058: Equity Compensation Strategies for 2024

00:00 - 31:17 | SPEAKER_00: Sometimes when I read these headlines and I see how bleak it's painted in tech, I just get disgusted and I get frustrated for the people who are still out there trading their time and talent for equity because it's not what's happening. When you look just at the headlines, you're not going to find the real news. But when you talk, you know, as I talk every week into my network and I understand what's happening in different companies, how equity packages are changing, who's hiring, what they're looking for, the market is incredibly active. But if all you're doing is scrolling your Google feed, then you're ultimately doing it wrong. Welcome to the podcast for financially focused technology employees. Are you working for equity? Do you have questions on how your career and money work together? Then welcome. Every week we discuss strategies and tactics for how to grow your career, build wealth and reach your financial and lifestyle goals. Welcome to Tech Equity and Money Talk. I'm your host, Christopher Nelson, and I want to welcome you to this episode. I want to call out the obvious that if you've been listening for a while, originally, this podcast started off as Tech Careers in Money Talk. But starting today, if you heard the intro, if you heard what I said right now, we are changing our brand to tech equity and money talk. And I want to speak into this because this is about the topic today. The topic today is really what is the state of trading your time and talent for equity today in 2024. And part of why we're making this pivot here is to focus, to double down on tech equity. When I first started the podcast, I wanted to sit at this intersection of career and money. And I did that for a year and had some incredible interviews and met some people that are doing some very impactful things for people who want to start working in tech. I think of Adam Broda for people who want to grow their career and become executives. I think of Maya Grossman. I had a lot of great interviews and there's a lot of people that are serving technology employees who want to work and grow their career. The questions that I get when people are emailing me, they're responding to newsletters or they're going to the contact page on the podcast. The questions are always around, how do I figure out how to be a better investor of my time and trade for equity in a more efficient way? Or it's how do I manage the money after I get it? and how do I get on this road to financial independence? And the more I've spent time in this education space, I realize that there is a huge deficit when it comes to this education around equity and around managing the money that comes with it. So my strategy has always been to, I want to double down on where people need the most help. And also the things that I feel most passionate about. And while I do love career coaching, and I have done some career coaching professionally, I have done some career coaching as I worked in tech many years, I want to spend the time and the effort to really help people become better investors of their time and talent. And then also understanding how do they build portfolios as a business to help drive themselves forward. So tech equity and money talk is how we're going to be positioned going forward. Yes, this means that I will be changing the sign in the background and some of the swag that I have as well. So stay tuned for that. But for this episode, it is really important that we talk about what is the state of trading your time and talent for tech equity in 2024. So what this means is we need to look at what's going on with hiring with technology and companies that give equity compensation. Now, if you look at the headlines and you look at the news, everybody loves to talk about layoffs, layoffs, layoffs, layoffs. Whenever there's a soundbite or somebody can talk about the layoffs, the tragedy, people are going to, you know, and I'm talking about media publications are going to talk about that. For you though, who are investing your time and talent, it's important to understand that beyond the hype, what's happening in big tech is that companies are continuing to hire even while they're laying off in other areas. The large tech firms, Google, Amazon. Amazon right now has a huge appetite and is hiring in a lot of different areas. They are continuing to grow just like Microsoft, just like Google, just like Meta. Now, what happens is because we are in this economic headwinds, they're looking at areas of their business that aren't growing, aren't doing as well from a bottom line perspective. and they're reducing headcount there and they're replacing it in other areas. The other thing that they're doing is they're also eliminating and thinning out middle management and they're hiring entry-level employees. It's important that you, as somebody who is an investor of their time and who want to just trade not just for salary but also for equity, that you understand these dynamics. And this cycle isn't new. When I entered the job market in 2001, stepping out to look for a job right in the middle of the dot-com implosion, The same thing was everywhere. The opportunity for myself as an entry-level employee, I just had to wait until the job market and the opportunity opened up for me. And so from when I was active in the job market, September 2001, which was not a good time to be looking for a job, it was April 2002 that I started working for Accenture. In 2008, it was the same way. 2008, 2010, there was a lot of jobs dropping. There were a layoffs, but it was in 2010 that it was post layoff at Splunk that I found an opportunity there. And that turned out to be, you know, one of the most impactful jobs in my career. And so I'm telling you this because you have to look beyond the headlines. I know it's hard out there right now. I talk with technology employees every single day and they tell me how hard it is to look for jobs. They also tell me how hard it is to compete in this marketplace because many things are changing. The dynamic is changing. But there's also a lot of people that are having a lot of success right now. And what they're doing is they're leveraging their network. They're having a lot of conversations with people and they're continuing to stay positive and look and understand what's out there. So the state of the job market, I realized we have some headwinds right now and it's challenging. There's also, I want to talk about the, you know, this going back to office. There seems to be this war between remote, hybrid, you know, and companies that are, you know, having these mandates that say we need to return to office. The reality is, is we're just in a new paradigm. We're in a brand new paradigm where there are companies that are still being built 100% remote. There are companies that are going to go public in the next five to seven years. that just like GitLab, who I worked for and took public in 2021, never had a main office. That's out there. There's also these larger, more established companies, your Google, Amazon, Facebook, Meta, Netflix, you name it, larger companies that have had office spaces, that have contracts, that have a way that they're used to working, that their company is used to functioning, that want to bring people back into the office. And the interesting thing is that for employees, I have heard from different employees, different things. I have had technology employee tell me, I need to go to the office. I need to be out of the house. I love to be with my coworkers. I love to be in this very collaborative environment. I do not want to work from home. I've also talked and know people who I only want to work from home. I also know people that really enjoy the hybrid, they enjoy a little bit of both. So looking beyond the headlines that wanna just talk about dragging people back to work or want to create all these positions, it's important that you understand what's important for you, what is the environment that you wanna look in so that you can understand the companies that have policies that align with what you want, number one. And then number two, working on whatever skillset that is, that's going to allow you to be the most productive. Working remote requires a different skill set than working in the office. And in all of those environments, you need to understand how you're going to continue to learn and grow yourself and continue to advance your skill set from basic skills to expertise. That's what's going to allow you to increase in value and actually trade for more equity. The other thing I think it's important to call out in this age of, you know, in 2024, when we're looking at trading our time and talent for equity is AI. We have to call it out. AI right now is the most disruptive technology that's out there. And it's also the most hyped technology that's out there as well. But this has a tremendous impact in the work environment. So let's look beyond the headlines. Let's look beyond the hype of AI is going to take everybody's jobs. AI is going to do these things. What is AI really doing? So it seems like when we think about jobs and we think about how AI is going to impact jobs, there was an Ernst & Young study, a survey that was done. And it says 50% of leaders in tech companies anticipate a combination of layoffs and hiring in and around the AI space because they want to hire people that have AI skills because AI skills are going to be essential. At the same time, you know, they are also on the other hand, 61% are saying that it's going to be difficult to find the AI talent. So what does that mean to you? And I think for all of us as technology employees. We need to understand that when there is new technology on the horizon, becoming an early adopter of it and understanding how it can help you is going to be essential in advancing your career in these disruptive ages. I didn't realize it at the time, but as I was in the CRM implementation space in the early 2000s, I had the opportunity to start working in SaaS in 2004, implementing Salesforce.com. This was four to six years before most people. This helped me advance my career faster, meaning that I got more responsibility, more opportunities to lead, to take on high-risk projects, to actually travel the globe. And then I was able to leverage that in the exchange for equity. So this is the real opportunity for you as well is, again, let's push the headlines aside that talk about the firing, replacing your jobs. And let's look at the real data that says while 50% know there's going to be layoffs and they want to hire people, 61% know that there's not the talent that they need. That's your opportunity. Companies are going to reshape their workforce to be more AI savvy. That means that the more you understand, the more that you can retrain and focus in that direction, the better. Because here's the good news. This is how technology works is AI related roles right now are offering 78% higher salaries than other occupations. Now, I think that stat, you know, I got it from a job site. I think that they may be talking about also to non-tech industries as well. So I don't think that 78% would be directly against, you know, current salary. However, it's important to understand that I know cybersecurity roles. I saw that as I was adjacent to CISOs and they were doing hiring. I saw how the salaries were increasing 20% year over year. This is the same type of opportunity that's available for AI. And when we work in technology to be able to get value when we're trading our time, we need to be able to ramp up to these new technologies. So this is the opportunity. Many technology leaders, 85% believe that emerging technology is also going to have positive impact on the workplace. And this is one of the things that I've heard from peers and colleagues that are still working in IT, inside of technology companies, is that it's removing a lot of low-level work and allowing people to have work that's more strategic, that's having work that's more rewarding. So taking a step back, in thinking, so what is the state? What's the state? 2024, we're halfway through the year, trading your time and talent for equity, looking beyond the hype, there's still opportunity. Technology is not going away. There is still hiring. It is a tough job market. That's just the reality. However, the opportunity is, especially around AI and new technologies, if you can ramp up on these new skills, there's an opportunity to make more in salary and trade that for more in equity. Those are the things as somebody who trades their time and talent for equity you want to understand is how do you become more of the asset and trade in the marketplace. The other thing we know is regardless of the return to office or hybrid or remote, remote companies are here to stay. They're growing, their footprint is growing. You need to choose where you want to work. you need to choose the environment that you want to work in. And part of that also has to do with your financial goals. If you really want big tech equity, which has a huge value, which is liquid, which is, you know, growing even in these environments, you may then need to return to office. That may be part of it. Or you just need to negotiate and understand if there's a hybrid work environment or something that can allow you to accomplish your financial goals. That's the important thing from the mindset perspective. Now, we talked about the headwinds in the market. We've talked about some of the challenges. There's also some amazing things that are happening right now in trading your time and talent for equity that you need to be aware of. In this challenging job market where there are layoffs, when people see other people laid off, what happens? They get scared. They want to understand if they're valued. So how companies respond to this, especially technology companies that provide equity as part of the compensation, is they then need to leverage that equity to retain employees. So right now, 50% of technology companies have made some strategic equity related increases since 2023, meaning that they look across. And so when I was a manager and in managed people in sometimes large organizations, large global organizations, we always had what's called the nine box. The nine box identifies who are your key employees, who are your critical employees. And when you're up and to the right in the nine box and you are an essential employee or you are a key employee, somebody who's helping to grow, somebody who has upside, somebody who's got essential information in keeping the company moving forward, we're going to make sure that you are happy. We're going to make sure that you have additional equity, that we're slapping the golden handcuffs on you and that you're content. This is happening right now in this environment. And it's important that you're aware because if you're somewhere where there are layoffs going on, there's an opportunity for you to understand what is the reality of a retention bonus or retention equity. So what's a strategy? How would you approach it? I would approach it with going to my hiring manager and saying, hey, there's a lot of layoffs. What are we doing to retain and keep employees here? Like, what's the strategy? You're not going to ask for what you can get right now. You're trying to ask general questions as a shareholder in the company. What are we doing to retain talent? How do you evaluate talent? These are all reasonable questions that you can be asking your manager that will give you insight into what they're doing. And then when you're having your one-on-one and you're talking about your career and where you're going, you want to understand, are you key talent? Are you essential talent? If not, what does it take to get there? All managers want their employees to desire to become key and essential talent because then they have a team that is providing a lot of impact to the business. Those are fair questions to ask. So right now in this environment, good news, equity related increases. There's also upskilling in staff retention through education. This goes back to what I was saying before. Now we have the ability to command higher salaries through AI. What kind of education is your company offering? It's so easy for us to get over busy, to overlook the opportunities that may be staring us in the face because we're working really hard and we're tired. If there is free education, you need to take the opportunity to upskill and especially things that are going to increase your value with the company and then allow you to trade for more equity or to be retained for more equity. One of the things that I'm most excited about that I have seen changes in 2024 that I haven't seen in the previous five or six years inside of equity compensation is flexibility in and around the vesting schedule. When we think about trading our time and talent for equity, When we sit at the negotiating table, we're trading for an amount of equity and then we're also negotiating, we should be negotiating for how fast and how frequent does that equity come to us. That's the vesting schedule. Most people are familiar with a four-year vesting schedule of 25% each year with the one-year cliff, meaning that you don't get any equity till the end of year one. Then after that, the equity comes to either monthly or quarterly in tranches of that 25% per year. What I've seen this year and what's happening is companies understand that flexible vesting is now a tool that they can use to attract employees, to retain employees, and to also incent employees and sent them around big projects and sent them around company goals. This year, I heard of a front-loaded vesting schedule, meaning that it was a three-year vest where they got 50% in the first year, 30%, and then 20%. This was by a pre-IPO startup company that was wanting to attract talent away from larger, more established companies. Because in this environment, hearing about layoffs, hearing about uncertainty, especially in the financial markets of being able to take companies public, that they wanted to attract employees. So they created this front investing schedule. And they're also known to give very generous refreshes too, to then keep you locked in. And from a company's perspective, you know, if you just work there one year, you feel great. You take 50% off the table. They may be able to then walk away from a scenario and want to transition to another employee, or they then sweeten and give you additional dollar or additional equity investing. So this is something that's very exciting. It's not written anywhere in the news. You're hearing it here, tech equity and money talk. This is what we talk about. And this is so important that for you working in technology, you're apprised of all these things that are going on so that you can understand what's going on in your company. Because when there's market uncertainty, when there's this fluctuation of people are getting laid off, they wanna retain people, and the ultimate goal of equity compensation is to attract and retain the best employees. Regardless of the market uncertainty, all of these companies still have a laser focus to meet their company goals. And they're going to meet those company goals by attracting and retaining the best employees. That means that this market is going to create changes in equity compensation that you have the opportunity to participate in if you understand what's going on, if you understand the rules of the game. And that's what I love to talk about here is what are the rules of the game. Let's just put a bow on that for a second. 2024, trading your time and talent for equity, choppy market, lot of headwinds. There's layoffs. There's also hiring, you know, this go, you know, return to the office, you're going to have to make a choice. There's also AI, skill up an AI, create more value for yourself, trade for more salary, trade for more equity. Then there's also great news. This market uncertainty is creating changes in equity compensation that can greatly benefit you. In this uncertain market, they're giving away more equity. Understand what your company is doing or understand if this is the time for you to go out to market and trade for another company. There's also changes that are happening with vesting schedules. Stay apprised, ask questions, Ask your HR what they're doing, what they've heard. Are they getting educated? It's so important that we are educated business people managing our own careers, walking into HR and letting them see who we are. Because if technology employees, if technology companies desire to attract and retain the best employees, they're going to get people who understand their value, who understand the marketplace, who understand how equity compensation, this game is played, the rules around it, and they're going to come with a lot of questions. And normally we do. So I want to walk through right now, what are three things that you can be doing to be successful in this marketplace, this marketplace, hard, challenging, but tons of opportunities. So what do you need to be doing? Well, you have to look at the story beyond the hype. I, I think so many people, you doom scroll on Google News and just read, oh, it's so dramatic. It's so this. Oh, I'm going to click on all the layoffs and what's happening. And that news is important. I'm not trying to say it's not important, but you have to look beyond that to find out some of these things that we just talked about. And you getting educated is asking these questions to your HR team. What are they doing? What is their retention strategy? How are they approaching some of these new changes to equity compensation? And you position this questioning as somebody who is a investor of their time and somebody who's also a part owner in the company. You're a shareholder. So you're allowed and expected to ask these kinds of questions. And the other thing is looking for resources. Think of tech equity and money news, our newsletter, where we talk about these types of things as well. We did articles earlier this year about the changes in the divesting schedules, but find other sources of data that give you the reality of what's happening in the job market to be educated. And I say that because, you know, for myself, having worked many years in tech, it's easy to get the message and to be in that, you know, frustrated mindset, not thinking that there's any opportunity, especially when there's challenges. But when you look beyond this. And I find that this isn't true just in investing your time and talent. This is true in investing in general. There's lots of opportunities in down markets. You have to have the mindset and you have to have the ability to find out where that data is and seek it. So that's number one is look beyond the hype, find data sources that you can trust and get informed and then put together a game plan. I think whenever you're in a situation like this, where there are headwinds, there are opportunities, you want to stick to your fundamentals. You want to stick to the basics. This is not the time to start changing anything. So what are the fundamentals of trading your time and talent for equity? The fundamentals are you are the asset. Your skills that are being developed to expertise are what bring value to a company. And the more that you can help that company execute to its goals, timely fashion, in an efficient fashion, the more you will get compensated in salary and in equity. And if you can equip other people to do the same thing, if you can build teams to do that, you'll get even more. That's why leaders get paid so much is because they can scale and bring together teams that can accomplish very impactful goals for an organization. That's why they get comped so well. So don't forget, you're the asset. Take time, invest in yourself, take care of yourself, mental health, physical health, take care of yourself, and then understand and know what you're worth so that you can negotiate for that. Also, don't forget what's on the other side of the table. In the midst of all of this chaos, and especially we have a lot of AI companies that are popping up, getting a ton of funding and are throwing a lot of equity around, get rooted in the fundamentals of what is the most valuable equity. What is the most valuable equity? When people ask me that, I say it's equity that has three attributes. Number one, it's liquid. Illiquid equity is not as valuable as liquid equity. I'm not saying don't invest in that. I worked for three pre-IPO companies that then went through an IPO. and got liquid equity. And that was part of my strategy. But the reality is in this down and challenging market, going to work for a public company, and there's plenty of them, not just big tech too, there's a lot of smaller companies, right? Think of CrowdStrike, Zscaler just had a pop in their stock this last week I saw. I mean, there's a lot of companies that are doing really well out there that are public and their stock is liquid. It's liquid and it's growing. Those are two valuable attributes. And the third most valuable attribute is that there's the least amount of restrictions on when you can trade, when you can get that liquid. Because the fundamentals of building wealth with tech equity is you build it in concentration. you keep it and you grow it through diversification. So once you start building up that position in a single company, the goal isn't to become a majority shareholder in the company that you're working for, it's to build out a diversified and growing portfolio that can support you and your family for this and the next generation. So don't lose your focus on the fundamentals, stick to the game plan, make sure that you have some clear goals and execute to a process so that you can remove the emotion from it as well. And then I'd say the third thing is always be building your skills as a negotiator. Now is the best time to build your skills as a negotiator. And I'm double clicking on this because this is where I tend to get a lot of questions. And this is where I've been providing some services recently to help people negotiate for equity compensation packages or evaluate, should I stay? Should I go? And negotiating equity, negotiating salary is hard for a lot of people. It's hard. And I know when I first started off, it was very hard for me. And the opportunity to negotiate will constantly present itself. And it presents itself like this, is when you sit down with your manager and you're having conversations around compensation, it starts by you knowing what is your worth in the marketplace. Hey, Bobby, for lack of a better word, this is my imaginary boss. Hey, Bobby, do you realize that directors at my level in company X, Y, and Z, they're getting this type of compensation package? What do you think about that? What are you seeing for compensation at your level? You're trying to engage somebody in a conversation that says, what's their observation of the marketplace? Then you take that conversation from, okay, I'm seeing this in the marketplace, what am I seeing here? What's my comp level? And help me understand if there's a difference. Now, if there's a positive difference, that's great. Then you wanna make sure that you're having the conversation, like, am I really worth that? It's important that you understand that because if your boss is articulating to you, yes, we're comping you above because you're X, Y, or Z, those things need to go into the notes. Those need to go into the notes because if you're being overly compensated, and I know there was a couple of points in my career where I was specifically told, we're comping you above market for X, Y, or Z because we need to get this accomplished. We want to make sure that you're happy. We want to make sure that you're satisfied. Okay. Those are the open and direct conversations that are, it's important that you get comfortable having. And it starts by, you know, making sure that you're, you know, your compensation level in the marketplace, and you're actually having conversations about your observations and what you see and what's changing. You can have conversations with your, you know, there's usually in, in technology, you have an HR business partner, Hey, HR business partner, I'm seeing that these other companies are doing different things with vesting schedules for employee retention. What are we doing for employee retention? Well, why do you ask? I'm just a shareholder of the company. I'm just curious what we're doing. I see a lot of things changing. I see a very exciting AI market environment out there. What are we doing? I'm curious. The great news is that this is where understanding your value as a shareholder, as is somebody who is a part owner in the company, who's asking inquisitive questions on the health and nature of the business is natural. You have to be able to get comfortable having those conversations, but it should be very natural because if The company has everybody who's focused on the customer, the product, and how we're being more effective, efficient, and competitive in the marketplace. If everybody is doing that in the company, it's going to be amazing. And I've seen that at a few companies and those companies did amazing things. I was at Splunk when we went from 150 million to a billion in five years. Everybody thought like an owner and it was amazing. And everybody was open and welcome to these different types of conversations. This is where I learned a lot of this. And so it's important that you're able to have the conversation and you can mark yourself to market. And then you have the conversation of what is the delta and why is it? Am I above market? Am I below market? Am I at market? And help me understand why. Why am I being valued this way? What am I bringing to the table? Now, some of those conversations can be hard if you feel like you're not meeting some of those expectations or you're below expectations. But if you feel like you are above expectations, then that is where you get everything aligned because you will only be able to get what you're worth if you know your value And if you're able to have conversations around it, you need to be able to have conversations. And this is the more you develop this. And this is why I tell everyone right now, start developing these skills, start asking these questions. There's a lot of uncertainty in the market. You could be encouraging your manager to be having that conversation as well, to be thinking about it. feel free to direct him to this podcast, to this episode. Because the more people that are having these conversations, the more we're building out this environment that says, it's okay to talk about equity compensation. It's okay to negotiate, to understand all of these things. The more we're ultimately going to be able to make in the long run. It's true. So I'm going to wrap it up with those three things. So the three things that you want to do in this environment is you want to look at the story beyond the hype. Look for the data. What's really happening in the marketplace. Ask questions. You're out there in these companies every day. What's going on at your company? What are they planning a training so that everybody can skill up in AI? Great. Or is there some opportunity for you to go get some money, go get a certificate, but look beyond the hype, get the news, take action. Number two, remember the fundamentals of trading your time and talent for equity. You are the asset. You need to invest in yourself to grow from basic skills to becoming an expert. And that can be in something that you're an individual contributor or it can be in becoming a leader. Either or. But you're the asset. Number two, don't lose sight of the rules of the game. You are here to work for liquid equity in growing companies that you can sell when you want to. Those are the three factors that give the highest value to equity and you need to have a line of sight of how to get there. Period. And number three, always, always work on your skill to negotiate and learn how to improve. Always, you know, get comfortable having these uncomfortable conversations. So thank you so much for joining. This is Tech Equity and Money Talk. We're here to talk about equity. We're here to talk about money and how you can trade your time and talent for equity and accelerate financial independence. Thank you very much. Christopher Nelson.