Real world salaries... How much to pay people?

[911teo]

3 years ago together with a friend we started a hedge fund.
A hedge fund is an investment vehicle that is very flexible with its trading strategies.

Basically we accept money for institutional investors and weatlhy individuals and invest it using our expertise.

The amount of money that my partner and I take home each year depends on how well we do in regards to our ivestors. Basically we have a compensation structure where we take a base fee plus a performance fee 100% linked to the profits made.

We are now expanding dramatically and we need to hire "support" people. By that I mean that we are still going to be the ones taking the risks (deciding how the money is invested) but we need more and more people around us to run administrative tasks.

For example we need a CFO, a compliance officer, a PA, someone that books all the trades done every day into our booking system etc.

Having always worked in the financial markets (trading) our compensation was always very simple and always linked to how much $$$ we would made.

Obvioulsy it is not possible for us to use the same structure for these other positions.

So I am wondering what a good CFO in a succesful (even if small) company makes. What are also the long term plans in for comp? What should be the % between salary and bonus? For example for my partner and myself the bonus is the main way we are getting paid (the performance fee is the bulk of the fees and it is calculated purely on the profits made).

But what is a good bonus? 10% of salary? 40%? 50%? Plus the company will have cash if we do well investing. But if we don't there is not going to be much left to pay people...

Is a $100k a good salary? $200k? How much should a CFO look to make in 5yr time? how much should the salary increase every year?

You see I get my motivation from the fact that if I do well trading I will make a lot of $$$. The support staff will know whether the P&L (profit and loss) is good or not. But they will not be affected much by it.

What do u guys think?

[Porsche-O-Phile]

This is an industry I know nothing about but I tend to believe that in general you get what you pay for. If you compensate/treat people well, you'll get it back - usually. Don't know how helpful that is, but just some common-sense type stuff I've observed.

Why not interview and ask people what they're asking? That also gets you out of having to listen to them b1tch and whine later on about not being paid enough, since they chose their own salary.

[Jims5543]

I am thinking 200K plus a 50% bonus. When do I start?

Kidding aside, the payscale will also depend on cost of living in your area. I would think SC will be lower scaled compared to NYC or LA.

My industry has trade publications that publish a salary review yearly. Can you access something like that?

[911teo]

Yes, in theory NC should be cheaper than NYC. But then Charlotte is quite expensive because of the big banking community (read Bank of America and Wachovia have their head quarters down here).

We believe in compensating/treating people well. We hired someone from out of state, paid them their asking salary, paid for the move, temporary housing etc. But now what? how do we keep them happy?

What should be their long term goal? I am trying to get inside their head to make sure we are all happy and everything is done fairly. Then again what is fair? we all work close together, relatively similar hours, but the comp is hugely different....

[Danskman]

Hmmm... company founder looking on an internet bbs trying to figure out how much to pay employees... ok. That's scary. Time to hire a professional consultant.

[RANDY P]

www.salary.com as a ballpark rate.

[Tishabet]

Originally posted by RANDY P
www.salary.com as a ballpark rate.

I second that.
Bureau of Labor Statistics might also be helpful.

[911teo]

Originally posted by RANDY P
www.salary.com as a ballpark rate.

That is actually quite useful

[RANDY P]

Originally posted by 911teo
That is actually quite useful

It's a pretty seriously taken site-

The bank uses this exact site to determine if you're lying about your income when applying for a loan. (assuming you're not showing tax returns or W2's)

rjp

[M.D. Holloway]

I have a few friends that are CFO's - one guy makes 450K+, the other about 150K and the 3rd is about 100K. Seems like it depends on your company size and sales numbers. My bosses wife was a CFO and the grind was too much - 7 days a aweek, 10 to 14 hour days. She gave it up and became a staff accountant for 75% less pay and 1000X more happiness.

What is the market(s) you play in? Any particular sectors? I have a great idea for a bidness show if you feel like throwing a lil $ump'n our way!

[911teo]

Mike

we play in Fixed income, no equity at all... In fact we do only Govt bonds and derivatives.... sorry...

[VaSteve]

Call a finance and accounting recruiter. They can help you out with a range and finding the right person. Oddly, I get calls often from Charlotte headhunters, even though I'm outside of DC.

As far as keeping them motivated, that varies.

Some people, like me, like to create and solve problems - with a new organization you might need that. But they may leave when the challenge is gone. Others like to manage. In your business that probably wouldn't work as it seems like there is a ton of stuff to get started.

In your business, the salary would grow with the complexity of the job, but would probably have a point when it "tops out." At least salarywise. Then you might get an incumbant that would never leave due to golden handcuffs. Bonuses...well, that usually depends on the performance of the firm. The CFO has *some* control over the performance, but in your line of work, it appears that you have more influence.

PM me if you want additional insight.

Steve

[dhoward]

Originally posted by Danskman
Hmmm... company founder looking on an internet bbs trying to figure out how much to pay employees... ok. That's scary. Time to hire a professional consultant.

Spoken like a true consultant!

[onewhippedpuppy]

No clue on salary, but how about tying bonuses to the firm's profits? Even if they are not the direct wage earners, the efficiency of your support staff will affect your bottom line. The best motivation is self motivation, if your staff feels that they have a stake in the company they will give it their all. At least most people will.

[M.D. Holloway]

Originally posted by 911teo
Mike

we play in Fixed income, no equity at all... In fact we do only Govt bonds and derivatives.... sorry...

hmmm..not really very sexy. Bit of a yawner but I bet the returns albeit small are highly predicatable?

[SlowToady]

I can't offer any useful advice but...

Would you mind if I looked you up in 3 or 4 years when I get out of college? Hedge Funds are sexy.

[snowman]

What you pay someone is really very simple. First of all is what do they want for a salary? Next, is it worth this much for their service? If so you hire them, if not keep looking.

If you have a whole bunch of applicants that are truly qualified for the job you want them to do, then you dictate what you are willing to pay. If you have to hunt down someone and beg them to work for you, then you ask them how much. That simple.

[onewhippedpuppy]

Something else I may add, don't try to get away with paying as little as you can. As somebody else said, you get what you pay for, and if you are always paying just enough to keep your employees, they're working just hard enough to not get fired. Set a fair wage for the position, and find the right person to fill it. And don't pay the BS wage game, be upfront about it. My wife's last job search was a joke, she could have saved both hers and the interviewer's time if they had simply told her upfront what the position paid, along with benefits. Don't waste your time or the time of others, because most people won't take a pay cut to work for you.

[VaSteve]

Matteo, you have a PM.

[ken_xman]

I would make a CFO salary base $150k, bonus it up with non-qual deferred comp, profit sharing, and long term ownership incentives 2-3% on a 10 year vesting schedule with a 5 year dead window.
NC sure does have nice weather....