A public compensation formula & a playground for people to self-actualize
In a previous article, Zefir’s cofounder Louis shared more about how we removed pompous titles from our organization at Zefir.
The big takeaway was “we want to reward people based on impact on company output, not title”. To complete this objective, we continued onto a second topic: our compensation structure. I (Déborah, People & Talent Lead at Zefir) will share more about how we went about it.
Indeed, this business issue is crucial to building a healthy and sustainable growth model. So when I started working with Rémy & Louis in March 2021, it was one of the first topics we added to the roadmap, for how central it was to all of our other People-related initiatives.
Until now, much like a lot of other companies, to decide how we would pay team members, we based ourselves on what we felt was “offer & demand”. Simply put, market salaries, as presented in discussions with candidates, were how we drove our offers, without any real thoughts about which areas we were investing the most, how we would reward performance, on having clarity amongst the team etc. This ended up raising several problems…
An inefficient situation
1) An obstacle to recruitment
We would spend several days agreeing on what offer to make to candidates. A time that we could easily have saved by using a pre-established model. And, as our offers were tailored to candidates, we found it difficult to position ourselves quickly regarding compensation in the recruitment process. Like any company, we had budget constraints too. Sometimes, we discovered too late that some of the candidates had far too high expectations. As a result, only one in two candidates accepted our offer. This was far too low.
Our goal: more than 90% acceptance of our job offers & a maximum of 24 hours between the final interview and the sending of our job offer.
2) A lack of internal transparency & difficulty to project themselves
Through our internal engagement pulse survey, we learnt that team members gave a fairly average score (6/10) on salary transparency. In addition, our career path was unclear, and the team did not have much visibility on how to progress at Zefir. In the long run, this could lead to major retention issues.
Our goal: increase the feeling of fairness in salaries to 8/10 and reward people with a growing impact every 6 months.
Our vision
“Clear level with clear expectations, clear scope and removed politics.”
We decided to build a new way forward. Clear level with clear expectations, clear scope and removed politics. A model that would be:
- Engaging: Define a motivating career path for both managers and individual contributors to project themselves in and perform towards. This project would be a forcing function for us to build our level descriptions and decide on what we valued.
- Attractive: Pay at the high-end of the market to attract top talent.
- Simple: Build a system that is easy to use and flexible over time.
- Fair: Design a fair compensation structure that can be publicly released. Transparency is the watchword of this model. With the team having access to everyone else’s salary level, we would have no choice than to be confident in our model.
Our compensation model
Here are the three fundamental principles we built our compensation model upon:
Principle 1: A formula rather than a salary grid
Transparency means being able to make our compensation model public, both internally and externally. At Zefir we have opted for a calculation formula. This choice seems to us to be relevant for three reasons:
1) Modularity
A grid only allows two main components (on the abscissa and ordinate). Therefore, a great advantage of the formula is that you can multiply the variables to reflect all the complexity and diversity of the salary factors (without needing to add levels or split hairs). And weigh them according to their level of importance.
2) Clarity
With a formula like ours, you fill in clear criteria to estimate your salary. The only question you have to ask yourself is the amount of impact you have thanks to the level of expertise you bring to the team and the level of autonomy over your topic. As a candidate, this doesn’t mean that you’ll have complete certainty over which level you’ll be at, this is defined during the hiring process, but at this stage you can still position yourself and open up the discussion.
3) Upgradability
Finally, we can add criteria without having to rethink our model completely, which makes it scalable and sustainable.
For example, if, one day, we wish to value internal coaching or factor in performance bonuses, we will simply add a new variable to our formula in the form of a multiplier. And the model will be updated.
In the same way, if we want to decorrelate functions or career paths (creating a new job family for a role stemming from another job family with slightly different market comparables), there again, it will not be necessary to create a new grid. Simply add a job family.
Principle 2: five weighted elements
The formula is based on five elements, whose weight corresponds to the importance they have in our minds.
1) The “job family” base — High weight
To remain above average from market comparables, we benchmarked with the Figures solution and positioned ourselves between the 50th and 75th percentile.
Some job families have a variable component to their salary as well. Those apply only to our teams in Sales and Investment for now.
In general, we intend to re-benchmark every 6 months or so, so that we have an accurate base (and only new salaries would be affected if the change is downwards).
2) The “level” multiplier — High weight
At Zefir, we value the scope and impact on the company’s performance above all. It is therefore logical that this is the most crucial criterion in the compensation calculation.
Everyone is thus positioned, after having completed their hiring process, on a scale of 1 to 8 in their “job family” according to:
- their scope of their role and level of autonomy in their field
- their level of technical mastery and depth of skills they apply to their job
3) The “loyalty” multiplier: years of internal experience at Zefir — Medium weight
To value people who have been working for Zefir for a long time and their acquired knowledge, we have separated internal and external experience, giving more weight to the first category. The internal experience is the only one that changes after hiring.
4) The “wisdom” multiplier: years of relevant external experience at date of hire — Low weight
This variable is set at the date of arrival in the company. The number of years of experience does not change after hiring. We count experience after graduation. A PhD or an apprenticeship can add up to 1 fixed year of experience on top of that.
5) The “Cost of living multiplier” — Low weight
We measure it according to the median income per capita per country to adapt to everyone’s level of need to have a comfortable life. For the time being, we do not differentiate by city and consider that the whole of France is on a relatively high cost of living.
To be noted: hiring people outside of France is still pretty tricky and our current rule of thumb is to be on a timezone at a max of 2h difference with Paris. Being based outside of France is decided on a case by case basis.
Principle 3: Equity is not optional
At Zefir, everyone is offered stock options, regardless of their position or experience level, because everyone contributes to building a long-term project.
We used to offer a salary-equity trade-off, which we think does not make sense for us anymore.
The formula is straightforward: depending on the role, we allocate an equity amount corresponding to a percentage of the person’s salary. Equity percentages are, like salaries, based on market comparables.
For now, from level 5 onwards, we are able to discuss equity depending on several factors such as candidate scarcity or growth potential. We are likely to make changes to the equity grid soon so that this is built in.
Also, people get a refill on their stock-option grant at every level-up.
There, you have it for the criteria and the method of calculation! Now every one of you can easily find out their potential salary at Zefir:
➡️ I discover my salary with the calculator ⬅️
Outcomes
We announced the new compensation model to the teams in April 2022 and implemented it in practice for May salaries. While we implemented it, we ensured there would be no income drop through a “legacy” principle (people catch up with the grid over time but their current salary remains the same if it is higher than the formula’s outcome).
The feedback was very positive about the transparency level and willingness to be fair. We have had some feedback on details, and we have iterated in June, improving on things such as consistency between some levels where the gap was too high or on some roles where we had initially too little benchmark.
This model makes us proud because it is fundamentally like us, based on our value of being data-driven, having a growth mindset and making bold People choices. And it is a stable foundation on which we will build the rest of our story.
