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Lack of VC funding forces startups to think lean

Sarah K. White | July 13, 2016
A steady drop in venture capitalist funding has forced startups to develop new strategies to evolve their workforce -- that includes layoffs, budget cuts and a new definition of growth.

Adjust your salary strategy

Employees are expensive -- between the cost of salary, onboarding and benefits, it can be difficult to strike that balance between coming up with a competitive offer and not hurting your company's bottom line. As a result, you might consider implementing a company-wide salary cap -- one that extends all the way up to the C-Suite, says Stevenson. He says initiatives like a salary cap can help show your employees that the executives, founders and board are all in it for the long haul -- and aren't just looking to get rich quick and ditch the company.

"[The policy] needs to be championed by the founders, investors, leaders -- and they need to sell the strategy to the company at large," says Stevenson. "As a founder, you need to lead on this effort, for example, you can take a smaller salary than the ceiling -- reverse the structure -- and pay your employees more than you pay yourself. Startup founders can take a page out of what they see public CEOs do in tougher financial times."

Another approach is to encourage a pay-transparency policy in your company, says Stevenson. Data from PayScale suggests that when employees know the salary of their peers -- and even bosses -- they are actually less likely to quit. In fact, the results found that even just conducting more open conversations about compensation helped employees feel more satisfied with their jobs. Opening up the lines of communication and creating a better sense of autonomy around compensation might help ease the blow of, what Stevenson calls, a "salary freeze."

Be transparent in hiring

A new employee is an investment, so the last thing you want to do is hire someone who doesn't know where your company stands -- and there's only one way to do that: Be as transparent as possible from the first interview. The last thing you want is to hire someone without giving them the full picture, and then quickly realize they weren't the right culture fit, says Stevenson. Chances are, you'll lose money on the new-hire, because you'll be looking to replace them sooner, rather than later. You want to give candidates a clear picture of the company's struggles, successes and long-term strategy.

If a candidate fully understands the company's current position and state of funding and salaries, there won't be any surprises. "It is more efficient for leaders to put it 'all out there' at the beginning of the hiring process. If you wait to the end of the interview process to tell them about this company structure, they will be more apt to turn down your offer -- and you have wasted their time and yours," says Stevenson.


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