00:00hello and welcome to the latest a 16z
00:02podcast on Matt Ober heart this episode
00:05is a conversation all about compensation
00:07and the simple act of defining what
00:09compensation is - discussing how to
00:11build and develop an overall Kompany a
00:13lot of great content in here around
00:16affordability versus competition pluses
00:18and minuses of our issues vs. options
00:20and a whole lot more this conversation
00:22includes the following voices in this
00:25Steve Cadogan town advisor and
00:27co-founder is di digital University Greg
00:30Loman who's a principal Compendium
00:3210-win who's an executive director at
00:34connery consulting and a 16z partner
00:37shannon chillz who leads our HR tech
00:39talent and people practices teams this
00:42recording and podcast is based on an
00:44event held at Andreessen Horowitz his
00:47Matt said I'm a recovering human
00:48resource professional to do it such a
00:52broad topic we have today and everyone
00:55in here is probably looking at it and
00:56coming at it from a different place
00:57given your background given the
00:59organization's you've been in and are in
01:01today I was with LinkedIn from a pre IPO
01:03through IPO which included the day we
01:06went public realizing that we had to
01:09switch from in options to an ah rescue
01:10program that night because the stock was
01:13just going wild so experienced a lot of
01:15craziness and also like many of you
01:17competing for really endangered-species
01:20software developers and engineers in the
01:23valley puts a real strain on it you know
01:24used to be you can do a salary survey
01:26once a year and you're feeling like
01:28you're pretty on top of what the
01:29competitive environment was and if
01:31you're not doing it quarterly or even
01:33monthly now you may be missing something
01:35and that puts a big pressure I think on
01:37all of us to be competitive and who
01:39you're competing for and how their
01:41programs are changing is really it's
01:43almost like the tide right lots of
01:45undercurrents and lots of things going
01:46on and flashy news that gets people's
01:49attention so maybe a good place to start
01:52would be to just unbundle some of the
01:54terms we use in compensation around
01:55there's comp there's total rewards you
01:58know equity and pieces like that when
02:00you guys opinion what's the difference
02:01between compensation and total rewards
02:04is there a difference look I mean I
02:06think you've got employees right you've
02:07got comp and you've got base you got
02:09bonus you got equity you got things the
02:12spends money on the ends up in my wallet
02:14basically my bank account it's really
02:16direct forms of compensation I think
02:18total rewards a little bit more broadly
02:19things that generally cost money that
02:22the company is kind of spending on perks
02:24training development anything that the
02:26employee finds value in that keeps them
02:28engaged with your company that they put
02:30on their balance sheet like I'm giving
02:32this company something with my
02:34contribution I'm working for this
02:35company I'm helping them create value
02:37that's on one side of my exchange with
02:39the company and on the other side is
02:41everything I get back for me it doesn't
02:43necessarily include like I'd like
02:45working for this company because of our
02:46mission or I feel good about what we're
02:49trying to achieve I mean that I think is
02:50something that the employee of himself
02:52helps create that's something that
02:54they're giving as well so I don't think
02:56you pay less because they like working
02:58there I think that's part of why they
03:00work there that's part of the umbrella
03:01around your total rewards package that's
03:04how I tend to think of this and I would
03:05say it goes by stage so when you're a
03:07smaller company most people talk about
03:09comp because its base and equity and
03:11then you kind of go through this
03:12evolution where all of a sudden you're
03:14talking about total compensation which
03:16is base bonus and equity and then you
03:19start talking about total rewards which
03:21is everything you're talking about all
03:22the perks its benefits its matching a
03:25401k it's the total rewards for working
03:27for the company I work with companies
03:29who are you know five hundred thousand
03:32dollars raised up to you know 100
03:33million raised and you see them go
03:35through the progression there and Comp
03:37is where it starts and then it starts to
03:39evolve to total rewards for me total
03:42rewards you also have to think about
03:43career development that professional
03:46development aspect I think that's a
03:48broader and that bleeds into culture
03:51what you're defining you've got to think
03:53about the development of your employee
03:55base all right great
03:57so for the folks who are evolving their
03:59compensation systems right now where do
04:01you start where should you start and
04:03what's some advice you have for people
04:05that are undertaking like laying the
04:06foundation of a comp strategy one thing
04:09I will say that I think is super super
04:11important is compensation cannot be done
04:13in a vacuum with just market data right
04:15so a lot of people want to go out and
04:17say the markets paying this and we have
04:19to do this and like we're competing for
04:21that it's like great what can you afford
04:25the affordability piece has to come into
04:27the initial discussion and if we're
04:30looking to hire 50 people and we have X
04:32amount of money and we can only afford
04:3425 people for competing against all
04:37these companies maybe you need to drive
04:39a conversation higher up about what is
04:41our headcount plan through so a lot of
04:43companies want to just look at you know
04:46here's what's going on in the market and
04:48unfortunately you have to look at
04:49affordability yeah I think that's a big
04:51big factor look I think a lot of times
04:54we certainly I hear it's reactive versus
04:58proactive to a certain extent and you've
05:00got to look at your own internal data
05:01the type of profile that you're hiring
05:04to and then you know getting a better
05:07understanding of the type of companies
05:09that you're comparing against and
05:10getting a sense of what that gap looks
05:13like and then also taking a look at
05:15future state companies meaning you have
05:18an intelligent conversation around look
05:20this is where we're at this is how we
05:22plan or are going to tackle this issue
05:25as we get to the next phase but it takes
05:28a lot of energy and a lot of effort as
05:30you can imagine and I think you've got
05:33to get in front of the data to a certain
05:35extent and then you know working on at
05:37that point your peer group is so
05:39important right and your peer group is
05:41like the hardest thing that you will
05:42define because nobody wants to think
05:45they're like X when they could be like Y
05:47right the place where I start and do you
05:50know who your employees are have you
05:51thought about just a level structure
05:53have you thought about figuring out how
05:55to band your employees the first time
05:57you go through that exercise it's really
05:59painful right we're gonna start to
06:01understand what the market pays for a
06:03particular job and your people are gonna
06:05have this question of is my employee
06:07overpaid or are they in the wrong level
06:10and if you don't get that framework set
06:13up initially your dad and then secondly
06:15I think you start to get into this
06:16question about data do you have data
06:18have you had surveys have you done this
06:20in the past and it's like well not
06:21really we just kind of we figure it out
06:23as we've gone so getting good
06:25information and how do we compare to
06:28those companies as you start to go
06:29through this research particularly in a
06:31pre IPO setting I mean the ranges are
06:33enormous right you could look at a
06:34particular cap Ray's got our headcount
06:37it might be five basis points for a job
06:3910 15 even 20 you know how do we compare
06:42to this companies what makes us similar
06:43what makes us different are we big
06:45enough we're percentage doesn't work
06:47should we start getting valued based
06:49data should we be looking at public
06:50company comm so I mean really setting
06:53the tone early with getting the right
06:54information around the benchmarking that
06:57you're gonna do get the level structure
06:59right get your company talking about
07:01who's critical who's experienced who's
07:04entry-level how do they line up to
07:06market I mean those are all really
07:08important building blocks before you
07:09even start to say well we're going to
07:10give a a new hired director X thousand
07:13options and as I say data can be
07:15dangerous right to a certain extent and
07:17I think you know sometimes it's
07:20misconstrued that because we have the
07:22data we have to pay everybody at these
07:24absolute data markers I think what
07:26you've got to really focus on is trying
07:28to hold a general population to a
07:31general philosophy market positioning
07:34philosophy and really think about
07:36developing and going after really
07:39aggressive Comp four key roles key
07:42contributors and that's how you're able
07:45to really you know build a an aggressive
07:48and competitive strategy because you're
07:52not going to be able to compete with the
07:54likes of a 50 billion dollar company
07:56right and that's a reality and that's
07:58how it becomes iterative right many
08:00times the proposal we come up with right
08:03you'll have a matrix of levels and
08:05functions salary ranges bonus targets
08:07new higher equity I also think if you're
08:09talking about any of those pieces he's
08:12probably talked about all of them
08:13including how you're gonna think about
08:14refresh and ongoing equity it's hard to
08:16bring a candidate in and say here's some
08:18new our equity well how's this gonna
08:19play out over time we haven't thought
08:21about that so you you want to carry it
08:23forward but that initial proposal is a
08:26little bit like sort of the artist
08:28rendering of an architectural proposal
08:30once you see that building build it may
08:32look a little different it may look a
08:33lot different and some of that comes
08:35through the process you listen to your
08:37recruiters you start to make those
08:38offers you see if they're closing you
08:40get a feel for how people are thinking
08:41about your equity and your company
08:44versus how they might be looking at
08:45other offers and I think it's important
08:47to have that feedback loop that comes
08:51develop based on market based on what we
08:53think is right and so that's where it
08:55becomes a very live iterative process
08:57for us to think about a comp strategy
09:00that's really gonna stick who needs to
09:01be part of that conversation who are the
09:03stakeholders that need to be part of
09:05this for this to really be something
09:07that sticks and holds because everyone
09:09here walked into a situation where the
09:11comp strategy was defaulted into based
09:14on hiring competition and they're like
09:16oh my gosh we've got inequities all over
09:18the place we're gonna have to smooth out
09:19overtime but how do you get that to work
09:21what we've seen work really really well
09:24is you have obviously hrs involved you
09:27have your CEO has to be at the table
09:29your CEO has to sign off on the comp
09:31strategy and I would say it's compras be
09:34pleasure comp strategy right and then on
09:37top of that you have to if you have
09:39obviously CFO or finance from a
09:41affordability standpoint and then I
09:43think your entire leadership team has to
09:45stand behind us there is a moment in
09:48which the CEO does need to take it to
09:50you know there's utilization and burn
09:54with regards to equity there's
09:56affordability with regards to cash but
09:58there needs to be alignment between your
10:01board members and your CEO on what
10:03they're gonna spend with regards to
10:05equity has anyone seen what happens when
10:07that's not the case it's not pretty
10:10look I think it's the operations goal to
10:13present a plan to the board right I
10:16think it's important for any kind of
10:18check to say look do we have the
10:21programs or the strategy in place so I
10:23can go in front of a comp committee or a
10:25board member and say this is what we're
10:28projecting this is how we're gonna do it
10:29this is our philosophy and this is how
10:31we've kind of thoughtfully looked at the
10:33employee population and how we're gonna
10:36pay them if you're not there yet then
10:38kind of goes back to what we talked
10:41about really baselining let's get
10:43leveling in place can we you know
10:45categorize our employees to a certain
10:47extent and it starts from there it's one
10:49of those things that if you actually do
10:52the entire year budget plan of equity
10:55spend off of your hiring spent or off
10:57your hiring plan and get your board to
11:00you'll find your approvals go a lot
11:03you can just say like here's what we
11:05planned here's what we're spending
11:06here's our rest of the year utilization
11:09a board member can sign off on that
11:10really really quickly
11:12and so this goes back to doing the prep
11:14work on how you're actually going to
11:16spend for the year what advice do you
11:18have for the folks here who are earlier
11:21stage they don't have a revenue stream
11:24yet they're not profitable yet but they
11:25want to hire and their leaders won't
11:27hire superstars from the high-paying
11:30companies out there the Google's of the
11:32world how should they think about being
11:34competitive like how can they be
11:36competitive is it just like oh sorry
11:37non-starter nothing budget can't hire
11:39those people again is to a certain
11:41extent assessing candidate and we talked
11:44about assessing you know candidates risk
11:46appetite and what their alignment is
11:48like there's a range of different
11:51development stages there's a range of
11:53problems that companies are trying to
11:57solve and it's not calm that's gonna
12:00ultimately seal it I think the big thing
12:03is getting in alignment with recruitment
12:06and the leadership to better understand
12:09that alignment fit with your company and
12:11that culture right and if you can get
12:14closer to that alignment you're gonna
12:16have an easier job on the compensation
12:18side now with the compensation aspect I
12:21think it's important that you're able to
12:23communicate a strategy whether you're
12:24you know 10 employees or a hundred
12:27employees I mean you've got to start
12:29early enough to be able to thoughtfully
12:32say look we're at this stage you know as
12:35we grow we're gonna start to develop
12:36different programs but far too often I
12:39just don't I mean even we have the
12:42luxuries of seeing pre a all the way up
12:44to you know post five rounds in public
12:46companies and nobody's discussing that
12:48it's important to kind of start thinking
12:52about that obviously at an early stage
12:54the certain kinds of people are going to
12:56be interested in certain kinds of
12:57companies and there's going to be a
12:59split in the market and as an earlier
13:01stage whatever stage of early you
13:03actually are you can't get everyone to
13:06come work for your company
13:07it's just not possible there are
13:08different profiles it's different to
13:10work at a startup than it is at Google
13:11if you're trying to buy talent that way
13:14you're chasing the market I think
13:16you're getting caught up in euphoria
13:17you're making promises you probably
13:19can't keep and so I think that often
13:21doesn't work out well I also think you
13:23know one of the things you see a lot in
13:24companies this was like the road map of
13:27Wall Street compensation as somebody had
13:29a lot of success somewhere let's pay
13:30them a lot and they'll make us
13:31successful that happens a lot in Wall
13:34Street that happens a lot in sports
13:35happens a lot everywhere and it
13:36certainly happens in Silicon Valley I
13:37think getting caught up and that can be
13:39really damaging for a business and we
13:41come in and start working with companies
13:43you might see two employees who
13:44basically do the same thing and I have
13:47five times as many options as that other
13:50person I mean they're huge disparities
13:52and that's just how they negotiated
13:53coming in and when they came in and I
13:55think trying to mitigate that early is
13:58really critical so being realistic about
14:00who you are and then selling your
14:02company selling the opportunity selling
14:04the technology selling the mission all
14:06of those things and then being
14:07competitive on pay and having a vision
14:10for how pay unfolds over time I think
14:12that's how you can use pay as a way to
14:15make sure that comp isn't the thing that
14:16stops them from coming we go through
14:18this whole process of putting a comp
14:20strategy in place we enlist comp
14:21consultants we get our leadership team
14:23to understand it we focus on ourselves
14:26understanding how we would sell it and
14:28we forget this huge step which is making
14:31sure our recruiters understand how to
14:33sell it and so that all of a sudden were
14:35surprised when our recruiters can't
14:36actually close candidates or speak to
14:38equity or speak to vision or speak to
14:40culture but it's like we do all this
14:41stuff and we don't educate our
14:44recruiters on how to actually roll it
14:46out or sell a program and we don't train
14:49our recruiters on how to double click on
14:52why somebody's not accepting our offer
14:54right it's really easy to say when
14:56you're leaving a company or leaving
14:57because a comp and that's typically all
14:59no or HR professionals that's not the
15:01reason people leave companies and -
15:03we're really quick at saying they got a
15:05better offer from another company where
15:07actually if you really have a good
15:09conversation with the person there's
15:10usually something that might have been
15:12broken in the process or the manager
15:14didn't sell it right or you know the
15:16follow up was really bad so it's like
15:18getting the good data back to HR that
15:20can actually help them iterate on a comp
15:22philosophy at hire and also you know can
15:25help you think about what talent are you
15:27losing and does it have to do with call
15:28do you guys have any examples of
15:30companies doing interesting things that
15:32is able to sort of NAB some really high
15:35quality candidates that maybe you're
15:36even taking a pay cut to join you know
15:38people right now are interested in
15:40joining companies who are disrupting X
15:42space right going back to your point you
15:45have to understand what's driving the
15:47talent you're speaking to there's tons
15:49of people who want to join companies who
15:51are doing something for the good of the
15:53world it's not the perks it's actually
15:55what are you working on what's the
15:57company's vision what are we trying to
15:59disrupt this appears yeah it's like who
16:03they're working with it's great to have
16:06you know leaders that and influence and
16:09have loyalty with other peers I mean
16:11that's a great way to build your initial
16:14employee base and I think a lot of
16:16hiring is done through that in
16:17engineering but again they it goes back
16:20to that value of alignment and what
16:23you're trying to solve for on a day to
16:25day perspective and who you work with
16:26well I think the other piece I used the
16:29words refresh equity I mean pay for
16:31performance right I think getting
16:33somebody in the door is one thing having
16:35high performers have confidence that
16:37they'll be rewarded if they contribute
16:39not just from the appreciation of their
16:40initial equity or through a salary raise
16:42but the opportunity for ongoing
16:44incentives I think is critical because
16:46those are the people that you really
16:47care about and I think the companies
16:48that we come into where things seem to
16:50be going well they are distributing
16:53equity and using it thoughtfully to
16:55reward people and recognize people
16:57there's a connection between paying
16:59performance and I think that's really
17:01more than free stuff that's what high
17:04performers want is to be recognized to
17:06contribute and be part of a thriving
17:08enterprise I get asked this question a
17:10lot is how can we differentiate like
17:12that if we are transparent well you can
17:14be transparent about your philosophy
17:15which is you pay for performance stand
17:18behind the decisions you made yes we pay
17:20our top performers and our critical
17:22performers right that's the way we
17:24manage and how we reward top performers
17:27everybody talks about the new higher
17:29grant and those programs and it's just
17:31over emphasized and I just think that
17:33when you think about employees
17:36development again that career ladder you
17:39think about retention and you really
17:42that you've got programs and leadership
17:45is bought into that that's ultimately
17:47what's gonna you know create value for
17:49your business yeah you know particularly
17:52I think later stage you start to get
17:53different profile of board member your
17:56dilution numbers start to really creep
17:57up that's when you start to get
17:59questions in particular and it can be
18:01hugely problematic right if you sort of
18:04litter to the Steve if you're overhang
18:06is getting up into the top of the range
18:09what do you do so getting ahead of that
18:10early so that you do have room to
18:12compensate people you have room to bring
18:14in executive new hires I mean the amount
18:16of equity that goes out the door in a
18:19late stage company that's really ramping
18:21up growth and heading to an IPO it can
18:24be extraordinary relative to what's
18:26going on in an earlier stage company
18:27that's moving along but hiring a kind of
18:29a reasonable rate I mean you can go from
18:31a few percentage points of equity to
18:33double-digit percentage points of equity
18:35pretty quickly so you got to be ready
18:37for that I think you have to start to
18:38plan pretty early to be able to
18:40accommodate that so let's talk about
18:42growth and evolving your comp strategy
18:44what are some of the markers in an
18:46organization's growth is it size is it
18:48geographic dispersement is it you know
18:51hey we're hiring more executives now so
18:53we need to adjust how this is doing or
18:55we're actually making a profit now so
18:57maybe we want to dial up the cash a
18:59little more in down the equity because
19:01of dilution like what are some of the
19:02things that would lead an organization
19:05to say hey we need to revisit our
19:06strategy I think all of the above it's
19:09very nuanced comp is not linear to
19:11whether you've raised or whether you've
19:14grown X percentage and headcount when we
19:17look at data we want to segment the data
19:20and we want to segment based on
19:21comparables development stages etc and
19:24that's going to give you a good baseline
19:26on what you're gonna face from a
19:27competitive perspective and you also
19:30want to look at future state so you
19:32better understand the changing dynamics
19:35between the different philosophies
19:37whether it's cash or equity or different
19:40pieces that make up that total reward
19:42strategy but I think to that point like
19:44you're focusing on growth I think it can
19:47be companies going through a downturn
19:48right companies pivoting companies just
19:51staying stable those are all times in
19:54which you actually need to be
19:55looking at your compensation philosophy
19:58because all of a sudden people are
20:00starting a question right should I stay
20:03should I go we were talking about
20:05extended exercise periods and how long
20:07should somebody work for you before they
20:09actually get access to an extended
20:10exercise period you know we haven't
20:12really seen any down markets and it's an
20:14incredible benefit and you know you have
20:17to be thinking about these different
20:18programs that you might need to put in
20:19place if you're not on a hyper browser
20:21right there is a huge valuation
20:24component to that because certainly look
20:26I mean we're bigger we're scaling but
20:28equity is a major part of the currency
20:30we're using and as our valuation profile
20:32changes maybe even the risk reward
20:35profile of our equity changes those are
20:38really key inflection points in terms of
20:40how you think about equity even getting
20:42very late stage you start to talk about
20:44rsu's do we start to talk about
20:46denominating or equity grants as a value
20:48rather than a percentage I mean those
20:50are key points that start to come up in
20:52the conversation particularly now when
20:54you're talking about many many
20:56multi-billion dollar pre-ipo companies
20:58right and that's just a different
20:59dynamic and I think to your point you
21:01just put it in context of you're growing
21:03you're getting close to IPO like the
21:06valuations and you start thinking about
21:08rsu's there's tons of companies who are
21:10implementing rsu's really really early
21:12now or they're implementing rsu's when
21:15like the 409a or the common like there
21:18isn't necessarily a need or a good
21:20reason to can you guys be in the
21:22professionals kind of talk about what
21:24you think when you think a good time to
21:25implement rsu's might be there's a lot
21:27of discussion on rsu's I mean because
21:30it's what everybody talks about these
21:32days in terms of their offer I mean when
21:34you think about the big employers Google
21:37Facebook etc everything is denominating
21:40are as usual Amazon Apple Amazon I mean
21:42everything is dollar based and it's hard
21:45for earlier stage companies to kind of
21:49articulate that same value I don't know
21:51if there's yeah there's not a right or
21:53wrong answer I think it's rsu's
21:57essentially you're dealing with present
21:59value equity versus and appreciation
22:02right so if you're not gonna go out
22:06meaning liquidity in a very long
22:09time I think it's hard for companies to
22:12move to that RSU model I just think it
22:15forces a lot of a taxation on the
22:18employee base it's just not as flexible
22:20from options perspective and you know if
22:23you've got a low strike price options
22:26are way more flexible for companies and
22:28I just think that sometimes the
22:30marketing and the valley of our issues
22:33pushes companies to do certain things
22:35that you know I think you've got a lot
22:37of room certainly from an options
22:38perspective but I agree yeah I mean I
22:41think look if you're in a pre IPO
22:42company the odds are good that you're
22:44talking about not you know growing our
22:46valuation by 10 percent or 20 percent
22:48you're talking about you know five nines
22:51or 10x right you're talking about
22:52multiples of returns there's really no
22:55scenario where RS us are better than
22:58options in that model and so from a pure
23:01upside from a pure opportunity
23:03perspective from a flexibility
23:04perspective from a tax perspective from
23:07an administrative perspective there are
23:08lots of advantages to stock options for
23:11pre IPO companies having said that you
23:13know our SES can provide some nice
23:15optics around burn rate and dilution I
23:17mean there's some nuance to how that
23:19actually plays out over time if you are
23:21a very large pre-ipo company you may
23:24have a little bit of a different sales
23:25pitch about your upside the dynamic is
23:28different you're not talking about
23:30probably 5x returns in the short term so
23:32there are some places where our SES can
23:34be a nice feature but I think it's a
23:36pretty small slice of the pre IPO world
23:38where they're better than options
23:40I think the point I want to double click
23:42on is like understand it yeah right
23:45understand I get that phone call the
23:47time we're thinking about our SES what
23:48do you think yeah what are you solving
23:50for yeah right well we're competing with
23:53Facebook and Google and Apple and
23:54they're giving everything in our SES
23:55cell your options you have a great story
23:59to sell you have an upside you have huge
24:02growth in front of you right and I ask
24:04the question like ok but explain to me
24:06when Facebook says they're giving 300 RS
24:09use and you're now competing and giving
24:11300 RS use like to me it just seems like
24:13the dollar value is a little bit
24:14different so then you have a whole
24:15selling thing that you're doing there
24:17too and educating so just make sure if
24:19you're being asked to do that you really
24:23and what that means we think of our se
24:25is in place like Google is these value
24:27preservation right there are an
24:29evaluation mode growth but not huge
24:32returns and you're giving an employee
24:33share stock it's got value that employee
24:36can look at that share and say at the
24:38end of the vesting period I'm as good
24:40you know as likely as anything to get
24:41that much value $900 $1,000 whatever it
24:44is a pre IPO company they've got a
24:46valuation the share of stock the
24:48preferred valuation might be six I don't
24:51know I mean is it likely to be worth six
24:52dollars at the end or more or less
24:54there's a hugely different risk reward
24:56profile even though it's an RS you even
24:58though that's what somebody paid for a
24:59share of that stock yesterday there's a
25:02huge kind of distribution of potential
25:04outcome so granting RS use isn't less
25:07risky the way it is we stock options
25:09when you think about pre IPO to public
25:11right okay so you guys have helped and
25:13consulted and seen lots of companies go
25:16through the IPO any big mistakes you've
25:18seen any big like oh man I wish we'd
25:20done that differently that they learned
25:22that they didn't expect something to was
25:24happening or would happen I think having
25:27the support function to drive your
25:29programs is probably one of the most
25:31critical things meaning you've got a
25:34philosophy you've got to be able to
25:37action the frequency from which you're
25:40gonna be supporting you know career
25:41development performance management all
25:43those things on an annualized basis and
25:45if you don't have the structure in place
25:47man you're gonna be in a world of hurt
25:50when you get to that IPO and post IPO
25:53and it takes a lot of you know planning
25:56and resourcing because there's a lot of
25:58compliance in my own personal experience
26:00it was ensuring that we were able to
26:03activate on the things that we said we
26:06it's the scalability of the programs
26:09I also think as we work with our CEOs
26:12and really understand transparency and
26:14what transparency means pre-ipo and what
26:16transparency means post IPO and making
26:19sure you have a communication strategy
26:21on all things company related as you get
26:24closer to IPO if you want to be super
26:25transparent and pre IPO understand what
26:28your strategy is once you become post
26:30IPO right and if you've been private for
26:33a while and you are going I feel a lot
26:34of times what I found is the CEO
26:36they haven't done this before may not be
26:39aware that the section 16 B officers
26:41will have their comp published and if
26:44there was some back office you know back
26:46alley dealings and special side things
26:48that's not cleaned up they're gonna be
26:50like taking everything from like
26:56different double trigger changing
26:57control things accelerators special
26:59benefits all that kind of stuff needs to
27:01be attended to before you file and it
27:04takes time and I think that's the key
27:06there's two types of companies that call
27:07us they say everything about going
27:09public okay when well yeah that eighteen
27:11months and then there's other so it's
27:12like well you know we've got a
27:14confidential s1 file and it'll be a few
27:16months and so very different right and
27:20there's that there's a pretty clear
27:20roadmap here from a common perspective
27:22particularly executives you got to get
27:24ready for disclosure you're clearly
27:26gonna start to think about contracts and
27:27severance for executives you've got
27:29equity plan to think about but where you
27:31get the benefit of backing up and
27:34starting earlier is a lot of things we
27:36talked about with rsu's versus options
27:38the foreign na prize your dilution all
27:41those things are gonna change most
27:43rapidly in most cases right as you go
27:45public right in that stage and you know
27:47you hire somebody twelve months out six
27:49months at one month out you could have a
27:51different comment answer at each of
27:54those three points and so you've got to
27:55be ready to move through that curve
27:57pretty quickly so start early start
27:59thinking about it I think particularly
28:01with respect to some of the direct
28:02compel amends because it's can change
28:04fast okay questions for the panel you
28:08made a great point on like affordability
28:09and I'm just curious because I do think
28:12there are certain managers and
28:14leadership who feel that they do want to
28:17buy certain talent and they feel that
28:19they can't afford it in their budgets
28:22and so how do you manage like
28:24considering the internal parity and the
28:27overall company strategy and leadership
28:30expectations I don't think you break
28:33that cycle until you actually are
28:35helping that leader with the overall
28:38strategy and budget and a lot of times I
28:41see this happen constantly over and over
28:44because each hiring manager really is in
28:49that one higher they're the bee's knees
28:52right so if you give them that
28:56opportunity you also have to give them
28:58the responsibility of managing an
29:00overarching budget and the consequences
29:03of that she's gonna keep doing that
29:06until you equip them with the the
29:09strategy and say this is the ring fence
29:12from which all managers within this
29:14organization are gonna operate in and
29:16this is your budget I'm curious how you
29:18think about going out of band though in
29:20the context of paying the people in
29:23levels for the same job and like around
29:25all of the pay gap and better
29:28negotiating and things like that so how
29:30do you say okay we're gonna go out of
29:32band but what about this next person who
29:35we're not gonna go about a band for but
29:37they're actually do you move them up a
29:39level or do you say alright we're gonna
29:41have this problem moving forward what we
29:44did in my days operationally is we had a
29:47different approval matrix for him and
29:50you have really had to stand behind why
29:53that person was gonna go out of band
29:55right and you know if that approval goes
29:59up to the CEO and then possibly the
30:01board your names behind that there's
30:04gonna be pushback there's gonna be
30:05questions and if you're one of those
30:07managers that asks for that constantly
30:10and you know you're backing that
30:13individual and that individual isn't
30:16performing then there's a little bit of
30:19a peer kind of review on and this person
30:22does that consistently we don't really
30:25value that person's assessment and I
30:28think that's kind of pure pressure to do
30:31the right thing right and I think that
30:33everybody still tries to to do the right
30:36thing and I think having a process from
30:39which that gets reviewed will mature
30:42into kind of you know everybody watching
30:44out for establishing a calibration
30:47process this is a great opportunity if
30:50this is really happening in your group
30:51to bring the executives together and say
30:53okay let's figure out as a team how
30:55we're gonna handle these right with the
30:57same thing with like a retention bonus
30:59or a you know a bonus that you're trying
31:01to keep someone from leaving
31:03hey should we give them a bonus to stay
31:04that's a big cultural move right and the
31:07more harmony you have there's no right
31:09or wrong answer to these none its what
31:11is consistent with the leadership team
31:13in building that muscle is really
31:14important I think calibration amongst
31:17leaders is really important but it's
31:19probably the hardest thing to do and
31:21sometimes there isn't a leadership team
31:23yeah exactly I mean and the HR
31:25professional kind of becomes that that
31:27intake and you have to really kind of
31:29take a lot of considerations in from a
31:31lot of different people and hopefully
31:34form a consistent recommendation so you
31:37can advise right consistency is probably
31:40the biggest yes right totally
31:42what are you guys seeing in terms of pay
31:45equity which has become like more of an
31:47issue like our company's actually doing
31:50any sort of like analysis around pay
31:52equity it's in New York
31:54San Francisco in California passed a law
31:57where they said you can no longer ask
31:59the question what do you currently make
32:00and that was passed in the hopes of
32:03removing a lot of the gender questions
32:05or inequality those laws will hopefully
32:08solve some of that issue yeah I mean if
32:11you're doing competitive analysis you
32:13can do gender pay analysis really really
32:17simply there's no reason not to do it I
32:19mean the data is there we're seeing a
32:22lot more of it I have one company that
32:23has put that as a one of their top HR
32:27initiatives and they're making really
32:31aggressive market adjustments around
32:33that and they're actually putting the
32:34stats in a place where all of their
32:37employees can see that I just think it's
32:39the right and appropriate thing to do
32:41and it's not adding any extra load to
32:44your competitive analysis or what you
32:46need to do in terms of developing you
32:49know those initial strategies the only
32:51thing it puts a lot of pressure on is
32:54that first thing we talked about is like
32:56who's who in my organization who
32:58actually is the same because if we have
32:59a mistake and mismatch and miss level on
33:01a comp analysis we can sort of factor
33:03that in maybe they should be there on
33:05the border so they should be high in the
33:06range or low in the range but if you're
33:08publishing these numbers you're saying
33:10two people are the same well suddenly
33:11that percentage difference isn't
33:13accommodated very well by the range
33:15if you have a low headcount and so you
33:18have to be really thoughtful I've talked
33:19about how you identify people well
33:20that's right do you think it helps to
33:22bring in the professionals that are
33:23doing it to understand because data can
33:26be dangerous and data can be helpful
33:27it's understanding what data are you
33:29looking at and making sense out of the
33:31data you can't just say like here's the
33:32data and everyone look at it and this is
33:34like come to your own conclusion you
33:36really do have to understand the data
33:38and this goes the levels and all of that
33:39so a question about dilution you
33:41mentioned that earlier as something to
33:43watch out for early let's say you've
33:45made a fair amount of sort of over
33:47generous mistakes early on you're at a
33:50point where you're employable now needs
33:52a refresh and the board is is really
33:55pushing back how do you prevent that in
33:57the beginning or you know or halt it or
33:59do something so that you can get to a
34:02thoughtful refresh when needed and
34:04you're not facing the same dilution
34:06issues well certainly how do you prevent
34:08it I mean a lot of the things we're
34:10talking about right in terms of having a
34:12structure early thinking about market
34:14data early thinking about the type of
34:16candidate that you're chasing and
34:17getting people in with a consistent
34:19equity profile but also reporting on
34:21these statistics along the way I think
34:23the more that you engage broadly both
34:25your board and your executive team your
34:27investors around what your strategy is
34:29is important I think to don't get behind
34:32on equity and so I was in a meeting just
34:35last week actually where this was the
34:36issue and there were board members not
34:38speaking to executives because there was
34:40such a huge divide around this concept
34:42and the proposals from the executive
34:44team was we haven't done a broad refresh
34:46in a long time and our dilutions fall
34:49into 13 and change percent and we want
34:51to add 10% to our pool and we want to
34:54give most of that now this would have
34:56been a lot easier if they'd been on top
34:57of this if they've been granting equity
34:59along the way the numbers that they were
35:01proposing in the absolute we're not
35:03ridiculous if they had gotten there in
35:05stages it would have been a lot easier
35:06well I think this goes back to
35:08philosophy versus strategy versus like
35:11real dialogue around equity here's a
35:14template and this template will actually
35:16help you have a really good conversation
35:18with your board and that has to do with
35:20you know what our total like what our
35:23equity pool is what our equity pool was
35:25at our last financing what we've added
35:27since our last financing what date
35:29the board actually approved additional
35:31equity what we're plans spend is what
35:34are projected executive hires are what
35:37our performance equity plan is because
35:39if you come to the board and say we're
35:41going to do a 13% spend and we have 200
35:43employees and we're actually given 199
35:45employees equity the one that we're not
35:48is CEO which gives us a light you're
35:50going to come back for a CEO equity like
35:52we're not in alignment right we want to
35:54see you actually spend it and give it to
35:57your top performers and really actually
35:59keep your top performers and that's a
36:01hard discussion to have but if you have
36:04those conversations and you're reporting
36:06to your board constantly and then all of
36:08a sudden you come back and you say look
36:10this is what we were going to spend we
36:12had high turnover we had high turnover
36:15on the executive team we have to upgrade
36:17our executives we thought we act like
36:19here's why we have misalignment that is
36:23a much easier conversation and then
36:25coming and having your first equity
36:27conversation saying we need 13% and
36:30actually it's not that we want to spend
36:32it now we've actually play on the spend
36:34now right or can you approve this and
36:38we're also looking for an option pool
36:40increase because we've spent this like
36:43that's not a good way to have a
36:44conversation being proactive on the
36:47spend is a much better way to have the
36:48conversation to the further you are on
36:51the right side of that curve of overhang
36:53the more questions you're gonna get
36:55about the link between pay and
36:56performance are you giving people a
36:58refresh grant because they've been
37:00around a long time or is it a promotion
37:03or performance something that's really
37:04triggered by their value to the
37:06organization that's when those questions
37:08really become most important and when
37:10you're having that value to the
37:12organization conversation with your
37:14board and you can actually point to the
37:16values like you're rarely going to have
37:19a lot of pushback if you're having zero
37:21conversation and you come with and this
37:25is the hardest thing right it's like
37:26weed and it happens frequently so it's
37:28not like there's a company that does
37:30this but it is like here's our approval
37:32for our equity performance grants that
37:34we did or our Refresh grants we did and
37:36we need an additional 2% well that seems
37:39like we could have gotten ahead of that
37:40conversation so that all this because
37:43all actuality like you are looking for
37:45the approval right can you build a
37:46bottoms-up plan yeah and that will help
37:49you I think that's a key question based
37:50on where you guys are at can you build a
37:52bottoms-up plan in doing so you're gonna
37:54be able to segment your employee
37:56population and understand you know where
37:59the levers are and then by understanding
38:01that you can present to your board
38:03overlaying your headcount plan of the
38:05future your retention strategy your
38:07executive hires and then once you
38:10understand that it kind of opens up
38:11because then you're able to really speak
38:13specifically to the board and the
38:16differing strategies on how you're gonna
38:19focus on exec comp or you're gonna focus
38:21on engineering etc right but until
38:24you're able to really kind of get your
38:26arms around that and have those details
38:28I think you're gonna struggle putting
38:29that overall strategy out and I would
38:31say over-communicate people really don't
38:33like being blindsided when it comes to
38:35burning and deletion and recognize your
38:39players right so if you've have a
38:41first-time CEO and they've not worked
38:43with the comp consultant before they've
38:45not had to face a comp committee or a
38:47board that's super tight around equity
38:49dilution and you've got lots of new
38:52players in there it really behooves you
38:54to really extra invest in the
38:57communication understanding and helping
39:00the CEO helping her see what's down the
39:03road because a lot of them like get the
39:05person when you just hire them right now
39:06well we could but next time we go to the
39:09board it's not gonna work you know
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