AlphaWeek Q&A: Adam Zoia, CEO, CompIQ
CompIQ is a new technology firm started by CEO Adam Zoia, who also remains Chairman of search firm Glocap. Zoia tells AlphaWeek’s Greg Winterton some of his thoughts on current trends in compensation in the private equity industry.
GW: Adam, thanks for taking the time. What are some of the particular issues around compensation that that private equity executives need to know about right now?
AZ: Historically, given the high absolute pay levels, most funds haven’t typically worried about their pay practices other than to focus on benchmarking their pay to peers for retention purposes. Recently passed state equal pay legislation changes the calculus by requiring firms to ensure internal pay equity. In other words, equal pay for equal work. Therefore, just because a person’s pay is on an absolute basis very high by normal standards, it does not shield firms from legal liability. Rather, if two people have similar performance reviews, have similar responsibilities, have a similar amount of work experience, etc., they should be paid very similar amounts.
GW: When we think of compliance, we tend to think of dealing with securities regulators like the SEC or FCA. But with the rise of new pay equity legislation in the US and UK, what more should compliance officers at private equity firms be thinking about?
AZ: In the states where equal pay legislation has passed, firms now need to document the basis for their pay decisions. The statutes specify the bases on which firms can justify pay and these include things that have not previously been incorporated into firms’ annual review process such as the granular responsibilities actually done by each employee. Firms will need to implement compliance systems such as CompIQ that track and document the basis for pay decisions and will need to retain this information for a number of years in the event that they are later accused of unfair pay practices.
GW: Along those lines, we are starting to see more equal pay lawsuits filed against brand name financial firms. What can private equity firms do to prevent that from happening to them?
AZ: They need to document the basis for their pay decisions referencing permissible criterion. Also, they also need to ensure that their performance review system is as free from gender and other biases as possible. They need to incorporate self-reported employee responsibilities into the documentation process to insulate themselves from subsequent claims related to unequal pay for equal work.
GW: Private equity firms have traditionally sourced their junior talent from investment bank training programs and MBA channels. Those young professionals now have more career options available to them than previously, especially in technology. How are private equity firms adjusting their comp structures/philosophies to compete?
AZ: Private equity cash compensation continues to increase as a partial means to combat alternative career paths such as technology. Equally as important, the nature of the jobs has shifted to include more work with portfolio companies as one way to give young professionals exposure to technology and other companies as part of their primarily analytical role. Lastly, the recruiting cycle begins earlier and earlier after the start of the analyst program as firms fight for the striking pool of quality bankers who want the buy-side vs. technology.
GW: How does your platform determine what’s fair pay for a particular role or not?
AZ: CompIQ’s entire compensation benchmarking methodology is grounded in the same criteria that are set forth in the recent state equal pay legislation. Our clients upload their pay data for each employee, employees enter in their responsibilities which are confirmed by their manager, performance reviews are entered and other variables such as location, years in the role, title, department and where applicable type of degree earned are all factored in to the model which then presents customised benchmarking data for each employee. The employees are then compared to one another within the firm and in cases where like employees are paid differently those discrepancies are highlighted for firms to review further.
GW: You are focused on CompIQ now as CEO and Founder, while also holding the Chairman title at Glocap. What’s in store for the future?
AZ: For my entire professional career I have been focused on Recruiting and HR tech - first with Glocap since 1997, then with Glocap’s compensation business since 2002, then with Stella which I co-founded in 2015 and most recently and presently with CompIQ where I’m the CEO and Founder. All three companies are in the HR tech space and leverage off one another. Both Stella and Glocap have their own CEOs and my role as Chairman of each company is one largely of supporting the businesses in an advisory versus an operating capacity. My full-time efforts are devoted to CompIQ.