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Salary at Venture-Backed Companies

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Re: Salary at Venture-Backed Companies

#51

Post by ntomaino »

seanMeverett wrote: post #48

I spent years as an executive compensation consultant both creating and analyzing salary surveys for the world's largest companies. What it teaches you is that: 1. Never use averages, always use medians 2. Sample sizes are critical, and anything below 5 samples you just can't trust (ideally 30, as the Central Limit Theorem suggests) 3. Garbage in, garbage out: if you don't know the population of the sample, then you…

great feedback, thanks. admittedly, my data alone does not do much. Just wanted to spark some discussion on the topic, and I thought I should eat my own dog food.

Re: Salary at Venture-Backed Companies

#52

Post by YZF »

praptak wrote: post #35
georgemcbay wrote: post #28

"But if you offer too much compensation, management and employees may begin to feel fat and happy and lose the motivation to maximize long-term value for shareholders." IMO (and while I can't speak to the management side of it), this displays a horrifying misunderstanding of the mindset of the technical people you want to hire and pay well. As an experienced and driven programmer, you hire me and pay me well so that…

I have read about cats that if you need a mouser you should not worry about feeding it too much. Cats will catch mice even if well fed. Feeding it too little means it will start to scout for food far away from your place, thus catching mice elsewhere.

Domestic cats are somewhat unique in that they don't exhibit contra-freeloading. That is they prefer not to work to working. I guess they consider catching mice "play". :-)

Re: Salary at Venture-Backed Companies

#53

Post by ruswick »

"But if you offer too much compensation, management and employees may begin to feel fat and happy and lose the motivation to maximize long-term value for shareholders."

God forbid if your employees are happy.

In all seriousness, I don't even remotely understand this mindset. Why would paying your employees less than they deserve or less than is optimal encourage them to "stay hungry." If anything, this is going to deter them from working inordinately hard or may drive them from the company altogether. If a company pays well, the employees have more to lose and are likely have a greater appreciation for their employer.

I just can't fathom how they expect that, by paying less than they ought to or less than their employees deserve, the employees will be more inclined to work hard.

This speaks to a fundament misinterpretation of employee motivation and is incredibly disquieting.

Re: Salary at Venture-Backed Companies

#54

Post by YZF »

Currently doing Coursera's Dan Ariely's behavioural economics course... A couple of thoughts:

- You want the relationship with your employees not to be based solely on money. If the only reason they work for you is the salary then you have a problem already.

- It has been shown experimentally that larger incentives can negatively impact performance. This is more important for bonuses but salary probably shows some similar behaviour. In general when you worry about the money and the stakes you become less effective.

- What people are paid relative to their peers is important. People feel better when they're paid better relative to their peers. The actual amount is less important. This supports the "pay fairly" approach.

EDIT: An interesting observation that has been made is that requiring public companies to publish their CEOs salaries has not caused those salaries to decline. If anything it caused them to keep going up. A similar effect should be expected in VC backed companies if they publish similar data as prospective CEOs would always want to be paid better than said data.

Re: Salary at Venture-Backed Companies

#55

Post by rayiner »

kkwok wrote: post #42

Is salary transparency definitely a great thing for companies? I've been told that in law firms (where all non-partner position salaries are revealed) this causes a race to the bottom and is not good for employees.

It doesn't really create a race to the bottom. What it does do is basically let the most profitable firms set the salary scale. When they raise salaries, everyone matches for fear of being seen as a cut below. Nobody cuts salaries because doing so is very conspicuous in a market where most firms pay the exact same salary. So I think in that sense, transparency has the effect of pulling up the median salary and is good for employees, though not necessarily employers. On the other hand, it takes pressure off the top firms. The most profitable firms don't raise salaries unless they really have to, because they know that if they do it'll move the whole market upward and any recruiting advantage will be short-lived. So in that sense it's probably a bit worse for people at the top who might make more otherwise.

I think using salaries as incentive systems is mostly hokum except for situations where performance can be very easily quantified (e.g. sales people). I think transparency combined with lockstep (pay is strictly by seniority) is a great model, at least for organizations where everyone is mostly doing the same kind of job.

Re: Salary at Venture-Backed Companies

#56

Post by zalew »

ruswick wrote: post #53

"But if you offer too much compensation, management and employees may begin to feel fat and happy and lose the motivation to maximize long-term value for shareholders." God forbid if your employees are happy. In all seriousness, I don't even remotely understand this mindset. Why would paying your employees less than they deserve or less than is optimal encourage them to "stay hungry." If anything, this is going to de…

Everyone knows a janitor won't clean the floor properly if he doesn't feel motivated to maximize long-term value for shareholders.

Re: Salary at Venture-Backed Companies

#57

Post by seanMeverett »

ntomaino wrote: post #51
seanMeverett wrote: post #48

I spent years as an executive compensation consultant both creating and analyzing salary surveys for the world's largest companies. What it teaches you is that: 1. Never use averages, always use medians 2. Sample sizes are critical, and anything below 5 samples you just can't trust (ideally 30, as the Central Limit Theorem suggests) 3. Garbage in, garbage out: if you don't know the population of the sample, then you…

great feedback, thanks. admittedly, my data alone does not do much. Just wanted to spark some discussion on the topic, and I thought I should eat my own dog food.

Totally understand, apologies if my comment came across as harsh, just trying to make sure we look at compensation data correctly since some of those numbers look a bit high relative to what I would imagine the market 50th percentile being for newer startups.

Re: Salary at Venture-Backed Companies

#58

Post by russell »

A couple of decades ago I read about a company in New Hampshire of Vermont that made skiing and hiking outerwear, definitely not hi-tech. They posted everyone's salaries on the wall, including management. If someone wanted a raise he crossed out his old salary and wrote in a new one. The president(?) said no-one abused the system because it was self-limiting it was all there for everyone to read.

I've never seen it anywhere else. It would take real guts to do it in Silicon Valley.

Re: Salary at Venture-Backed Companies

#60

Post by [deleted] »

georgemcbay wrote: post #28

"But if you offer too much compensation, management and employees may begin to feel fat and happy and lose the motivation to maximize long-term value for shareholders." IMO (and while I can't speak to the management side of it), this displays a horrifying misunderstanding of the mindset of the technical people you want to hire and pay well. As an experienced and driven programmer, you hire me and pay me well so that…

[deleted]
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