Designing a compensation structure at an early-stage company can feel like navigating a maze with no map. You’re trying to build something fair, competitive, and motivating, all while headcount is growing, roles are shifting, and budgets are tight. It’s easy to fall into the trap of copying what big companies do or defaulting to generic market data.
But what growing companies actually need isn’t complexity—it’s clarity. The goal isn’t to build the perfect system. It’s to build the right-sized one: thoughtful, flexible, and impactful.
Start With Philosophy, Not Spreadsheets
Before diving into pay bands or market data, get clear on your compensation philosophy. It’s your compass, guiding how you make and explain pay decisions.
- Are you prioritizing fairness, simplicity, or offering high earning potential?
- What mix of cash and equity reflects your values?
- Where do you want to compete in the market?
Skip the vague “50th percentile” goal. Instead, define what story you want your comp to tell. For example: “We pay fairly and transparently, with meaningful upside for long-term contributors.”
Just as important is defining your talent peer group. Don’t just benchmark by industry, consider stage, team size, hiring velocity, and funding. Tools like Pave are relevant and reliable sources for real-time compensation data to pair with the context you have about your business and the specific role. Understand: Who are we really competing with, and what tradeoffs are we willing to make?
And don’t forget geography. If you’re remote-first, national bands may be cleanest. If you hire in hubs like SF or NYC, tiered bands might better reflect market realities. Whatever your model, keep it consistent and explainable.
Make Pay Practices a Playbook, Not a Policy
Once your philosophy is set, turn it into usable guidance. Not a 30-page policy, but a clear, practical playbook for how to hire, promote, and grow.
For hiring, create sufficiently wide salary bands by job family and job level and equip managers with anchor points. Don’t reinvent the wheel for every candidate. A consistent offer framework builds trust and avoids negotiation games that can introduce bias.
For promotions, keep it simple and fair. Promotions should reflect a meaningful shift in scope or impact, not just tenure. Align on timing (quarterly or biannual promos work well) and make expectations visible. Sometimes the role outgrows the person and you’ll need to adjust accordingly.
When it comes to movement within a range, reframe your mindset. Aim for momentum, not just annual merit increases. New to role? 85–90% of range. Fully ramped? ~100%. Exceeding expectations? Up to 110%. Use equity refreshes to reward long-term value, not just Day 1 enthusiasm.
Clarity Beats Complexity
Small companies often overcomplicate compensation too early, mistaking complexity for sophistication. Instead of building intricate systems with micro-levels and narrow bands, focus on broad, scalable structures—job families and salary ranges that fit on one page and make sense across roles.
Just as important as the design is communication: even the best comp philosophy fails without clear, consistent messaging. Training doesn’t need to be elaborate—a well-written email can go a long way. What matters most is that your team, especially managers, can explain and apply it with confidence.
Compensation That Resonates Beyond the Numbers
Compensation is emotional. It signals what matters and what’s rewarded. It’s not just how much you pay, it’s how intentionally you do it. You don’t need to over-pay everyone. You need to create clarity. Be transparent. Offer clear growth paths. Make equity feel like ownership, not just math. Even explaining the “why” behind decisions can go a long way in building trust.
How You Know It’s Working
A right-sized comp system doesn’t try to be perfect. It does a few things well:
- Allows managers to explain decisions without hesitation
- Provides a structure that flexes with the business
- Ensures people understand and trust how pay works
If you’re checking those boxes, you’re likely in the zone. If not? Don’t worry. Comp needs to evolve with your company. Build what works for now and make it easy to adjust later.
Compensation Is a Story You’re Telling
You don’t need a Fortune 500 structure. You need something real that’s rooted in your values, built for your stage, and ready to grow with you. The best comp programs aren’t about matching the market, they’re about reflecting who you are and where you’re going.
At Woven, we believe the most powerful compensation systems aren’t the ones that mirror what everyone else is doing, they’re the ones that feel like you. Thoughtful. Honest. Scalable. And built for impact.
_
About WOVEN
As former HR executives and operators ourselves, we are equal parts doers, thinkers, and strategists. Our team has decades of in-house and advisory experience across all types of public and private industries: technology, professional services, consumer products, non-profits, and more. Our deep experience gives us the knowledge to help you with what you need for today—and also what you’ll need tomorrow.
Sarah Kors is a Senior Associate at WOVEN HR, a full-service HR consulting firm of former HR executives and operators. With over a decade of building people foundations that power businesses, Sarah brings a long history of partnering with C-level executives and leaders to drive compensation, performance, and operational strategies that deliver results.
