Is Company Stability a New Form of Compensation?
2023 was a wild ride. Will we look back and call it the "Great Reset?" It's easy to forget our industry's relative nascence, and that some of these difficult cycles are actually necessary for forward progress, even if it doesn't feel like it at the moment. For much of 2023, high interest rates and a tight venture market put downward pressure on hiring (although not necessarily compensation), as companies were forced to retrench, get lean, and prove they could scale. The VC frenzy in the preceding years had driven compensation to new heights, but it appeared to us that macroeconomic inflation stepped in when they stepped out, propping up wages as they plateaued.
In our 4th Edition of the Digital Health Executive Compensation Study*, we wanted to explore what would happen to compensation in a year that was marred by layoffs at the mid-levels, hiring freezes, yet continued growth for companies that needed to meet their goals. The result was that base compensation stayed relatively flat versus this time last year.
A couple of notable spikes occurred in sales / revenue and business development leadership and client success. The dips were seen in individual contributor business development (likely a shift of compensation from base to variable) and a small dip in tech / engineering. Both of these functions felt some of the bigger boosts during the previous cycle.
Negotiation rates were down across the board this year (from 46% to 44% on average, which is a continuation of the decreasing trend in previous years), signaling perhaps a read of the market's tightening, and an understanding of when not to push. RIFs continued throughout the year, though early stage companies continuing to hire at a significant clip (27% of respondents from early stage companies saw team growth of 50% or more), while the number of executives proactively resigning dipped to 17% (from 21%) - unsurprising in a volatile market.
Looking forward, the data suggests a big game of musical chairs in 2024. 66% of our respondents are actively or passively looking to make a change next year, specifically paying attention to mission, leadership and compensation. The #1 reason for a job change in 2023 was leadership. Paired with a softening venture market and a need for companies that have raised successfully to grow, we could see a significant amount of executive movement ahead towards companies where stability is more certain.
*If you participated in the 2023 Digital Health Executive Compensation Study, you should have received it in your inbox in December. If you did not, please email firstname.lastname@example.org. If you did not participate, the report will be released in February. 2024 survey will open in September.
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