It’s Not Just About the Money
We are in a bull market for Digital Health right now. Full stop. We are at minimum 4 quarters deep into it, and depending on how you view Q2 of 2020, it may have started before then, with a brief pause to watch Covid pour jet fuel all over this fire. Whether or not we’re in a bubble is a conversation for another day, or a beer (in person!) at JPMorgan in January. What’s not up for debate is the impact this environment is having on talent acquisition, and while I know some will frown on the term “war for talent,” that’s probably putting it mildly. Here’s just a few things we’ve seen in the last 9 months:
A candidate reached offer stage for a complex search and was contacted by another opportunity, to which they told them that they were getting ready to receive said offer. To compete, the competing company made them an offer BEFORE interviewing them, and then conducted their full interview process in a compressed time-frame.
A candidate fielded multiple offers inside of 36 hours, all of which were above market rate, and to try to get leverage, one company threw down a $50K signing bonus to get the candidate to say yes by midnight – the same day the offer was made.
For the second time in a decade of us running executive search, a candidate accepted a counteroffer from their current employer. In a surprise first for us, they then recommitted to leaving, before flipping back to staying put – meaning they signed an offer letter twice, before ultimately staying with their current organization for a 100% increase in cash compensation and a $4M retention bonus over 4 years. The first time we saw a candidate accept a counteroffer from their current employer was April 2020.
I’ve got more stories but they’re all heartburn-inducing, so what do you do about it? The knee-jerk reaction is to pay more. Play the game, contribute to the inflation and get in the current, because we all know how important the right people are to building great companies. In some cases this will make sense. In others, not so much. There are a few things you can do as a high growth company competing for talent that don’t have to destroy your P&L.
Know Market Compensation For Your Needs
It’s imperative that you have a good grip on what the market is bearing for the search you have underway. If you are bottom quartile in all components (base, bonus, equity) you’ve got a problem. That problem isn’t limited to the new hire, it’s already festering inside your team. There’s a lot of concern about parity for incoming execs against the existing team, and rightfully so, but every time you bring in a senior leader, it’s an optimal time to reevaluate compensation on your existing team. Otherwise, this market will get you twice – once when your dream candidate takes a different offer, and again when folks on your team learn how far below market their comp is because someone is calling to double it. If you’re curious about how your compensation stacks up, you can check out our market compensation study from the end of last year. Conservatively, add 10-15% across the board because it’s changed that much. You can find it here.
Run a Tight, Decisive Process
Right now, a day can make a difference in closing out your top choice for a senior role. A week is an eternity. Structure a process that is well-defined, well-communicated, and has a bias toward action. Communicate that process to your candidates when you start engaging them and let them know the value of each step to them, not just to you. One of the single biggest cost-free levers a CEO can pull right now is decisively pulling the trigger when they see what they’re looking for. Being decisive is not the same as rushing. Swift decisions have to be a priority. If it isn’t a priority, you’re wasting your time, and you’ll end up frustrated and spinning your wheels. This doesn’t mean you’re running a search process for a CFO in a week. It just means that slack and waste in an ill-defined process that adds a day or a week or two to the rodeo means the bull wins.
Put Your Comp Plan Together Before you Pick Your Winner
This plays off of the importance of cadence in the last point. If you are just starting to formulate your bonus plan, or your LTIP, or how your commission schedule is going to look at the same time you’re constructing an offer for your finalist, it’s going to end badly. Budget all parts of the pay for the role for a base case scenario when you launch your search, and then model a stretch case and a “I never thought we could land that kind of exec” case. Get Board buy-in as early as possible. Have conversations with your finalists about the cap table, company valuations, raise plans, and equity outlooks, before you make them an offer. The more items that matter that can be checked off the list in parallel to your vetting process, the smoother your closing will be. And have a template offer letter ready before you decide that you should put said offer down, so all you need to do is fill in some blanks and click “send.”
Be Prepared to Reach
The first 3 points are basically free. We can debate the merits of the inflation we’re seeing, but that won’t make it go away. There are more great jobs than there are great candidates to fill them right now. Everyone still wants passive candidates that aren’t actively looking for something new. Combine these things, and you have a candidate’s market. So we can lament runaway costs or go halfway to meet them, and make the rest up with creativity. Are there milestone equity markers? Can you swing a sign-on bonus (this helps keep base pay parity for your current team, and can be clawed back if someone leaves)? Can you offer interesting PTO opportunities? Can you provide other benefits that have real value (not ping pong tables in the office)? Can you commit to revisiting cash compensation at key milestones like fundraises?
This market won’t last forever, but we’re in for at least the next 12-18 months in our opinion. That’s forever in startup land. So if reaching to compete solely on compensation isn’t an option, control the levers that you can. Be decisive and swift, run a tight process, work through pertinent issues that are on candidates’ minds in parallel to your vetting, and when the time comes, act. In addition to giving you more leverage, coincidentally, all of these things will create a better candidate experience, and if you think they’re not paying attention to that now more than ever, thing again.