2020 Kleiner Perkins People Report

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2020 Kleiner Perkins People Report

Compensation
Compensation

Designing Hiring Strategy

Things to consider when aligning business goals and product roadmap to hiring plan:

Role types (e.g. software engineer, marketing, etc)

Experience needed / level of seniority

Domain expertise / industry

Before you start recruiting, decide where you want talent to be located:

Type

Pros

Cons

In-office

Collaboration; Easier communication; camaraderie

Building costs; talent may not want to go into the office or move to your location

Hybrid

Provides flexibility for employees; larger talent pool (not restricted by location)

Building costs; communication is more challenging

Remote

Flexible for employees; larger talent pool (not restricted by location)

Invest in tools to connect employees and train managers; need to over-communicate; harder to design a cohesive culture

There are no rows in this table

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💡Insight: The majority of companies as we transition to a new work culture will adopt a hybrid workplace model.

Determining Pay

Consider where you want your talent to be located. Below are various pay models.

Locally Competitive / Tiered City:

Pay for the same role differs by city

Most cost effective but higher admin cost

Common for in-office strategy

Geographic Tiers:

Create 4 tiers and map similarly paid locations together (e.g. Boston, LA, DC are paid similarly)

More cost effective and less admin cost

Prevalent for hybrid and remote strategies

Bay Area Pay Across All U.S. Locations:

Very competitive outside of BA/SF

Highest cost and little admin cost

Common for seed stage but does not scale (NOT recommended past seed)

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** The map on the right shows the % discount to SF/Bay Area comp. For Canada, it is a 30% discount, on average. **

Source: Blended data from comp consultants, Option Impact, and Bureau of Labor and Statistics

There are no rows in this table

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💡Insight: Top U.S. Engineering Hubs:

https://www.hiringlab.org/2019/04/18/tech-hubs-2019/⁠

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Compensation Philosophy

A compensation philosophy defines how a company plans to pay and reward employees based on a set of principles and values important to them.

Main components for designing comp philosophy:

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Screen Shot 2020-10-01 at 3.49.20 PM.png

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Culture & Values

How much should you share with employees with regards to compensation? Keep in mind, it’s not all or nothing! Transparency around comp is a continuum. Below are the various levels of transparency:

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Screen Shot 2020-10-01 at 4.02.59 PM.png

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💡 Tip: If you are developing a comp philosophy for the first time, keep it the “What” and “How”. Employees want to understand the rules of the game -- when is comp reviewed, what are they being evaluated against, factors taken into consideration in the comp increase decision.

Equality in Pay

Equality in your compensation practices will help in building trust with employees. In addition to the fact that it is the right thing to do and good business practice, it’s also the law. We encourage you to reach out to an employment attorney for more specifics.

Compensation can be different for employees in similar roles if it is for one or some of these legitimate reasons:

Experience

Education/Training

Tenure

Performance

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California Equal Pay Act⁠

and

Equal Pay Act⁠

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In summary, both laws require men and women in the same workplace be given equal pay for equal work. The jobs need not be identical, but they must be substantially equal. Job content (not job titles) determines whether jobs are substantially equal.

💡 Tip: We recommend completing a pay equity analysis at least once a year. The purpose of the analysis is to ensure that you do not have any pay equity issues and comply with the law. Please reach out to an employment attorney to ensure the analysis is under Attorney Client Privilege.

Compensation Bands

Majority of companies that raised $50M+ have formal comp bands. It’s never too early to put together comp bands. We recommend that you formalize leveling and bands when you reach 50-100 employees.

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Performance Reviews

The most commonly used performance review tools are:

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Betterworks⁠

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Lattice⁠

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Pathlight⁠

(for Customer-Facing teams)

Other performance review tools that were mentioned include:

CultureAmp⁠

Reflektive⁠

Namely⁠

7Geese⁠

15five⁠

Implementing Formal Bonus Program

For early to mid-stage companies, we do not recommend implementing a cash bonus plan (for most companies although there are always exceptions). We are seeing a shift back towards being cash-flow positive before implementing a formal cash bonus program (not limited to only companies in our portfolio). There are several factors to take into consideration to determine readiness for a formal, company-wide bonus plan:

Stage of company

Financially: Ratio of revenue to total capital raised; cash flow positive

Philosophically: Do you believe bonuses will drive performance?

Operationally: Ability to forecast accurately 12 months out; systems and processes in place to measure and track progress against goals

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💡Insight: Cash bonus plans are more prevalent in late stage companies because they are often competing with public companies on compensation in the form of higher salaries, cash bonus plans, and stock that can be sold in the open market.