgrown it and this is how we’re thinking about the next option scheme. Here’s what’s different.
The companies who've mastered this are thinking about it very, very early. They're open with candidates before they walk in the front door, exactly how they're thinking about pay, even though they may not be required to disclose that publicly, they're doing it anyway, because they see the gain from that kind of transparency.
The more taboo that compensation is, the longer that lasts, the more difficult it is to manage changes that you need to embed. Each time I come into a startup now, I increasingly try to bring transparency into the conversation earlier and earlier and earlier. I'm yet to hit a point where it's been too early.
Compensation can feel like a black box. I think it's changing, thankfully. But the more you can really bring in transparency, because when you bring in transparency around compensation, you bring in transparency around other topics, too. Business strategy, how are we doing? What are we really facing? Here's what we want to do, but here's the barrel that we're looking down.
Yeah, absolutely. So true. I think the taboo topic, what makes it a black box, is that people associate pay transparency with everyone knowing what everyone gets paid. It’s one percent of the story of pay transparency. Some companies do it right. You can jump onto Buffer's website and look at everyone's salary. That's great. That works for them. I would never blindly introduce that into a startup I've been in, unless for some reason it was going to be right in that context.
But if the worry around pay transparency or the hesitance to keep it a black box is because you're worried that people will have all their salary details shared, A) Look hard in the mirror, first of all, because often it's hiding something that you know is problematic. B) Pay transparency is so much deeper than simply here's what X person gets paid.
Pay transparency helps recruitment, it helps branding, it helps conversations around progression and leveling. It helps understand new roles you're coming in, where you can have a conversation with somebody around the difference between a customer success manager, head of customer success, and a VP of customer success. Comp transparency can help you to understand the leveling around that. So if the hesitance is just purely everyone's going to know what they need to get paid, look deeper into what pay transparency can do because it doesn't have to mean that. There's so much more to it.
What might you say to a founder or CEO who wants to add more pay transparency into their processes? What would be one way to begin doing that?
There's two things that add value early on around pay transparency. We've done one of them at Send, and we're planning to do the second one soon. So the two things are embedded into everything recruitment. Bring pay transparency to a very personal level. So be able to explain to Pat, who works in the PeopleOps team why you've received this increase, how we've thought about it in terms of budget, how we've benchmarked Pat’s people up salary against the market, what benchmarks have we used. Make it a really personal thing for that person because at the end of the day, we're all just individual selfish people. We care more about what we do and how it impacts us than we do others for the most part.
We've introduced into recruitment that every job ad that goes out, we have a range. The range is what is set. We don't move away from that range almost ever. When we make an offer to somebody at the end of a recruitment process, we give them the best offer first and tell them we don't negotiate. We do a best offer too. We don't even try to low ball them. It's surprising to a lot of folks, but we tell people how we came to that number, why we think that number is in line with the rest of the team in our benchmarking, and we let them make an informed decision. If they say no, great, they've made a decision that's good for them. We've made a decision that's right for us.
The evidence behind it now that we've done about 50 of these, we've got a 96% offer acceptance rate. That’s without negotiating the first offer, having first transparency from the start, our recruitment funnel, all thanks to Liam. This is why he's a great partner in crime. It's fantastic. And then the individual element is a way to bring it into a conversation in a really safe way. I think everyone should know why their pay is the way that it is and in time be able to answer the question, I'm Pat in PeopleOps and I'd love to go from people business partner to PeopleOps manager. What's my path to do there and what would my salary increase be? If we can answer that question, we've solved 99% of transparency.
Pay transparency helps recruitment, it helps branding, it helps conversations around progression and leveling. It helps understand new roles you're coming in, where you can have a conversation with somebody around the difference between a customer success manager, head of customer success, and a VP of customer success. Comp transparency can help you to understand the leveling around that. So if the hesitance is just purely everyone's going to know what they need to get paid, look deeper into what pay transparency can do because it doesn't have to mean that. There's so much more to it.
You’re revealing that there’s logic to it. My guess is that because there’s a framework and philosophy that when you’re explaining it, people relax. They trust you. They don’t feel like it’s an adversarial relationship. I love that you don’t negotiate and that you’re open about your philosophy with candidates.
It's the reason why I can also say something that will be public on LinkedIn. We set a median. Our team knows that. We have an equity framework in place that's also set around the median too, and our team knows that. We're comparing ourselves against SaaS businesses that are growing, not against insurance companies. Our team also knows that. They can read it all about it on our Notion site.
People have learned to negotiate because they're so sick of people in my position, low balling offers, treating candidates like crap, and they've learned to fight hard for what they deserve. The only way that ever fixes itself is if the next few decades, we have consistent practices of rebuilding trust with people and sitting down saying, here is the approach to our compensation. Here is the best offer we want to give you so that you don't need to negotiate. If we do that for two decades, that negotiation behavior will no longer be taught to people who are 20 something entering the workforce.
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