Radford Perspectives


Discover the biggest global compensation trends, issues and challenges facing technology and life sciences companies in Europe today.

The market forces we see in the United States are just as active in Europe.

While technology and life sciences markets are expanding, they are increasingly competing with general industry companies for talent due to a converging need for specialized skills that, until now, were mostly limited to tech companies, such as cyber security, software engineering, data science and research specialists. As a result, our clients in Europe are focused on creating compelling rewards packages and innovative workforce opportunities. In the following sections, we discuss some of these organizations' biggest challenges and opportunities today.

A Strong Venture-Backed Startup Scene

While the uncertainty created by Brexit is still casting a shadow on the business community (which we discuss in greater detail below), it isn’t slowing down growth in London’s startup scene. Venture capital investment in the UK reached an all-time high of £2.99 billion ($4.18 billion in US dollars). That’s almost double the amount of investment from 2016, according to data compiled by Pitchbook for the lobby group London & Partners. Another impressive statistic: Tech firms in the UK attracted more investment from VC firms compared to Germany, France, Spain and Ireland combined last year.

As many of these companies prepare for growth, they are looking at what they need to do to get their compensation programs and governance frameworks ready for their next phase. Many of our European pre-IPO clients are interested in knowing what the benchmarks are for equity practices in the US, especially if they are considering listing on a US exchange and/or hiring talent from overseas. Figures A shows the differences in equity practices among newly public European vs. US companies.


Figure A
Outstanding Equity (Including IPO Awards) at IPO


  •   European listed in the US
  •   US-based
  Options only RSUs only Options & RSUs No outstanding equity

Source: Radford US Pre-IPO/Venture-Backed Survey; Proprietary Prospectus Database, July 2017


European-based technology companies are less likely to have outstanding equity grants at the time of IPO compared to US companies; however, the same is not true for the life sciences market where the prevalence of different equity vehicles is more in line between both regions. The differences in equity practices upon going public underscore the importance of benchmarking compensation to the market you’re competing in for talent.


We recently highlighted the shifting equity strategy that European-based life sciences companies have when listing in the US. When it comes to burn rates, US companies are the most aggressive in the global market, burning through 4.8% of equity annually at the median, as seen in Figure B. More interesting, European companies listed on the Nasdaq stock exchange operate with a similarly aggressive equity policy, burning through 4.2% of equity annually. This data supports the notion that the location of a company’s stock exchange listing has an impact on its equity philosophy as companies compete with local market competitors to attract and retain top talent through a competitive equity program. These companies also operate within the context of US governance models and investor expectations. Meanwhile, European companies not listed in the US only burn through 2.3% of their equity annually.


Figure B
Three-Year Average Gross Equity Burn Rate at Life Sciences Companies

  50th Percentile European Headquartered 50th Percentile Nasdaq-listed European Headquartered 50th Percentile US Headquartered under $1B Market Cap

Source: Radford Burn Rate and Overhang Database


Brexit Still Looms Large

With just months left until the UK must formally exit the European Union (EU), many HR leaders at European companies are still in a holding pattern. At our Radford European Technology Year-End Meeting in London, we surveyed more than 60 of our European technology clients and found a majority are waiting to develop a contingency plan for their talent program in response to Brexit.


Figure C
What is your company’s response to Brexit and the impact on talent?

  Wait-and-see approach Discreet team project is looking into it Our response has already been executed A visible talent plan has been/is being developed across the business

The results aren't entirely surprising: While Brexit will potentially have a big influence on how and where companies source talent, there is no more clarity on how the UK will separate from the EU than there was back in June 2016 when the referendum triggering Brexit was approved by voters. The business community hopes for a "soft Brexit" that will allow flexibility in work visas between the UK and EU, but the outlook for this outcome changes daily. A "hard Brexit" would make it much more challenging for companies to hire EU nationals to work in the UK and, therefore, wages may potentially rise in response to talent shortages.



Some of our clients are discussing different talent scenarios and how these might impact their organization internally. These approaches include:

  1. A number of companies have responded that a ‘short-term’ fix for now is to restrict hiring from the EU and look to hire tech talent from outside the EU, with India being mentioned.
  2. The larger companies, while concerned, believe that their brand and existing reward strategy will enable them to continue to attract the talent they need.
  3. The offshoring of product/software development teams to alternative EU locations is being considered, simply for the purpose of maintaining access to the EU talent pool. Locations being suggested include Berlin, Krakow, Prague and other sites with links to academia.
  4. The smaller companies have suggested that they were already finding it difficult to attract talent in the UK even in the pre-Brexit world. A number of companies are looking at alternative sites in the UK where there is an academia-rich talent pool but a smaller number of technology competitors. The challenge with that is London remains the most popular destination for early career talent.

Business Competition Begets Innovation Centers

Given the supply and demand in the labor market for specialized skills and competition among companies for market share, many businesses are either considering or are in the process of setting up specialized innovation centers. These aren't just research and development centers that go by a different name. They bring select employees together to spend their time almost exclusively exploring creative projects with the very best facilities and technology available. Employees working in innovation centers may have differentiated compensation, particularly if the centers are embedded within a larger company that wants the flexibility to operate their division like a nimble startup.

While Silicon Valley is home to the lion's share of innovation centers, the region's contribution to the total number of centers worldwide has fallen in recent years due partly to high costs of living and a tight labor market. Companies in major cities in Europe and Asia are creating them at a faster speed, according to several independent studies. Many of our clients are beginning to express interest in setting up these specialized operations. Larger life sciences companies, for example, see the benefits of having smaller innovation centers for their scientists to encourage new drug treatments, thereby allowing them to compete with smaller biotech startups.

It's important for companies to keep in mind that innovation centers have been effective for many larger organizations, but it isn't a panacea for corporate growth and success. Once your hub is established, you have to nurture its development and ensure employees are engaged and consistently motivated. While engaging employees at these centers involves a compelling total rewards package, it's also important to ensure employees feel they have access to the right technology that enables their work and that they have the freedom to experiment without being penalized for failure. In other words, it's all about the culture. Furthermore, successes that result from the innovation work need to be integrated into the larger organization. Put simply, an innovative center can't operate in a vacuum. Its overarching purpose should be integral to the broader growth strategy of the organization.


Innovative Centers Are Expanding Across the Globe


Source: The Discipline of Innovation, Capgemini, December 2017


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