The strategy behind the Coinbase announcement

Reflecting back on our chapter excerpt, an interesting question is:  what does form follow, after all?  Or, for the student of strategy, what does strategy follow?  Let’s use an example from the Silicon Valley tech news in May, Coinbase’s announcement regarding its new compensation policies:

“Evolving compensation is not just about appealing to candidates, though; it’s also about taking a hard look at industry norms and innovating to relieve pain points, ensure more equity across the workforce, and improve transparency.”*

Strategic choices regarding talent attraction and retention are arguably more important in knowledge-based industries such as software and IT hardware than just about anywhere else.  Brock opens their blogpost with an opinion something to that effect.  So what did Coinbase “follow” in making these choices?  Let’s look at the substance of the communique, then the method.

The substance, in increasing order of novelty, consisted of 3 components.  The first was a straightforward increase in compensation targets (pay scales), consistent with the growing success of the company from early stage startup to newly public entity.  Coinbase likely was experiencing greater difficulty in attracting new hires and, to remain competitive, moved closer to its peer public firms.  The second was a stated intention to eliminate negotiations for starting salaries, a typical part of the hiring process.  Coinbase pointedly added that it would make up the “pay for performance” variability through its annual review and bonus system, and added that it believed this would remove some of the bias inherent in the new hire process, supplementing its diversity-in-hiring goals.  The third, and most controversial, was a shift in equity grant methods, from the standard multi-year vesting schedule to a single year plus the elimination of the first year cliff (so that new hires begin to vest from day one).  Note the functional rationales of all three aspects.

Leave a Comment