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🤩 Building The World's Most Beloved Neobank. An interview with Dom Pym, co-founder & ex-CEO at Up.
🔥 One Million Outbound Emails Per Day. Our wild plan to send world record levels of outbound .
💆🏻 The Ultimate Founder Mental Health Stack. Psychedelics, depression drugs, dog walks, training, meditation, Whoop and loads more.

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HOUSEKEEPING 📨

Firstly, massive congrats to our partner today, Attio, who just raised $33M to keep building the future of CRM. It’s pretty incredible to watch them execute.

We will be learning from Matt McFarlane today, expert in compensation, the next which will come out in the next weeks will be with Scott Leese on the future of GTM and so on. I hope you enjoy them!

Oh, and a week ago I put a call out for anyone hiring remotely to let me know and I got a great response. So, I am doing it again. If you are hiring reply to this email (or head here) and I’ll throw you a $1000 credit on any role.

EXPERT OF THE WEEK 🎙

Matt McFarlane, Director at FNDN

Matt is the Director of FNDN, and is based in Brisbane, Australia, where he lives with his partner, Kathleen, and spoodle, Delilah. Matt’s business, FNDN, which is an acronym for Foundation, helps startups get their compensation practices right — and achieve pay that is clear, fair, and competitive.

Previously, Matt lead the People Operations teams, and compensation within it, across a range of different industries, focusing primarily within the startup space. His last role saw him at Oyster, building and leading the compensation practices while the team scaled from 250 to 650 people across 70+ countries, all in 12 months.

Tell us about the problem you are trying to solve at FNDN? Why this?

We’re in a golden era of pay. Companies are seeing a big shift away from secretive pay practices. Now, they’re being forced to speak about, educate, and justify pay decisions to their people, and many of them aren’t sure where to start.

Social expectations are shifting, and depending on the region, significant legislative changes, such as pay transparency, are becoming commonplace. The pandemic also drove a shake-up of how companies think about pay in a global context. Additionally, we’re also seeing an enormous revolution in compensation benchmarking and technology. This adds another dynamic to company capability and creating a new frontier for how pay is administered.

Right now we’re in the midst of a melting pot of pay related issues that is driving a need for companies to get on the front foot of how they think about pay. Since pay is a company's biggest expense, the People function must know its impact.

While these big changes are imposed on companies, compensation isn't a hot topic in 'how to lead a people function' books. Many leaders view compensation as a mystical art. So, they feel unequipped to address it as well as they would with talent acquisition or organizational development.

That’s the gap FNDN aims to fill. We help companies approach compensation head on and determine how to pay in a way that is right for them. We want to prevent companies from overspending due to a lack of structure. We also want to avoid pay inequity, poor engagement, and high attrition.

What is the biggest mistakes companies make when building a comp policy?

The biggest mistake is not realizing it's crucial to align it with your company's strategy and culture. The second is not questioning the assumptions behind their decisions and taking a first principles approach to their business.

A comp policy is so much more than just choosing a percentile in the market and paying to that. 99% of the time, a company will choose mid-market or 50th percentile. It’s comfortable. We don’t want to overpay for talent, but we don’t want people to think we’re screwing them over. But there’s rarely a ‘why’ behind that decision.

This is where a lot of the mysticism stems from in compensation. As a startup, you want to spend as little as possible on salaries and yet still be able to find and keep your people. What’s the number for doing that? No one knows. All you can do is take a principles based approach to helping you determine it.

Explain your philosophy around career paths? How do you build them?

I love career paths. They can keep people at a company longer. They open up options beyond just the 'climbing the ladder' approach. It's a solid way for companies to build cross-functional knowledge and relationships. But, they need to be considered at the right stage.

Early stage startups are more focused on getting people in the door to do the job today. There’s a second stage where you’re growing those same people into more senior versions of their same functional roles, to help you handle the growth. Then, there’s a third stage. That growth will, inevitably, taper off. You need to find ways for people to progress and develop, other than eyeing their boss's job.

Usually a good place to start is to publicize your vacancies. Also, think about the moves you want to solidify, like Finance to Data or Customer Experience to Sales. Then, facilitate that with targeted training and development. One of the real structural constraints from a pay perspective though, is what you pay someone who’s moved into an adjacent role.

If someone is coming from a higher paid role to a lower paid role, what do you do? You could bring them down to the new salary or let them stay on their existing pay, making them an outlier against their team, who are arguably more experienced in that role. You might even argue if they’ve moved roles, they should get an increase because you want to incentivise those movements.

All of those could be the right answer, and each company has to chart its own course through the grey. If employee turnover is due to a lack of career growth, it shows people want to progress. It doesn't say if they'll do it laterally or for a pay cut. Determining all of these things for yourself and making decisions that support your organisations goals is the way to go.

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What is the most important driver to above average talent retention today?

In my experience, people think about pay in three key ways. First, they will consider if the offered amount is competitive when deciding whether to join your company. Once they're on board, they start looking for signs that indicate they're being paid fairly compared to others in similar roles. Finally, they focus on how their pay reflects differentiation, such as performance-based compensation. Two and three are critical for retaining above average talent.

As a company, you need to help people know who their peers are so they know who to compare themselves with because they will draw parallels whether you do or don’t. The most common way to do this is with job titles. The next steps are about joining the dots between someone's skills, performance or behaviours, and the value of those things to the company.

Above average talent expects to be rewarded differently to peers when they think they’re outperforming them. This can be through a pay-for-performance incentive in role, or promotion to a new role with a higher salary.

This is where pay transparency tends to be helpful. Typically, companies that go to the effort of sharing with someone what they think they’re worth, have probably gone to the effort of defining why. Knowing what they need to do to get rewarded is a surefire way to help people continue to be above average. Not differentiating may curb their high performance. It brings no benefit. Or, they may seek a higher-paying, high-performance job.

How do you look at global comp? What is the most common practice you are seeing?

Philosophically, I see global compensation as a way for companies to access great talent. The salaries are discounted to the company, but they can transform the lives of the recipients. This is worse for companies in higher-paying countries. But, it applies to all firms that hire based on talent, not cost.

I still fondly recall a time at Oyster, where we had a no-negotiation stance on pay. If you came in wanting to negotiate, you either accepted the salary, or moved on. Conversely, if your pay expectations were below where our pay point landed, you’d be uplifted to the higher amount.

We hired someone in South East Asia who had drastically low salary expectations, but which were typical for the region. We effectively doubled those expectations with our offer, and the life changing effect it had for this person was so heartening. There were so many more things this person could do, and this salary reduced their living pressures significantly, which meant they had better peace of mind and were enormously motivated in their work. How often does your salary get doubled? The effect was profound.

_{*Breaking the fourth wall here for a quick bit of feedback on the new interview type.}

This not only comes back to benefit the company but it was still done at a huge discount to hiring that same role in places like Sydney or London or New York.

The challenge though is what to pay in those places that might have great talent, but no benchmarking data. Early on during covid, when global hiring hit its peak, this concept of geographic agnostic pay, which is paying the same salary regardless of country, reached fever pitch. That’s one way of solving the ‘what do we pay’ debacle, just pay the same as your HQ, but it hardly nets a financial benefit. An alternative is to benchmark to a lower salary region and use that for a group of companies, as another common approach.

But, as part of that exercise, one pay practice has shifted. It is the move towards nationalised salaries, especially in remote companies. Why force people to live and work in a capital city when their salary could give them better quality of life if they chose to live regionally.

In terms of most common practice, I’m closer to the smaller size companies and so speaking from that experience, I can say companies still very much choose to differentiate pay on a geographic basis. Which makes sense to me. Why add the complexity of remote workforces? There's no gain, only a chance for better talent.

I’m a massive fan of insights and so I follow a lot of the work delivered by Peter Walker at Carta. They released something recently that showed it’s the bigger end of town that is more likely to pay the same no matter someone's location, but it’s still a nascent practice.

What are some best practices for managing high comp expectations in a stabilised market?

This is another way that pay transparency comes in handy because it helps you articulate your pay practices and explain how you compare yourself to the market, especially in a market that has slowed.

This is particularly helpful for showing candidates that the era of ‘day in the life’ TikTok influencers touting the poolside work life haven’t really stuck around.

The same is true for managing compensation expectations internally, too. A practice I’m fond of is showing people how the market has moved in the lead up to a compensation review. Show them what the facts are and manage their expectations of outsized pay increases.

Any other compensation trends you are seeing right now?

This is another relatively new thing but a recent topic I’ve been hearing is what to do when bands are actually reducing? You can take the approach that you model the market, which is fine until you start hiring new people in at less than the ones you have, and need to work out what to do when it comes to being equitable.

Or, you can accept that it’s a nuance of salary surveys in a stable era and leave the bands alone for a cycle. Salaries typically only trend one way, and thats up. But if it’s been multiple years of trending down it starts to beg the question of whether to map to it so as not to compromise your philosophy. Either that, or your philosophy needs to change.

How do you get the best out of yourself personally and professionally?

As cliche as it is, I’m a big fan of the whole concept that your network is your net worth. I try to meticulously meet and have access to the smartest people around me so that I can navigate whatever it is I’m going through. More often than not, that person is my partner, who is infinitely smarter than me.

From a personal standpoint, I don’t do anything particularly exciting. I keep a healthy sense of humor. I eat healthy most of the time. I get as much high-quality sleep as possible—I'm a big fan of my Eight Sleep for this. I also exercise to offset my love of fine foods. I’m at a stage where I’ve run two half marathons and haven’t yet convinced myself that doing it twice is worth it. Hope the marathon running readers will tell me if it was actually worth it.

And that's it! You can also find Matt on LinkedIn or check out his company FNDN to learn more about their innovative compensation solutions.

BRAIN FOOD 🧠 

I was playing around with some AI tools last week and ran into this image upscaler called Magnific. It’s pretty wild because you can take an image, crank up the details, and it'll upgrade it in seconds. You can even go from those grainy photos into high-res pieces just by tweaking some settings.

I've been using it mostly to take my Midjourney to the next level of realism, and it’s quite mind-blowing to see how much you can upgrade an image.

TWEET OF THE WEEK 🐣 

TOOLS WE USE 🛠️

Every week we highlight tools we actually use inside of our business and give them an honest review. Today we are highlighting Attio—powerful, flexible and data-driven, the exact CRM your business needs.

See the full set of tools we use inside of Athyna & Open Source CEO here.

HOW I CAN HELP 🥳