How startups determine wages. Invisible processes
When a startup offers you a job, remember that there is a whole invisible process that determines the “right” salary that each company is ready to offer you. Information is a powerful weapon in hiring staff. Companies use a wide variety of tactics to make their competitive advantage the way they determine their remuneration policies.
These include:
As the payroll survey data and the strategies listed above are becoming more and more popular, for a good half of the last decade I have been involved in managing the pay departments in international consulting companies. In this article, I will reveal to you some of the features that will help you better understand the company's vision and more thoroughly prepare for the upcoming discussion of conditions.
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To begin with, we will discuss salary benchmarking - a tool that allows companies to participate in market research with their competitors , and, based on the data, determine how much each company pays for the execution of a particular role. In the end, which company wants to overpay employees? Among the most popular companies and products for salary benchmarking are:
Option Impact (tool is especially popular in Silicon Valley)
Radford (popular among tech companies that are actively moving forward, such as Facebook, for example)
Towers watson
Aon-hewitt
Mercer
All these tools work according to a similar principle - they examine the data of participating companies, record their data on wage costs, and then provide employers with aggregate statistics for a certain fee.
All this information is contained in standard databases and spreadsheets such as Excel, Microsoft Access or MySQL / Postgres. Then the payment department creates a wage schedule and data on the share in the company’s capital, taking into account each individual department and group (A-series startups, information technology companies of an open type, etc.), including average values and modes of operation. Based on these schedules and taking into account job descriptions, location and experience, the company decides how competitive it wants to be.
Facebook and Google, for example, prefer to stick to the 95th percentile of the company for most candidates. Younger companies, such as Stripe, adhere to the 75th percentile, but at the same time expect to increase the share of capital with their own growth and development.
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These data are of particular value. Companies can pay tens of thousands of dollars for them every year. The company's goal is to pay employees exactly as much as is necessary in order to remain competitive under current market conditions. See, the alignment is no longer in favor of the candidate?
Some large companies, such as Google, have their own internal payroll analytics teams that act as venture capital or banking analysts. You can independently collect information piece by piece about the Google online team, but the main point is this: this is an extremely data-dependent organization that takes into account many factors, including counter-partners from competitors. Suppose both Google and Uber have offered you a job, and you tell Google about the terms of Uber. Then Google’s billing department will create its own Uber value model and adapt its offer if it turns out to be uncompetitive.
Accordingly, when negotiating with Google, always be prepared to provide a counteroffer from start-ups that Google’s payment department considers to be top. Many engineers, designers, and product managers at Google receive a salary that is much higher than the “standard” only because they received lucrative offers from their competitors. (In any situation, it is important to come to an interview with a ready offer. In the case of Google, this is the only lever with which you can really influence the proposed conditions).
However, payroll surveys are not perfect. One of the weaknesses is their irregularity - most companies update their salary and plan data only once in 8-12 months. Technology is changing at an incredible rate, and if you can convince a company that their data is irrelevant, you will get the opportunity to ask for more. Another weakness is the pre-ipo stock. Because these reviews break a company's stock into stages (initial / A / B), rather than according to market size, performance, or probability of success, presentable, data-based arguments and dynamic tables (also known as cascade models ) can be weighty arguments. in favor of a more significant share of shares, taking into account possible risks.
Less formal methods of collecting information include “living room reviews” with other executives or founders of the company. Representatives of companies just get together for a cup of coffee or a glass of hot drink and discuss who pays for this or that job. This approach seems stupid, but in fact it is surprisingly effective. And completely free, though not perfect.
Finally, startups keep track of the counter-offers that were received by the candidates that interested them. Even if a start-up as a result does not hire anyone, he will know how much competitors are willing to pay for this job. Think about how many people Uber hires every year. Compare this with the number of offers you can receive in a year, and you are fully aware of the scale of information asymmetry.
Finally, I want to remind you that negotiations never take place on equal terms - they are always decided in favor of the company, since it has access to the information that you, the candidates, do not know. OfferLetter.io service will help you to get the desired position - carefully selected industry data and negotiation coaching will help you defend your interests and get what you truly deserve.
These include:
- Third-party salary surveys, also known as salary benchmarking .
- "Guest review" , conducted among the founders and leaders of various companies.
- Suggestions from other candidates .
As the payroll survey data and the strategies listed above are becoming more and more popular, for a good half of the last decade I have been involved in managing the pay departments in international consulting companies. In this article, I will reveal to you some of the features that will help you better understand the company's vision and more thoroughly prepare for the upcoming discussion of conditions.
')
To begin with, we will discuss salary benchmarking - a tool that allows companies to participate in market research with their competitors , and, based on the data, determine how much each company pays for the execution of a particular role. In the end, which company wants to overpay employees? Among the most popular companies and products for salary benchmarking are:
Option Impact (tool is especially popular in Silicon Valley)
Radford (popular among tech companies that are actively moving forward, such as Facebook, for example)
Towers watson
Aon-hewitt
Mercer
All these tools work according to a similar principle - they examine the data of participating companies, record their data on wage costs, and then provide employers with aggregate statistics for a certain fee.
All this information is contained in standard databases and spreadsheets such as Excel, Microsoft Access or MySQL / Postgres. Then the payment department creates a wage schedule and data on the share in the company’s capital, taking into account each individual department and group (A-series startups, information technology companies of an open type, etc.), including average values and modes of operation. Based on these schedules and taking into account job descriptions, location and experience, the company decides how competitive it wants to be.
Facebook and Google, for example, prefer to stick to the 95th percentile of the company for most candidates. Younger companies, such as Stripe, adhere to the 75th percentile, but at the same time expect to increase the share of capital with their own growth and development.
<img src = "
"alt =" image "/>
These data are of particular value. Companies can pay tens of thousands of dollars for them every year. The company's goal is to pay employees exactly as much as is necessary in order to remain competitive under current market conditions. See, the alignment is no longer in favor of the candidate?
Some large companies, such as Google, have their own internal payroll analytics teams that act as venture capital or banking analysts. You can independently collect information piece by piece about the Google online team, but the main point is this: this is an extremely data-dependent organization that takes into account many factors, including counter-partners from competitors. Suppose both Google and Uber have offered you a job, and you tell Google about the terms of Uber. Then Google’s billing department will create its own Uber value model and adapt its offer if it turns out to be uncompetitive.
Accordingly, when negotiating with Google, always be prepared to provide a counteroffer from start-ups that Google’s payment department considers to be top. Many engineers, designers, and product managers at Google receive a salary that is much higher than the “standard” only because they received lucrative offers from their competitors. (In any situation, it is important to come to an interview with a ready offer. In the case of Google, this is the only lever with which you can really influence the proposed conditions).
However, payroll surveys are not perfect. One of the weaknesses is their irregularity - most companies update their salary and plan data only once in 8-12 months. Technology is changing at an incredible rate, and if you can convince a company that their data is irrelevant, you will get the opportunity to ask for more. Another weakness is the pre-ipo stock. Because these reviews break a company's stock into stages (initial / A / B), rather than according to market size, performance, or probability of success, presentable, data-based arguments and dynamic tables (also known as cascade models ) can be weighty arguments. in favor of a more significant share of shares, taking into account possible risks.
Less formal methods of collecting information include “living room reviews” with other executives or founders of the company. Representatives of companies just get together for a cup of coffee or a glass of hot drink and discuss who pays for this or that job. This approach seems stupid, but in fact it is surprisingly effective. And completely free, though not perfect.
Finally, startups keep track of the counter-offers that were received by the candidates that interested them. Even if a start-up as a result does not hire anyone, he will know how much competitors are willing to pay for this job. Think about how many people Uber hires every year. Compare this with the number of offers you can receive in a year, and you are fully aware of the scale of information asymmetry.
Finally, I want to remind you that negotiations never take place on equal terms - they are always decided in favor of the company, since it has access to the information that you, the candidates, do not know. OfferLetter.io service will help you to get the desired position - carefully selected industry data and negotiation coaching will help you defend your interests and get what you truly deserve.
Source: https://habr.com/ru/post/350932/
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