Developing a compensation philosophy—and doing so sooner rather than later—is one key way to get compensation right. But what exactly is a compensation philosophy, and how do you go about developing one for your startup? 

When done well, your compensation philosophy can set the stage for building a more transparent culture and building trust with employees. 

What is a compensation philosophy? 

A compensation philosophy is a statement that standardizes your compensation practices and puts the “why” behind every compensation decision your company makes. If all compensation information was made public to every employee at your company tomorrow, your compensation philosophy should be robust enough to justify the decisions that have been made. 

When done well, your compensation philosophy can set the stage for building a more transparent culture and building trust with employees. 

How to develop your compensation philosophy 

We talked with Sabrina Kelly, the VP of Talent at Techstars, to get her advice for early-stage founders who are developing their compensation philosophy for the first time. 

Sabrina explained that compensation philosophy is not one-size-fits-all. It should be created through a process of discovery among co-founders or a core leadership team. She also emphasized the importance of doing this sooner rather than later, because while setting compensation subjectively might not cause any ripples among a team of four to six people, it will undoubtedly raise difficult questions at scale. 

One of the most valuable, and often under-appreciated, tools for setting compensation is benchmarking data. Using benchmarks early on and deciding what ranges you want to target will have a great impact on your compensation strategy, but getting reliable and up-to-date market information can be challenging due to the variety across startup roles. Sabrina recommends using the Option Impact Tool by Advanced-HR: “At Techstars, we use this tool to give our portfolio companies access to updated cash and equity benchmarks by funding stage, geography, and revenue.” She advises founders to tap into free resources like these and use them to build consistency and equity in their pay practices. 

Interested in learning more? Join us for an AMA with Sabrina Kelly and Options Impact on August 28, 2019 at 12:00 pm Eastern Time to learn about setting a compensation philosophy and utilizing compensation data for hiring and benchmarking.  

You will learn about how you can use Options Impact survey data to optimize your compensation strategy and hear directly from Sabrina on steps you can take to build a compensation philosophy for your startup.

See more content like this in the People & Culture Toolkit → 

Compensation, hr, People Ops, Techstars Talent

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