A Compensation Conversation for 2023
by Tess Vorselen
This year, amidst a talent landscape shaped by market, pandemic, and geopolitical headwinds, we conducted our first annual compensation survey. Our approach was guided by conversations held earlier in the year with founders and people leaders in our portfolio. Instead of raw compensation data, their resounding request was for real-time benchmarks on topics like equity refresh timing, sales compensation structures, board compensation, and the approach to geo-based pay.
Based on our survey findings, we identified three areas that get top billing in 2023 planning: compensation transparency, equity refresh strategies, and employee education regarding equity. Below we explain why we believe each is a significant priority for decision-makers to address in the upcoming year.
Compensation transparency — it’s coming!
As of now, pay transparency laws exist in multiple markets, including New York and Colorado, and are just weeks away from being rolled out in California. These regulations come alongside a growing demand for transparency from employee populations across the tech industry — as one people leader noted, “expectations around salary and band transparency are at an all-time high.” We have been advising our companies to be on top of this legislation and what it means for their hiring processes (i.e., rethinking compensation bands and how to share them). When it comes to internal compensation transparency practices, we suggest companies listen to employee concerns, decide what practices are sustainable for their team, and lock in what “compensation transparency” will look like moving forward. From our vantage point, it’s best to dial in an approach early and scale from there rather than retroactively restructure an entire philosophy. As more laws come into effect and employees push for increased transparency, we are seeing all our companies begin tackling compensation transparency for 2023.
Refresh with retention in mind.
Every organization approaches equity refreshes a bit differently. When looking through the data on this topic, we saw that employee tenure (i.e., years served) was still the most important consideration for most companies when designing refresh policies. In recent months, we have been recommending a more progressive approach that emphasizes individual performance. This model allows companies to more readily flex and make pinpointed increases and adjustments for top performers during market downturns rather than make general increases or be locked into providing refreshes for those employees who have been around longest, regardless of performance. As more companies shift to retention mode in the coming year, we encourage companies to revisit their equity refresh programs with flexibility.
Educate and communicate.
In the many conversations we held ahead of our survey, leaders expressed curiosity around how employees were valuing equity as part of their total compensation package. Many noticed an increased demand for cash over equity, and one leader observed candidates “asking more about 401K match programs than equity grants.” This trend has companies thinking through programs and practices to better communicate equity value and the idea of “total compensation” to both prospective candidates and employees. Over recent months, we have begun hearing specific questions around 409a re-valuations, market conditions, and how to communicate impacts on equity value to employees. We advise companies to prioritize employee education and communication around equity, specifically how it works and how to value it. Investing in internal comms planning and infrastructure, along with equity education curriculum and resources, will benefit both the employer and employees. Particularly through market shifts, we urge our companies to keep lines of communication open with employees around their equity and to be prepared with resources and proactive communication ahead of any major changes.
While we won’t publicly share our survey’s full results, we are open to feedback and conversations around these topics. We plan to roll out this qualitative compensation survey annually and will continue to iterate based on input from our community.