2022 KP People Report

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2022 KP People Report

2022 KP People Report

2022 KP People Report

Current Environment

Highlights

Top insights in this section are:

CEOs and exec teams are placing more emphasis on performance.

On a macro level, we are seeing later stage financing rounds that closed in Q1 2022 have averaged a drop of 30% from their last valuation.

Many companies have or are in the process of refreshing their 409a to reflect lower public market comps.

“The idea that burnout and quiet quitting are our only options is clearly a false choice. There’s a third alternative — being engaged in our work without burning out and sacrificing our health and happiness...” -Arianna Huffington, CEO of Thrive Global

The Decline of Funding & Valuations

Below is a chart from Carta’s Q2 State of Private Markets report which is showing that in Q2, we saw an increase in 409A valuation drops (almost close to peak 2020). We predict this will continue into 2023.

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“Many companies have or are in the process of refreshing their 409a to reflect lower public market comps. Locking in a lower valuation will often mean reduced AMT impact for employees who choose to exercise. Any company with a 409a >6 months old should consider a refresh to ensure their valuation reflects recent market movement.”

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- Michael White, Co-Founder of Multiply

With both the size and frequency of funding rounds decreasing, companies are tightening their belts on all operating expenses. The impacts include:

Headcount Changes:

CEOs and exec teams are placing greater emphasis on performance (see Workplace Culture →

Performance Management⁠

). Companies are being more selective and intentional about hiring. In a July 2022 survey:

64% reported having reduced headcount but are still selectively hiring.

14%* no changes to headcount plans from earlier this year.

15%** reduced headcount and froze hiring.

11% increased headcount plans. * This skews earlier stage (ranges from 1-25 to 101-200 employees). ** Fairly consistent regardless of company size starting with 26-50 employees.

Data from Carta through August 2022 below showing that startup hiring has slowed dramatically. For the first time since Spring 2020, the net ratio is negative/shrinking (# of employees leaving > # of new hires).

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Tightening on Spend with more emphasis on ROI. Events will be more intentional and intimate. Smaller teams are coming together frequently to get better together - connect, build trust and drive outcomes. In 2023, we predict it will be the exception, not the norm, to have an annual companywide offsite past 500 employees.

Layoffs - Leadership teams are faced with answering: “Can this employee grow into the expectations of the role fast enough, or will they need to be layered or transitioned out?”

Compensation Strategy Changes in 2022

On a macro level, we are seeing later stage financing rounds that closed in Q1 2022 have averaged a drop of 30% from their last valuation, according to Pitchbook’s Global Markets Snapshot.

In Q2 (April - June 2022), 60% of companies reported having shifted their compensation strategy - fragmented findings. Drilling into the companies that have made changes:

Close to 40% of companies with 500+ employees have either widened equity bands or moved to a higher percentile target (ex: previously targeting 50th percentile, now 65th) for hard to fill roles (mostly in engineering or leadership roles). We see this most common with companies that didn’t set the correct target percentile, and with companies earlier in their revenue journey that have high valuations.

Only a handful of companies (<10%) decreased their equity bands / moved to a lower percentile target (ex: previously 90th, now 75th).

Close to a quarter (25%) of companies are tightening cash compensation bands.

Despite macro trends in overall headcount reduction and

layoffs⁠

, Pave data is still showing core tech salaries (SWE, PM, PD) on the rise (see chart below). We know there has been title inflation especially at early to mid stage startups. This is causing a disconnect between manager expectations and the employee’s capabilities which can impact employee morale and recruiting. The responsibility falls on the manager and the company to ensure they level employees correctly as the various compensation databases are only as good if the input/leveling is correct.

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Screen Shot 2022-10-18 at 8.18.30 PM.png

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In this environment, companies are optimizing for lower cash burn, and many are turning to equity to award/retain their top performers.

100% of companies agree about the importance of educating employees on equity.

To determine what’s the best comp strategy for your company, you need to know:

- Where your company sits in the market for key talent

- If you have a compensation issue, is it cash or equity, or both?

- Your budget

Layoffs

As of October 25th, 2022, there have been 93,156 layoffs in 2022 according to

layoffs.fyi⁠

. We predict there will continue to be layoffs through the rest of this year. According to Pave data, the top 3 functions impacted are: Sales, Content Marketing, and Recruiting. The cohort most impacted by level are talent early in their career, especially new grads.

💡 RIF - Best Practices: Layoffs are emotional and never easy. There is a lot of behind the scenes work that has to be done before the message can be delivered to employees. Below are just a few best practices.

1) Do it all at once. Try to avoid a second round within the same year. It is harmful to employee morale.

2) Treat those affected kindly. They are individual people - not an expense on a spreadsheet. A remote RIF is not an excuse to communicate difficult decisions without empathy. RIFs tend to affect the weaker performers or junior hires, but that doesn't mean the talent won't be successful somewhere else. They will be an alumnus of your company and can be strong advocates of the company depending on their experience/how they were treated. The employees that you retain will be watching how you treat those impacted, some of whom may be their friends. The goal is to maintain a strong employer brand and keep morale at your company high during these difficult times.

3) Legal

Start planning with your outside counsel as soon as you decide that layoffs are a realistic possibility. They will advise you of the different options (reduction by attrition, voluntary separation programs, involuntary RIF, etc.) and work with you to make sure that you have the proper planning and documentation in place. In addition, retaining outside counsel will ensure that your pre-layoff deliberations are privileged.

Once you have a plan in place, analyze whether your layoff decisions will be subject to heightened litigation risk. This might result from allegations of a disparate impact on protected categories of employees (based on race, national original, age, gender, etc.), disparate treatment of a protected group, or retaliation against specific employees.

Review Federal and State WARN Act requirements and prepare notices as applicable. Failure to adhere to the requirements of the WARN Act can result in penalties for non-compliance including payments to employees for all wages and benefits between 60 days and the actual notification date.

If you have any individual over the age of 40 that is impacted, ensure you are following The Older Worker Protection Act (OWBPA) and offer appropriate release of claims document and the associated workforce listing.

4) Post-termination windows. Some companies are choosing to extend post-termination exercise windows beyond the typical 90 days. When that isn't possible, an affordable non-recourse option exercise financing program like Multiply can help employees retain their equity.

Quiet Quitting

Quiet quitting, a term popularized from TikTok, has incited strong personal opinions and responses across the internet.

What is quiet quitting?

Only doing tasks pertaining directly to their job.

Doing the bare minimum.

Not working past working hours.

Being actively disengaged from company initiatives.

“The idea that burnout and quiet quitting are our only options is clearly a false choice. There’s a third alternative — being engaged in our work without burning out and sacrificing our health and happiness. I love people who are interviewing for Thrive and say, ‘I give 100% when I'm working, and these are my boundaries.’ That's very different from, “I do the bare minimum to get by.”

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- Arianna Huffington, founder/CEO of Thrive Global

Solution: The Thrive Global Platform

Thrive Global an employee experience platform designed to beat stress and burnout. Thrive embeds well-being directly into the daily workflow to meet people where they are with real-time stress-reducing tools, inspirational storytelling, and science-backed Microsteps that help them build better habits.

Thrive helps users move from awareness to action across six well-being Journeys (Recharge, Food, Move, Money, Focus and Connect).

Features

Pulse Check: Thrive invites users to start a daily conversation through Pulse check, where they're asked a single question to help gauge well-being. Thrive then provides users with personalized content recommendations based on how they feel that day and how they're doing on their overall well-being journey. Users receive Quotes, Resets, Articles, Microsteps, and powerful lessons from our Learn courses. This helps employees celebrate progress, find inspiration in others, and take action to build resilience and reduce stress.

Executive Insights: Thrive’s Pulse Dashboard enables organizations to focus interventions where they’ll have the greatest impact. Automatically recommended interventions are shared with executives to improve levels of energy, enthusiasm, and effectiveness.

Employee Engagement: After participating in Thrive programming, employees and leaders report immediate increases in stress management, ability to succeed at their work, and motivation to be an effective leader.

81% of respondents report they are more motivated to be an effective leader.

78% say they're better prepared to succeed in their job.

85% say they're better equipped to manage their stress.

88% say they're better equipped to recharge their minds.

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Thrive Product Suite October 2022 cropped.png

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Attrition

Regrettable Turnover (By Company Size)

38% of companies surveyed have not experienced regrettable attrition during Q2 (April 2022 - June 2022). Data shown below is for those who have experienced regrettable attrition. Some early-stage companies do not track this data but this is a core metric we recommend you track.

Employee Size

Average Percentage

1-50

51-100

101-200

200-500

500+

There are no rows in this table

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*Calculation method is regrettable terminations during April 2022 through June 2022 / average headcount (example 2/15) = 13.33%.

Trends Regarding Regrettable Turnover (By Company Size)

Majority of companies are seeing regrettable turnover stay the same.

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Non-Regrettable Turnover (By Company Size)

24% of companies surveyed have experienced non-regrettable attrition in Q2. Data shown below is for those who have experienced non-regrettable attrition. Some early-stage companies do not track this data but this is a core metric we recommend you track.

Company Size

Average Regrettable Turnover

1-50

13%

51-100

101-200

200-500

500+

There are no rows in this table

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*Calculation method is non-regrettable terminations during April 2022 through June 2022 / average headcount (example 1/15) = 6.67%.

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