Executive Compensation

Executive Compensation

Overview

Canonical home for GTM compensation strategy (IC through CRO). Comp is a behavior design system, not a headline OTE. CRO packages that pay only on bookings create mercenary quarter-end deals, logo churn, and sandbagged forecasts. Pavilion's CRO Council — led by Sam Jacobs — gates variable comp on revenue quality: net new ARR, NRR, and efficiency (Rule of 40 / EBITDA), not bookings alone.

Master playbook: references/gtm-compensation-strategy.md (Pattern 35).
Role × stage matrix: references/comp-by-role-stage.md.
IC bands + templates: gtm-role-descriptions → comp-benchmarks.md.
Founder budget / negotiation: founder-comp-playbook.
Approval conversations: gtm-leadership. Legal: employment-compliance.
HR GTM ramp handoff: hr-gtm-playbook.md (Pattern 28).
Reconcile thresholds: references/benchmark-reconciliation.md.

Not legal or tax advice. Every clause requires qualified counsel; state law varies on non-compete, commission timing, and parachute taxes.

When to Use

• "Design GTM comp plan" / "OTE and quota design"
• "Annual comp review for sales team"
• "Structure CRO compensation"
• "VP Sales offer letter clauses"
• "Executive severance for sales leader"
• "Equity refresh for CRO"
• "Variable gates for VP Sales"
• "Pavilion-style exec comp"
• "Board approval package for revenue leader"

IC plan templates live in gtm-role-descriptions; strategy and worksheets live here.

Step-by-Step Process (Full GTM Comp)

Phase 0: Load Master Playbook

1. references/gtm-compensation-strategy.md — philosophy, role strategies, stage gates
2. references/comp-by-role-stage.md — matrix by ARR band
3. skills/founder-led/gtm-role-descriptions/references/comp-benchmarks.md (via gtm-role-descriptions) — H1 2026 bands
4. templates/comp-plan-design-worksheet.md — plan design
5. templates/ote-calculator-template.md — quota math + scenarios

Founders: run founder-comp-playbook payroll % ARR check before publishing bands.

Authoritative Foundations

• Sam Jacobs (Pavilion). Founded Pavilion (Revenue Collective); hosts CRO School and publishes revenue-leader comp norms. Emphasis: peer benchmarks, efficient growth, and multi-metric executive gates — not hero bookings.
• Pavilion CRO Council. Private comp data for CROs at scale; use as directional benchmark with Bridge Group public surveys.
• Bridge Group. Leadership OTE bands, quota:OTE at org level, ramp expectations.
• Jason Lemkin. VP Sales before $2M ARR: ~70% failure; comp must include system-building milestones, not only ARR.
• Mark Roberge. Tie executive variable to measurable machine outcomes: hiring, training, process adoption — not vanity pipeline.
• Frank Slootman (Snowflake). Sales exec comp aligned to consumption when revenue is usage-based — entire exec team on same metric set; eliminate siloed MBOs that block cross-functional alignment. See gtm-leadership/references/cro-enterprise-strategy.md.
• John McMahon. CRO bonus should reflect forecast certification quality and rep productivity curves — not lone-wolf hero quarters. Board expects predictable commits backed by MEDDICC.

Step-by-Step Process

Phase 1: Role Band & Mix

Load references/executive-comp-benchmarks.md for Pavilion/Bridge alignment.

Phase 2: Variable Gates (CRO / VP)

Pavilion-quality gate model:

Partial payout: Document matrix — e.g. 80% ARR + 110% NRR = 85% variable max.

Phase 3: Clause Library

Load references/executive-clause-library.md — full clause set:

• At-will employment and cause definition
• Variable calculation, timing, and clawback (90-day logo churn)
• Equity: grant size, vest, cliff, refresh schedule
• Change of control: single vs double-trigger acceleration
• Severance: without cause (3–6 mo base + pro-rata bonus)
• Non-solicit / non-compete (jurisdiction-specific)
• Recoupment and D&O indemnity
• 280G parachute gross-up policy (if applicable)
• Signing bonus and relocation
• Garden leave and cooperation post-termination
• Board reporting and forecast certification
• Commission plan incorporation by reference

Template package: templates/executive-offer-package.md

Phase 4: Equity

Coordinate with equity-management and 409A.

Phase 5: Board Approval Packet

Deliverables for board or comp committee:

1. OTE and gate summary
2. Scenario payout table (50% / 80% / 100% / 120% plan)
3. Equity grant summary cap table impact
4. Severance and change-of-control exposure
5. Comparison to Bridge / Pavilion band (directional)
6. Recruiting context (internal vs external, urgency)

Phase 6: Negotiation Patterns

Output Format

• Executive offer package (templates/executive-offer-package.md)
• Clause appendix with marked optional/required clauses
• Board comp memo (1–2 pages)
• Variable payout scenario table

Quality Check

• Variable gated on ≥2 metrics including revenue quality (NRR or efficiency)
• Cause and severance definitions explicit
• Clawback on churn/downgrade documented
• Equity vest, cliff, refresh stated
• Change-of-control triggers defined
• Legal review flag on non-compete and commission law
• VP milestone gates if pre-$5M ARR (Lemkin system-building)

Common Pitfalls

1. Bookings-only CRO bonus. Pays for bad-fit ARR. Fix: NRR + efficiency gates.
2. No clawback. Logo churn 60 days post-close. Fix: 90-day ARR clawback.
3. Hero VP comp. Single ARR number, no hiring/ramp gates. Fix: 20% system KPIs.
4. Verbal equity. Fix: written grant with board approval date.
5. National non-compete template. Unenforceable in many states. Fix: counsel.

Consumption-Model CRO Gates (Snowflake pattern)

When revenue recognizes on usage (Snowflake, Databricks DBU, similar):

Do not pay CRO on bookings alone when GAAP revenue trails contracts.

Execution Artifacts

• references/framework-notes.md
• templates/output-template.md
• scripts/check-output.py
• references/gtm-compensation-strategy.md — canonical master playbook (Pattern 35)
• references/comp-by-role-stage.md — role × ARR stage matrix
• templates/comp-plan-design-worksheet.md — plan design worksheet
• templates/ote-calculator-template.md — OTE, quota, accelerator scenarios
• ../gtm-leadership/references/cro-enterprise-strategy.md — Consumption comp alignment, McMahon board gates (Pattern 31)
• references/executive-clause-library.md — full clause text blocks
• references/executive-comp-benchmarks.md — Pavilion/Bridge bands
• references/pavilion-cro-comp.md — Sam Jacobs / CRO Council patterns
• templates/executive-offer-package.md — offer + comp + equity summary
• templates/board-comp-memo.md — board approval format Cross-skill: CRO variable gates align with saas-outcomes/references/exit-metrics-matrix.md (NRR, Rule of 40, burn multiple)

Related Skills

• gtm-role-descriptions — IC comp bands + plan templates
• founder-comp-playbook — founder budget, negotiation, offer walkthrough
• sales-team-building — hire sequence, POD economics, comp models
• revenue-team-onboarding — ramp tables aligned to comp plans
• gtm-leadership — comp approval conversations
• equity-management — cap table, 409A
• employment-compliance — offer legality
• board-meeting-prep — comp committee presentation
• financial-modeling — scenario modeling for gates