Employers have two issues to deal with. First (and presumably most important), employers should take a hard look at current compensation plans of the top performers in the firm. Compare plans to current industry standards and discuss specific compensation expectations with the employee. If there is a gap between the employee’s expectations and the current plan, make closing that gap a priority or risk losing that team member to a more competitive firm.

Second, when courting potential new employees, there is an opportunity to differentiate the firm by offering something better, especially to newly minted MBA’s. In addition to base salary, consider more attractive variable compensation and a share in the upside through carry participation. Discuss the typical partner path and earnings targets (both short and long term), and consider anonymously sharing some compensation ranges earned by the top 10% in the previous year to demonstrate what is possible in the firm.

From the 2007 Private Equity and Venture Capital Compensation Report by Job Search Digest

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