One of the best things about startups is zero bureaucracy. That said, there are a few lightweight structures that add massive value when implemented early. At the top of that list are setting a company cadence–which I’ll write about in another post soon–and establishing compensation levels and bands.
Banding is the practice of setting standard ranges for salaries, bonuses, and equity by level. As you grow, the matrix will become more complex, but at the beginning, you can start with a simple grid with 4 or 5 levels. Here’s an example, with illustrative numbers.
To build you own, get the best market numbers you can (investors often have this data, or Culpepper has a startup offering that’s about $2,000.)
Taking the time to set bands lets you make faster compensation decisions: you simply select the relevant band, assess where the candidate should fall within the band, and make the offer. You can get Board approval to make offers within bands simplifying administration. Critically, banding will help you avoid creating compensation disparities that you’ll have to rationalize later (which is painful.) I even use the bands to help employees understand where they fit and how they move up.
An evening spent creating this simple compensation framework will pay back 10x.
