Where the Jobs Are: PayScale Lands New Board Member, Exposes Three Trends in Human Capital
Whether you’re a startup founder, Fortune 500 executive, or average Joe on the street, everyone is wondering what 2010 will look like for jobs and compensation. Indications so far are not good. Unemployment rates are sky-high. Salary freezes are still rampant. At the same time, nobody can seem to agree on how to pay executives what they’re really worth. ($23 billion in bonuses to Goldman Sachs employees?)
I took the opportunity to talk about some of these issues with the leadership at PayScale, a Seattle company that provides real-time compensation data to employers and employees, through what it calls “the world’s largest database of individual compensation profiles.” From where he sits, PayScale CEO Mike Metzger has an intriguing view of current trends in “human capital,” which I loosely define to include the talent flow, skill sets, experience, and compensation levels associated with creating economic value.
PayScale also announced a new board member today. She is Robin Ferracone, the CEO of RAF Capital, executive chair of Farient Advisors, and an expert in human resources with more than 25 years of consulting experience. Ferracone, who’s based in the Los Angeles area, has made a modest but undisclosed investment in PayScale, according to the company. (Metzger and Ferracone first met through another board member, Patricia Nakache from Trinity Ventures.)
“It’s a very interesting business,” Ferracone says. “When you get pay data directly from the consumers, you then get information about the individual. What PayScale does is it’s able to fill in the gaps about jobs that don’t get picked up by surveys.” That includes things like salaries across different offices and geographic regions for a given company, say—all updated continuously instead of once or twice a year.
PayScale was founded in 2002 and has been backed by Fluke Venture Partners, Madrona Venture Group, Trinity Ventures, and others. A year ago, the company raised a $2 million Series C funding round. Metzger says PayScale’s staff now numbers in the “high 40s,” and that the company is not yet profitable, but is “driving hard” for profitability in 2010. He adds that it is coming off its best year and best quarter ever, in terms of revenue.
Here are the top three trends that Metzger and Ferracone are seeing in human capital as we head into 2010. (Metzger prefaced his comments with the caveat that PayScale sells its aggregated data mainly to small and medium-size businesses, so his view is biased towards those customers, versus Fortune 1000 companies.)
1. 2010 will not revert “back to normal.”
A lot of organizations in 2009 froze their compensation adjustments, says Metzger. “Flat was the new up. One of the themes we’re starting to hear now is that in 2010, things will not go back to normal.” That means companies are “beginning to sharpen the lens they’re using relative to the cost of human capital” and “taking a conservative posture in when they’ll make adjustments.”
The days of across-the-board pay increases plus merit bonuses seem to be gone for good. Overall, Metzger calls the situation “a little bit of a reset in terms of comp adjustment strategy.” And Ferracone adds, “We’re seeing [companies] not trying to make up for lost time, on the salary front.”
2. Talent is still in high demand in certain fields.
It’s not like nobody’s hiring. “There continue to be sectors and geographies where there are high demands for talent—IT in the Bay Area, nursing everywhere, and accounting in major metro areas,” Metzger says. In 2009, “those were areas where you saw some modest increases.” And he adds that he’s seeing those trends play out in the Seattle area.
But Ferracone cautions, “There are some ‘spot hot’ areas, I think that’s right. We’re not seeing the whole market being hot.” She also pointed out that these are U.S. trends; the job market in China, for example, may be hot in very different areas.
3. More companies are pushing performance-based pay structures.
“There’s more and more interest in the [small and medium-size business] market in trying to create simple but efficient pay per performance,” Metzger says. “We’re just beginning to hear it from companies we didn’t hear [it from] a couple years ago.” And tying compensation to performance is not just hitting the management and sales ranks, but also software developers, he says.
Companies are “trying to provide a focusing device and a path to paying someone more,” Ferracone says. “Equity incentives took a big hit at the executive level. This year, with levels moderating, we’re seeing a bit of reinstatement in equity awards at the executive level.”
The reason for this trend, besides companies’ desire to get what they pay for, is “to have more alignment between the workforce and business goals, and a more rigorous approach to making decisions on who are the long-term keepers on your talent team,” Metzger says. “If you’re successful in doing that, you reduce the operating risk around your organization.” And for employees, he says, it provides better transparency and feedback on what it takes to be successful, and how the business is doing.
Overall, Metzger says, “organizations are gradually moving out of a defensive posture and into an offensive posture” when it comes to human capital. They’re looking for more effective ways to manage their talent. And one last trend that jobseekers should be aware of: Metzger says that in conversations with customers, “their strategy is to overinvest in their development and sales teams, and hover at market [levels] for the rest of the teams.”