Comp Banding

comp-banding

When to use

• Levels and comp bands need a first pass (or an annual refresh) and the question is what shape the ladder takes, where the bands sit, and how cash / equity trade.
• A specific compensation decision crosses the desk (counter-offer, retention, market correction, promotion, geo move) and the question is which lever is the right one.
• A funding event, geo expansion, or org-stage transition makes the existing comp shape misfit reality.

Do NOT use as a payroll / equity-administration substitute (this skill produces the cognition; payroll / cap-table tools implement), as an individual-performance review (route to Q4 perf-feedback-craft), or for hiring-loop / sourcing design (separate skill area).

Cognition cluster

• Mental model 1 — First principles. Strip every comp question to: what behavior are we paying for, over what horizon, with what risk-bearing? Cash pays for present effort; equity pays for future co-built value with risk; bonus pays for outcome-linked behavior. Mixing the levers without first-principles intent produces confusion. See mental-models.md § 1.
• Mental model 28 — Inversion. "What comp shape would force our best people to leave?" Inversion surfaces the load-bearing risks (condensation at senior levels, equity refresh gaps, geo arbitrage that punishes loyalty).
• Mental model 26 — Optionality. Each comp lever preserves or forecloses future options. Above-band offers preserve hire optionality but foreclose internal-equity optionality. Equity-heavy mix preserves cash runway but forecloses people who need liquidity. Read every move as an optionality trade.
• Mental model 21 — Second-order thinking. A raise to one person ripples (perceived parity, retention pressure on peers, expectation-setting for next cycle). A band shift ripples (new-hire offers anchor higher, internal expectations re-anchor). Comp moves rarely stay isolated.
• Context-spine — org-stage + customer-segment + regulatory-regime. Read org-stage for what's affordable and credible (pre-seed: cash-light, equity-heavy; growth: cash-competitive at 50th–75th; late: cash-led, equity less load-bearing). Read customer-segment for which talent pool we compete in (enterprise sales needs enterprise pay shape). Read regulatory-regime for pay-transparency / disclosure obligations (EU directive, CA / CO / NY state laws).

Cross-wing handoff

• Composed downstream of Q1 org-design — the level / band shape follows the structure decision; comp without a structure is rootless.
• Hands off to Q3 onboarding-program for the time-to-productivity expectation that comp shape implies.
• Hands off to O1 unit-economics-modeling for the OpEx impact of comp decisions on burn / runway.
• Composed when J1 regulatory-regime flags pay-transparency obligations.

Procedure

Step 0: Inspect intent before framing the comp question

Before designing or adjusting bands, name:

1. What behavior are we paying for? (retention, attraction at top of market, alignment to long-term outcome, performance leverage).
2. Over what horizon? (this quarter, this year, this 4-year vest cycle).
3. Whose risk are we asking the person to bear? (cash risk = ours; equity risk = theirs; bonus-on-outcome = shared).

The intent gates which lever moves; without it, comp decisions chase symptoms.

Step 1: Design the level ladder

Levels are the spine; bands attach to levels, not the other way around:

1. Ladder breadth — name how many levels each track has (IC vs management; eng / design / PM / sales / ops separate or unified).
2. Level criteria — what behaviors and scope distinguish L4 from L5 from L6. Force concrete scope language, not adjective stacks ("strong" → "leads a 3–5 person workstream end-to-end").
3. Dual-track parity — IC vs management at equivalent levels should pay parity within a small band, or the IC track erodes silently.
4. Skip-level distance — a step from L4 to L5 is usually 12–24 months of demonstrated growth; smaller steps inflate the ladder.

A ladder where every adjective is "strong" is a placebo; force scope and behavior language.

Step 2: Place the bands

For each level × function × geo, name:

1. Cash band — 25th / 50th / 75th / 90th percentile against a named market reference (one named comp dataset, e.g. Pave / Radford / OptionImpact, not "feels right").
2. Equity band — initial grant + refresh cadence. Equity in % of company at grant for early stage; in $ value or share count for later stage.
3. Bonus / variable — applies primarily to sales / GTM; not appropriate as standard for eng / product without an explicit reason.
4. Total comp — cash + (equity ÷ vest years) + expected bonus. Compare TC against market reference, not just base.

Where to sit: pre-seed / seed = below 50th cash, above 75th equity; Series A / B = 50th–75th cash, above 50th equity; growth = 50th–75th cash, 50th equity; late = 75th cash, below 50th equity.

Step 3: Geo and remote shape

Pick one explicit policy; ambiguity here destroys trust:

1. Same-band-everywhere — single global band; expensive but stops geo arbitrage gaming.
2. Tiered-by-geo — 2–4 tiers (e.g. tier 1: SF/NYC; tier 2: other US metro; tier 3: rest of US; tier 4: EU; tier 5: rest of world). Document tier assignments transparently.
3. Cost-of-living indexed — per-city multiplier from a published index (Numbeo / similar). Most transparent but creates fairness debates for premium-cost low-pay cities.

A move within the same role across tiers needs a documented rule (re-band, hold harmless, partial adjust).

Step 4: Decide the lever for a specific case

For a specific decision (raise, retention, market correction, promotion, counter-offer), pick exactly one primary lever:

1. Promotion — when scope has grown to the next level; comp follows level. Wrong lever for "retention without scope growth".
2. Market correction — when the person's comp drifted below band due to market movement; not contingent on performance. Apply to a cohort, not just the squeaky wheel.
3. Retention / counter-offer — when external pull risks loss; size the cost-of-loss honestly (re-hire cost, knowledge loss, team morale). Use sparingly; each one re-prices the next.
4. Performance raise — within band, for demonstrated above-expectation impact. Documented in performance evidence.
5. Equity refresh — for retention beyond initial vest; typically annual for high-impact talent past year 2.

Mixing levers ("a raise AND a promotion AND a refresh") confuses signal and inflates anchor for next cycle.

Step 5: Validate the comp decision before emitting

Before producing the artifact, verify three things:

1. Intent confirmed — confirm Step 0 named the behavior, horizon, and risk-bearer; un-named intent means the lever is chosen on vibes and must be re-run.
2. Lever-vs-symptom check — assert the chosen lever in Step 4 matches the diagnosed root cause; using promotion for retention without scope growth is canonical mis-use and fails the check.
3. Ripple sized — verify the second-order ripple (peer parity, anchor for next-hire offers, internal-equity impact) is sized; un-sized ripples blow up at the next review cycle.

All three must pass. If any fails, return to the failing step.

Step 6: Emit the comp artifact

Produce the comp-banding artifact for the leadership decision-maker and / or the specific compensation case file. For band-design exercises, emit the ladder + bands + geo policy + lever-decision tree. For individual decisions, emit the diagnosed root cause + chosen lever + ripple-sized impact.

Related Skills

WHEN to use this

• First-pass level ladder + comp band construction.
• Annual comp refresh against market movement.
• Individual case decisions (raise, retention, promotion, geo move, counter-offer).
• Funding-event / org-stage transition comp re-shape.

WHEN NOT to use this

• Performance / individual-feedback work — route to perf-feedback-craft (Q4).
• Org / team structure decisions — route to org-design (Q1).
• Onboarding / time-to-productivity — route to onboarding-program (Q3).
• Compensation-platform admin (Pave / Carta / Sequoia) — out of scope.

When the agent should load this

• "Set our comp bands."
• "Is this raise market?"
• "Promotion or market correction?"
• "How do we handle geo for remote hires?"
• "Wie banden wir die Levels?"

Output

1. level-ladder.md — tracks × levels × scope-and-behavior criteria × dual-track parity check.
2. comp-bands.md — level × function × geo × cash / equity / variable bands referenced to a named market dataset.
3. geo-policy.md — same-band / tiered / COL-indexed + tier assignments + move-across-tier rules.
4. lever-decision.md (per-case) — diagnosed root cause × chosen lever × ripple sizing × counter-anchor for next cycle.

Gotcha

• "Strong" / "senior" / "leads" without scope is a placebo level ladder. Force concrete language.
• IC and management parity at equivalent levels matters more than people say; ICs notice within a quarter.
• Counter-offers always cost more than they look on paper; they re-anchor the next person who threatens to leave.
• Pay transparency laws are not optional and not consistent across geos; a band that looks fine in one state can be a posting violation in another.

Do NOT

• Do NOT design bands without a named market reference dataset; "feels right" bands are unfalsifiable and erode trust.
• Do NOT promote as a retention tactic without genuine scope growth; this is the canonical inflation mechanism.
• Do NOT skip the ripple sizing; isolated comp moves are rare in practice.

Runnable example

Series-B SaaS, 80 people, eng lead requests a 25 % raise for a senior eng with a competing offer.

• Step 0 — Intent: retention; horizon = next 12 months; risk = loss of person + 6 months re-hire cost.
• Step 1 — Ladder check: person is L5 senior; scope hasn't grown to L6 staff. Promotion is not the right lever.
• Step 2 — Band check: current cash sits at 55th percentile per Pave; competing offer is at 90th. Band ceiling for L5 is 75th. 25 % raise would push above the L5 band ceiling.
• Step 3 — Geo: person is remote tier 2; offer is remote tier 1. Tier-policy check: company policy allows tier 1 only on relocation; offer is staying tier 2.
• Step 4 — Lever: not promotion (no scope growth), not full retention to competing offer (breaches L5 band ceiling), not market correction (already at 55th). Recommended lever: partial cash raise to 70th of L5 band + equity refresh sized to span 3-year retention horizon + named scope-growth path with explicit L6 promotion criteria over next 12–18 months.
• Step 5 — Validate: intent named (retention with future scope growth as anchor); lever matches root cause without breaking ladder; ripple sized (two peer L5s are at 50th, will need parity correction within 6 months — budget that now).
• Step 6 — Emit lever-decision artifact for VP Eng + finance approval; document scope-growth path in the perf-feedback system for the next review cycle.