Today's Edition

• How a Killer Salary Structure is Startup Jet Fuel, with Calvin Croskey

• Transform 2025

💵 How a Killer Salary Structure is Startup Jet Fuel, with Calvin Croskey

You’ve built an MVP, you’ve proven the concept can drive revenue by acquiring loyal customers, and now it’s time to scale.

The future is bright.

To do that, you need the best of the best talent to execute on the vision.

To do THAT, you need to offer competitive compensation, benefits, and equity that will lure these highly sought-after individuals away from blue-chip tech companies with deeper pockets. Much easier said than done.

Bill Campbell, the famous Silicon Valley executive coach, once said,

Compensating people well demonstrates love and respect and ties them strongly to the goals of the company. Doing so gets the issue of “money” off the table and allows the team to focus on the intrinsic motivators of why they decided to join a startup - your startup - in the first place.

I spoke with Calvin Croskey, Compensation Advisor at Sequoia, about what a compensation structure should look like and the value proposition for any organization.

In terms of credentials, Calvin has spent his entire career as a Compensation Consultant & Advisor, and most recently spent time as the Functional Head of Compensation at a technology startup called Jobcase before joining Sequoia as a Director in the Compensation Advisory practice, working closely with Founders, CEOs, CFOs, CPOs, and Head of Total Rewards of early stage startups and global enterprises to develop their compensation & equity practices.

He shared that the ultimate goal of a strong compensation philosophy is to reduce the friction of hiring and retaining the people you need to reach the mythical J-curve growth that startup founders dream about. If you pay folks competitively, fairly, and transparently, it should eliminate future potential problems—both fiscally and culturally— that may arise.

Why it matters: A well-defined salary structure is crucial getting the right people through the door. It ensures that your employees are paid fairly and competitively, which boosts team member morale and engagement. Plus, it promotes pay transparency and compliance with labor laws, creating a positive work environment for your employees and making their choice of “choosing your startup” to work for everyday, easy. So, what is a salary structure?

• A salary structure is a group of carefully curated pay ranges (often driven by either a job, function, or level)

• A pay range is a predetermined compensation range (often anchored by a range minimum to a range maximum) for a position based on the job’s benchmark role, level, and location (location is a key factor primarily for non-executive salaries). It’s set with a:

  • Minimum: Lowest value a company is willing to pay for a position

  • Midpoint: Approximates the target market positioning for a particular position

  • Maximum: Highest value a company is willing to pay for a position

Take a closer look: Think of a salary structure as a framework that makes determining your people spend easy and turnkey. Not only this, but as employees climb the organizational hierarchy over time, there are guardrails in place to ensure their promotional compensation package is offered effectively and fairly compared to others currently holding a similar title. The main goals here are to:

• Organize talent of similar skill sets, location, and position qualifications (and other common compensable factors) across different functions into similar pay levels

• Determine a range of pay to ensure that employees are paid similarly (for equivalent qualifications, experience, industry knowledge, performance, etc.).

• Ensure pay is competitive against other companies of similar size, stage, industry, location, and company financial portfolio (particularly for executive compensation and equity).

There are direct benefits to doing this well. It adds transparency, aids in budgeting, attracts and retains critical talent, links pay to performance, ensures equitable compensation, keeps you competitive in the market, and supports legal compliance. But there are indirect value adds too:

1. Change the conversation: Knowing your compensation is in line with the competition allows you to focus on more important conversations around topics like culture, mission, and attitude. A much better discussion than nickel-and-diming on annual salary.

2. Brand & Reputation: Being known for caring about your people vs. skimping on fair pay should be a no-brainer. Word travels fast in this ecosystem.

3. Company + People Alignment: When a salary is no longer an issue, and equity-based compensation jumps to the forefront, you’re optimizing for results by aligning the company’s success with the individual’s success.

What to Consider: Establishing pay bands is not the end of the road. It’s (hopefully) just the beginning. The leading market practice is to refresh your salary structure every 1 to 2 years, with “hot” jobs and business critical functions (e.g. Engineering in a technology/software-based company) possibly being refreshed more often.

This isn’t to say that you should fully refresh your bands from the ground up every year. If you’re experiencing low turnover, high-offer acceptance, or have minimal cash budget for pay changes, then it’s okay to keep doing what you’re doing and be more intentional / targeted about exactly where your precious capital is spent.

For the year-end compensation cycles where time, resources, budget, etc. are limited, a common “quick-fix” is to increase bands using a blanket approach, such as increasing the midpoint by a certain percentage across all functions or even keeping the bands constant year-over-year. This saves on administration, boosts speed, and increases simplicity— but only if the salary ranges are already effective and other notable people analytics are proving OK such as turnover, offer acceptance rate for key positions, and employee sentiment around compensation (via company-wide engagement/pulse surveys).

Takeaways: 34% of early stage companies (<100 employees) don’t have a formal compensation process, which highlights the major opportunity for employers to get this right.

• A well-defined salary structure is more than just numbers in an Excel sheet; it’s really about showing respect and aligning your team with the company vision.

• By offering competitive and fair compensation, you can create a culture where everyone feels valued and validated. This reduces hiring friction and lets your team focus on optimizing for company success.

• By regularly reviewing & updating your pay structures, you maintain competitiveness and compliance, and set your people up for sustainable success.

Next week, I’ll share an outline of influencing factors to refreshing salary structures, what the band refresh process should look like, along with some recommendations and implementation advice.

In the meantime, here’s a sneak peek into Sequoia’s 2024 Compensation Practices Report:

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👋 Quick about me:

I’m Cris Cafiero, and for nearly a decade, I’ve collaborated with founders, CFOs, and people leaders of early-stage, venture-backed startups. As an ex-Zenefits, ex-ADP, and now Business Consultant for Sequoia, I help startups build scalable people management infrastructure and maximize their people investment through compensation & benefits strategies.

Based in LA, I share my life with my wife and our two dogs. I’m into NBA drama, Marvel, reading, video games, computer-building, real estate investing, and lifelong learning.

I care about helping startups build a thoughtful, people-first culture and hope you find the topic as interesting as I do.

_{The intent of this newsletter is to provide general information. This information/analysis does not necessarily fully address any specific legal issue or situation, and it should not be construed as, nor is it intended to provide, legal advice. Furthermore, this message does not establish any attorney-client relationship between any of readers with the author. Questions regarding specific issues should be addressed directly with your respective legal or tax counsel (or directly with the San Francisco Office of Labor Standards Enforcement).  ​
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