Challenge 

Like many growing startup organizations, StartingUp, LLC, had ambitious plans to expand its health data platform. The hardworking compensation analysts found the organization, however, could afford neither the Silicone nor Los Angeles Valley salary price tags for the top-tier talent that they need to push their burgeoning startup to great performance levels. Their early-stage funding capped cash compensation, resulting in a difficult recruiting experience – their candidates were fielding offers from larger companies boasting well-structured and stocked salary packages. 

They asked themselves, “How can we make candidates an offer that they can’t refuse without overpaying or promising unsustainable equity payouts?” Their team needed a credible, data-backed way to compete without exceeding pay budgets. 

Solution 

Using ERI’s Executive Compensation Assessor, the team pulled Total Compensation and Long-Term Incentive (LTI) benchmarks for key leadership roles, taking these key steps: 

  1. Get percentile-based pay estimates across all industries at the national level, looking to the 10-25th percentile range for base pay to be market competitive while keeping their small budget in mind. 
  2. Review the estimated mix of compensation to explore common base pay vs. incentives vs. equity payouts to inform pay package components and mixes to build up to once more funding or capital for payroll is achieved. 
  3. Survey the prevalence of equity pay for their executives using Total Compensation reports to supplement their base pay offer benchmarked at a low percentile. Since their goal is to use LTI to make the base salary more acceptable, in this case, they survey the median to higher percentiles of LTI data to get highly competitive equity pay rates. They decide to benchmark LTI at the 75th percentile for all executive positions with an option for a 5-year payout schedule.  
  4. Examine how firms structured specific LTI components in total packages, comparing stock awards, option awards, and other perks. 

Figure 1. The Total Compensation resource in ERI’s Executive Compensation Assessor reports total cash compensation, long-term incentives, total direct compensation, and total compensation at specific percentiles, along with charts displaying the estimated mix of compensation and the prevalence of certain pay components in an executive pay package based on the job title, organization size, and industry selection.

Figure 2. The Survey & Proxy Analyses table in ERI’s Executive Compensation Assessor displays salary, bonus, and total cash compensation, with maximum reasonable compensation limits for an organization’s top jobs, plus estimates of stock awards, option awards, non-equity compensation, pension, other compensation, etc., at specific percentiles. Use the Refine List feature to customize a list of comparable companies and access source documents, such as proxy and 10-K files.

Results  

Instead of just guessing how much equity to offer and blindly building a long-term incentive plan for executives, this company can benchmark realistically against actual market data and should see improved offer acceptance rates for their executive roles. This gives them and their candidates peace of mind. They can expect the results of their market analysis on equity pay to help reshape offers and successfully hire seasoned leaders on a lean salary and equity grant budget. By looking at the prevalence data, they were able to decide whether to offer equity at all. Comparing percentile ranges for base pay allowed them to align offers to the right level of competitiveness. Getting LTI data informed total reward package components, and they were able to educate stakeholders on how the organization’s compensation mix stacks up with the market

The Platform for All Your Organization’s Needs

ERI’s Assessor Platform is key to optimized salary planning. Our robust compensation management solution houses the salary survey data and applications that you need to design competitive and effective compensation structures. From benchmarking with reliable market data to analyzing geographic differentials and conducting pay equity analyses, ERI’s comprehensive platform is an innovative way of merging integral salary survey data with efficient features, all in one system.

Are you interested in ERI’s unique compensation solutions? Try a demo to jump-start the way you manage compensation!