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BALANCING THE PAYSCALE

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For expansion stage businesses, recruiting top talent requires both strategy and creativity. Offering competitive – yet reasonable – compensation packages is one crucial piece to that puzzle. So how can companies be sure that they’re getting the numbers right? OpenView Venture Partners and Payscale.com joined forces to find out.

t the expansion stage, companies are growing rapidly – both in revenue and head count. But while identifying and hiring the best-qualified candidates is critical, offering them the right compensation and benefit packages is just as important. After all, if a company underpays its employees, it runs the risk of creating an unmotivated workforce with wandering eyes for better opportunities. Overpay, and it sets a dangerous long-term precedent that can negatively impact its ability to scale efficiently. “It’s essential to get compensation right from the beginning in order to manage pay increases and retain top talent,” says OpenView Venture Partners recruiting analyst Diana Martz. “An effective package, including an incentivized component, will make employees feel their work is valued and encourage them to focus on delivering results.” That’s especially true when an expansion stage company prepares to hire employees with 3 to 5 years of experience. Those new hires, says Martz, are a company’s foot soldiers, working hard in the trenches to push the company to its next growth stage. If they aren’t motivated – or a company can’t afford to hire enough of them – it could stunt the business’s growth trajectory. The key, says Adrienne Graham, founder and CEO of recruiting services firm Hues Consulting and Management, is to weigh an employee’s role, experience and expectations with the market value for the position. That means executing comparable research on the company’s industry, city (see sidebar: Three Tiers of Tech) and competition. “There’s a lot of pre-planning that needs to be done,” explains Graham. “Companies have to really understand the role and market for the position. Once you’re armed with that information, I’m a firm believer that you pay someone what they’re worth. It sounds simple, but if you under or overpay it can create a lot of turmoil.” OpenView and PayScale.com collaborated to bring some clarity to that issue. Using data collected by PayScale, OpenView analyzed the average compensation for marketing associates, inside sales reps and software developers (three key positions in most expansion stage businesses) in Austin, Boston and San Francisco. The p g graphs below estimate the pay range that companies can expect when they hire t employees with 3-5 years experience in each of those roles and markets. year

THREE TIERS OF TECH
For this report, OpenView identified three cities for its compensation research. All three (Boston, Austin and San Francisco) are widely considered the top high-tech hubs in the United States, while each represents a specific cost of living tier that can influence a fair salary and benefits package. With a $100,000 salary in Boston as the median sample, here’s how much CNNMoney’s cost of living calculator estimates an employee would need in San Francisco and Austin (along with a few other tech-heavy cities) to live a comparable lifestyle:

TIER ONE San Jose/Santa Clara - $120,000
Boston - $100,000 Washington D.C. - $105,000 Philadelphia - $95,000 Seattle - $91,000 Chicago - $89,000 Austin - $72,000 Denver - $77,000 Durham - $72,000 Dallas - $69,000 Columbus - $69,000

San Francisco - $123,000

TIER TWO

TIER THREE

I N S I D E S A L E S
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“ “Salespeople expect leverage and they want to be paid for success. I It’s critical to do your homework and create a fair compensation p package for the person, the role and the market. It has to be attract tive to the candidate you’re hiring, but it needs to align with and w work toward the company’s economic model too.” Brian Zimmerman, Managing Director, OpenView Venture Partners B

SAN FRANCISCO INSIDE SALES PAY STRUCTURE BREAKDOWN
2.53%

Base Salary
31.62%

Bonus
4.21% 92.15%

Commission Profit Sharing

TOTAL CASH COMPENSATION CURVE
AUSTIN
Average: $62,861

BOSTON
Average: $64,445

SAN FRANCISCO
Average: $77,377
Median $76,021 75th Percentile $77,523 90th Percentile $93,188 25th Percentile $61,127 75th Percentile $96,340

Median $62,097 25th Percentile $50,933 10th Percentile $42,760 75th Percentile $76,315 90th Percentile $93,035

25th Percentile $52,734 10th Percentile $44,568

Median $63,762

10th Percentile $50,667

90th Percentile $122,926

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*Average experience and company size are fixed at 3-5 years and 50 employees respectively.

“An effective compensation package, including an incentivized component, will make employees feel their work is valued and encourage them to focus on delivering results.” Diana Martz, Recruiting Analyst, OpenView Venture Partners

“The market has a funny way of uncovering underpaid, underappremarke ciated talen which creates more churn and risk in the long term for talent, employers that make that mistake. Conversely, if you’re overpaying t your people, then you’re using precious resource capital inefficiently.” people

BOSTON MARKETING PAY STRUCTURE BREAKDOWN
12.85% 4.21%

M A R K E T I N G

George Roberts, Venture Partner, OpenView Venture Partners Robert
92.15%

Base Salary Bonus Commission

TOTAL CASH COMPENSATION CURVE
AUSTIN
Average: $39,431

BOSTON
Average: $44,617

SAN FRANCISCO
Average: $45,976
Median $45,747 75th Percentile $50,258 90th Percentile $56,285 25th Percentile $39,013 10th Percentile $33,226 75th Percentile $53,397 90th Percentile $61,818

Median $39,322 25th Percentile $34,332 10th Percentile $29,858 75th Percentile $44,746 90th Percentile $50,438

Median $44,486 25th Percentile $39,239 10th Percentile $34,663

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*Average experience and company size are fixed at 3-5 years and 50 employees respectively.

D E V E L O P M E N T

“When you’re looking for top talent, paying them exactly what they’re worth is critical. But you have to hire within your means too. If you hire an all-star and pay them more than you can afford, then y you’re in big trouble if they don’t pan out. A lot of smaller expanding companies can’t afford to make that mistake.” A Adrienne Graham, CEO, Hues Consulting and Management

AUSTIN DEVELOPER PAY STRUCTURE BREAKDOWN
3.64% 4.21%

Base Salary Bonus
92.15%

Profit Sharing

TOTAL CASH COMPENSATION CURVE
AUSTIN
Average: $63,742

BOSTON
Average: $74,452

SAN FRANCISCO
Average: $81,718
Median $81,476 75th Percentile $84,816 90th Percentile $95,432 25th Percentile $69,276 10th Percentile $58,324 75th Percentile $94,644 90th Percentile $108,250

25th Percentile $54,332 10th Percentile $45,620

Median $63,639

Median $74,303 75th Percentile $73,370 90th Percentile $83,222 25th Percentile $64,388 10th Percentile $55,365

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*Average experience and company size are fixed at 3-5 years and 50 employees respectively.