Stay ahead of diverging expectations.
You’re now promoting your best employees and recruiting all-stars to fill critical gaps as you level up your executive team. Also critical though to the success of your new executive, is getting incentives right. Broadly speaking, we divide them into two buckets:
1. Compensation
In reality, most people can’t ignore the little voice in their head and wait until their work anniversary or regularly scheduled performance review to think about whether they’re paid fairly or not. The best executives (and startup employees in general) are bombarded by recruiters on Linkedin, often chat with friends recently hired at other startups, and will regularly compare their pay packages to yours and those of other executives at your company. It’s your job to stay ahead of diverging expectations.
The best way to do that is to follow traditional cash + equity (standard vesting) compensation structures that are on-market with similarly capitalized venture-backed companies. Collect data points through your interview process, from recruiters, and benchmarking tools like Pave. (If you don’t have access to one of these tools we can provide access to a benchmarking report.) Be transparent on how you came up with your compensation proposal, inviting the candidate to offer their own data points. It’s a huge opportunity to close the gap on mismatches between your executive’s expectation, your expectation, and reality.
Note: stay away from overcomplicated bonus structures, trying to be too cheap or too generous, or trades for more equity and less salary. They all leave too much room for changing views over time, which will inevitably create unwanted friction.
2. Motivation
Understanding what motivates your executive and aligning their personals goals with the company’s goals is as important as getting their compensation package right. It goes hand-in-hand, because really it’s all about helping them get further up the stack on Maslow’s hierarchy of needs.
In short, Maslow's theory, published first in his 1943 research paper, is that humans need to have comfort in achievement of their more basic levels of need (e.g., stable income and employment), before they can really dial in to the higher order ones (e.g., problem solving towards a better sales motion, or balancing speed and code quality for the long run).
In order to help your executive reach their highest potential, unpack the personal motivations behind their actions and assess whether or not you’re really setting them up for success beyond just alignment on compensation. Do they feel like they’re working towards a promotion or do they feel they are overdue for one? Are they threatened by one or more of their peers and constantly jockeying for position? What’s going on in their lives outside of work?
Answering these types of questions will help you paint a more complete picture of the motivations behind the employee's actions, and more specifically, whether you and the company are meeting the employee's basic needs according to Maslow.
References
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