How to Negotiate Executive Compensation

The goal of negotiating executive compensation is to get the very best offer that the company could possibly give you.

This matters because you want to feel great when you start a job. You do not want to find out that other people are paid grossly more. That would feel awful.

Here is my framework for negotiating executive compensation:

1. Think through your compensation philosophy

2. Research what this role pays in market

3. Understand where compensation conversations occur

4. Conduct final negotiations

5. Avoid costly negotiation mistakes

1. Think through your compensation philosophy

Executives demonstrate a level of maturity by thinking through their compensation philosophy. The employer has thought through their compensation philosophy, and you should too. Changing roles is an executive decision, and you will want to think through the economic side of the equation.

1. What is your cash / equity split preference?
   There are two types of offers -> more cash / less equity or less cash / more equity. What is important to you? 
   

2. What does your lifestyle require?
   If you move to a startup from a public company, you are going to take a paycut. If your public company RSUs help you make ends meet, it will be difficult to consider a venture backed role. Discuss with your family about what will keep the lights on and what is comfortable for you to live on and not suffer or reach into savings. You might need less than you think.

3. What really matters to you?
   Four things have to align for a candidate to take a new role -> 1) economics (financial compensation), 2) timing, 3) intellectual challenge (the job) and 4) fit (culture and traditions). Figure out your trade-offs. Some execs are willing to take less cash for a more intellectually challenging role. But all four need to align or you cannot get married.

2. Research what this role pays in market

This helps bolster your justification for your compensation expectations.

1. Gather data points for your compensation range
   Talk with 1) your peer groups, 2) talent partners in venture, and 3) search firms that specialize in your role. They can provide these data points. And try to gather at least 5 data points to build your range.
   

2. Anchor your compensation range on company revenue
   It does not matter what their valuation is, what letter their last round was (ie - Series B), or who led their last round. As a G2M leader, anchor your compensation range on revenue. For example, if the role is a CMO at a company with $20 - $30M in revenue, then gather data for CMOs at companies with $20 - $30M in revenue.

3. Determine where you land on the compensation range
   Are you in the 75th percentile of candidates? Compensation ranges can be wide. It may seem like CEOs like the low end of the range and candidates like the high end. But when you uncover the data and look at placements, you will see that the candidates who are paid more have successfully held the same role in a previous position. And others will receive the mid to lower end of the range if this is their first time in the role.