I’ll admit that I found it hard in the second half of 2022 to clear-off the white-space necessary to write many blog posts. Candidly, I’ve been in an extended slump on this front. When we find ourselves in a rut, it helps to have friends to lend a hand. With that in mind, I’m grateful to have many such friends in the early-stage SaaS community for just such situations. More specifically, I was delighted when James Marshall approached me with an idea for the “Made not Found” blog that leveraged his deep knowledge of analyst firms. The piece below is overwhelmingly the result of James’ experience and expertise, with a small bit of collaboration from me. Thank you, James, for generously sharing; and thanks to all for reading this post and helping the MnF blog get off the schneid early in ‘23.
Since my days of working for Gartner, I’ve learned to brace myself when mentioning B2B analyst firms to leaders of small-scale SaaS businesses. It’s not uncommon for one tech-leader to describe their industry analysts with admiration, and another to accuse theirs of downright corruption or extortion. A common sentiment is that paid research analyst engagements feel beyond our control, more akin to high stakes gambling than a rational, high-ROI growth strategy.
Over countless meetings with analysts, tech-CEOs, and investors, I’ve observed how great analyst-outcomes must be intentionally crafted by (and for) tech companies. Similarly, I’ve seen how analyst-related failures were quite predictable based on the actions taken (or not taken) by tech companies early-on in their engagements with analyst firms.
Let’s explore three common pitfalls to avoid, key questions to ask, and corrective actions to take. When thoughtfully navigated, these common stumbling blocks can become stepping stones, and serve as a strong foundation for meaningful analyst outcomes.
Pitfall #1: You invested money with analysts who don’t advise your target-market.
Too often, companies pay analyst-firms before confirming how those analysts plan to cover their space in the SaaS universe. This is a costly mistake that results in wasted dollars and time spent with analysts who don’t actively advise your target-buyers.
Key Question to Ask: Do these industry-analysts advise your target-buyers on how to buy solutions like yours? This is an especially critical point for vertical or niche SaaS businesses to confirm.
Key Action to Take: Analyst Interview — Just like you would interview someone for a position in your company, it’s important to take the time to properly interview any prospective key analyst. Discuss the below questions (and do so before any money changes hands!):
· How many conversations a month do you have with our target buyers?
· What is the most common business profile of these target-buyers you advise (revenue, employee count, industry, etc.)?
· What kinds of questions do our target-buyers ask you?
· What challenges are these buyers facing when choosing a solution?
· What kind of research do you plan to write this year? How will it help these buyers?
· Who are the biggest players in this space that my company competes with?
· Do you plan to rank vendors in this space? If so, what criteria will inform your decisions?
Questions like these are the beginnings of a high-leverage analyst engagement. From here, a well-executed engagement strategy will prove more attainable. Conversely, choosing an analyst based on brand awareness (or any other less informed criterion) commonly and predictably leads to dissatisfaction with one’s analyst.
Pitfall #2: You don’t have a strategy for turning analyst-investment into revenue growth.
While an unaimed arrow never misses, it’s best to approach analysts intentionally. This is especially true in the early days of working with an analyst.
Key Question to Ask: What steps can we take to convert the analyst’s influence into our firm’s revenue growth? This can also be a good question to directly and candidly ask the analyst (while acknowledging it is exclusively our job, not theirs, to drive our revenue growth). However, don’t be discouraged if they avoid specific talk of outputs (such as research mentions or referred business). Analysts closely guard their reputation of objectivity, so they generally won’t “go there” in terms of discussing tangible results…but achieving such outcomes remains possible.
Key Action to Take (#1): Identify Strategic Goals — Begin by internally outlining your 12-month goals for the relationship. There are three revenue-generating outcomes in analyst relations:
· Research Mentions: When your company is named in published research, your solutions get shortlisted more often. Your sales team can also leverage this research for instant credibility.
· Referred Business: During a direct conversation with your sales prospect, an analyst recommends that the prospect evaluate your company’s product.
· Insight that enhances your competitive position: This is the most overlooked benefit. As I’ll explain below, analyst-advice is directly correlated to the probability of being named in research or recommended for a shortlist.
Key Action to Take (#2): Inform, Solicit Feedback, Apply — Here’s the secret: Nobody calls their own baby ugly; not even analysts. Leverage this human tendency by making analysts feel heard in some of your company’s critical decisions.
To illustrate this point, analyst-success can be distilled to the below cycle: inform the analyst about your product, solicit feedback, apply that feedback (if agreeable to your own vision), repeat.
Example: Ask the analyst to prioritize your feature-roadmap based on needs they see in the marketplace. This will be a valuable point-of-view that captures an influential analyst’s mindshare while helping to create an emotional investment in your company’s success. Their output could also save your company countless hours of internal debate!
Real-World Outcomes: The answer to your target-buyer’s question of “Who should we shortlist?” can be found among the vendors who ask that same analyst, “What features do you think are most important for our customers?” Analysts will shortlist vendors who align with their view of the marketplace. The same rule applies for tech companies hoping for favorable research coverage.
Pitfall #3: You’ve assigned the wrong people to speak with the analysts.
It’s common for tech leaders to invest significant capital with analysts, only to assign a lead-gen focused marketer to speak on behalf of their company. Those two parties can’t typically hold a meaningful conversation about your company’s strategy. Analysts catch on to this lack of investment in the relationship by leadership, and the impact to your brand is negative.
Key Question to Ask: Who in our company has the optimal blend of (1) seniority, (2) product / market vision, and (3) time to invest in relationship-building with the analyst?
Key Action to Take (#1): Put leaders in the meeting — The best people to speak with the analysts are the people with the blend of these three attributes; and those tend to be the CEO, the Head of Product, and the Head of Marketing (if they are responsible for packaging, pricing, and messaging…not just lead gen). Up until Salesforce surpassed $250m in annual revenue, Mark Benioff was well known at Gartner for his raucous debates with analysts. He even hired the analyst with whom he disagreed the most!
Key Action to Take (#2): Assign a separate show-runner — While tech leaders should be able to allocate the time to engaging substantively with analysts, they rarely have the bandwidth to establish, manage, and execute their company’s analyst strategy. Be disciplined about assigning someone to run the overall strategy of your analyst engagement, while surgically inserting the right leaders in the actual analyst meetings. This teamwork results in maximum impact. You can assign this strategy to someone internally or to an outside firm (just be careful to find one with real analyst experience, not a generic PR firm).
Conclusion: The Payoff — Intentional engagement with analysts creates significant momentum for businesses. That benefit is felt 10x for startups, where an analyst’s 3rd-party validation provides a level of credibility usually reserved for much larger companies.
For this reason, some tech-focused PE and VC firms spend millions of dollars each year with analyst firms. These investors mandate a well-executed Gartner and Forrester strategy as part of their value-creation playbook. Much the same, some SaaS founders and leaders are savvy analyst-relations pros who execute their own version of these strategies.
These leaders are in the minority and their analyst growth strategies are far from being a commodity. By taking the right steps to pair your company leaders with the right analysts, you can create an analyst-strategy that is a real accelerator to your company’s growth.
A recent post on this blog identified different types of client feedback groups that small-scale B2B SaaS businesses can set-up to intentionally solicit input about their market and solutions. That post went on to assert that managing such groups can be difficult and costly in terms of time, resources, and money. In retrospect, that was probably only partially helpful. This piece aims to improve and expand upon the last one by offering (a) a case for why programmatic client engagement is well worth the investment and (b) a few tips for avoiding some of the (many) mistakes that we’ve made on this front over the years.
It’s Expensive // Is it Worth It?
Yes, it really is. There are countless ways that such groups can benefit SaaS businesses; we’ve coalesced around 5 big ones that we hope to get out of such initiatives.
Avoiding the Pitfalls:
Hopefully the case is clear for why client engagement groups are well worth the effort. So, now for a few words to the wise in terms of do’s and don’ts for managing them:
Hopefully this follow-up post offers a valuable expansion upon its predecessor. In sum, investing in customer engagement is well worth the effort. But, as in all things, a bit of forethought and awareness of pitfalls should make that endeavor more rewarding with less risk.
One-size-fits-all seems to work fine for a few things. These arguably include: plastic rain ponchos, ping-pong paddles, the Flexfit ball caps that my dad likes to wear, and those awful grippy-socks handed out on trans-oceanic flights. For everything else, though, one-size-fits-all is brutal — always sub-optimal, often ineffective, and sometimes flat-out painful.
This principle holds true in many aspects of the small-scale SaaS world. And yet, we SaaS leaders consistently fall into the one-size-fits-all trap when it comes to customer engagement and setting up a formalized channel for soliciting actionable client feedback. There are many reasons for this including the fact that early-stage SaaS businesses often entirely lack an intentional approach to collecting market feedback; and launching an inaugural customer advisory board (often referred to by such acronyms as CAB, PAB, SAB, PUG, BUG, etc.) legitimately represents a major leap forward. Really, it does. Still, a one-size-fits-all approach to customer engagement can sometimes create as many problems as it solves. To describe and to combat that, this post draws on observations across many years & multiple companies to offer a framework for thoughtfully selecting an approach to customer engagement that best suits a business’ specific needs.
First, let’s introduce a few terms that will be useful to any discussion about programs for soliciting customer feedback:
· Focus groups / 1-on-1 Interviews: When conducting a focus group, researchers gather a group of clients / customers / users together to discuss a specific topic (or they do it on a 1-on-1 basis). Usually, the goal is to learn people’s opinions about a product or service, not to test how they use it. On this point, let’s draw a distinction here:
· Surveys: Standardized data collection from clients / users on a defined market or particular product.
· Tools / Data: Methods for gathering broader insights, including product usage stats, industry data, heat maps, A/B testing, etc.
· Client Groups: Convening knowledgeable clients who provide insight on the market and feedback about your solutions via the methods described above.
To be clear, all of these can be valuable, but this post focuses on the last of these forms of engagement — client groups. While there are arguably countless different flavors of client groups, we’ve observed three general types, as follows:
Hopefully these brief descriptions make a clear case for how each of these groups would serve vastly different purposes on behalf of a business. The graphic below double-clicks further into how these groups typically differ in terms of size, meeting frequency, and longevity of commitment.
The table below adds some quantifiable detail around how we tend to think about and structure programs for each of these types of groups.
To go one step further, and for those so inclined, it is also worth expanding upon this table as your programs become more formalized. We tend to add the following rows to nail-down additional criteria, including:
In closing, a few words about why these distinctions actually matter: Most importantly, small-scale SaaS businesses have a finite set of resources; and engaging with these groups is hard(!). We think about the challenges of managing user groups in two categories, as follows:
I. Time & Resources — it takes a lot of both; below is a set of related tasks:
II. Mixed Results — the hard reality is that these forums don’t always yield the expected outputs; below is just a small sampling of ways these groups can run off the rails:
As a SaaS business evolves its programs for engaging with customers, it would be ideal to simultaneously manage a portfolio with one (or more) of each of these user groups. Sadly, (to repeat) small-scale SaaS businesses constantly balance the tension between an infinite set of possibilities against tightly constrained resources. Given that, it’s important that they ruthlessly prioritize in all areas, including how to programmatically solicit strategic / product feedback from their clients. So…with many small-scale SaaS businesses looking first to mature to the point of having even just ONE of the customer feedback groups described above, it’s important to do so with intentionality. Because, as with most things, one size does NOT fit all…avoid the plastic poncho; and choose wisely.
A word of thanks to Paul Miller, ardent product management leader, now CEO, and previous thought partner to this blog, who recently helped me to crystallize “what good looks like” in terms of customer engagement programs.
Over the past decade, the “ARR waterfall” or “SaaS revenue waterfall” has become a mainstay within the landscape of SaaS metrics and reporting. This is hardly surprising: operators, investors, and analysts all need a commonly accepted standard for assessing the topline performance of SaaS businesses; and the ARR Waterfall conveys so much in only a few lines (for this reason, I’d submit that the ARR waterfall is essentially the haiku of SaaS reporting…but I digress). As in the example below, an ARR waterfall neatly ties together new bookings, upsell, contraction, and churn into a structured, easily digestible story around the surprisingly complex question of how much net Annual Recurring Revenue (ARR) a business adds in each period.
We also like a purely graphical / summary representation of this table, which is likely the source of the term “waterfall:”
This all works well in a prototypically tidy SaaS business: clients pay a specified amount for subscriptions to use a SaaS solution over a designated period, renewing that commitment at regular intervals. These renewals typically take place on an annual or monthly basis (or do NOT take place, resulting in “churn” or “drops”). Likewise, this quintessential SaaS business tends to offer graduated packages (“Good / Better / Best”) of its solution and/or allows customers to add or remove modules on top of a base subscription (“Core + More”). These add-ons lead to ARR expansion (aka “upsell”) but can also result in contraction when customers elect to scale back their licensed capabilities (aka “downsell”). In this scenario, new bookings, upsell, contraction, and churn all tend to be discrete, knowable, and quantifiable figures…in other words, comfortingly black-and-white.
The dirty secret within many SaaS businesses, however, is that the world is a lot messier and more complicated than ARR waterfalls would make it appear. Below are just a few examples of common nuances, along with the inevitable Good, Bad, and Ugly that each represents to SaaS providers trying to craft a tidy ARR waterfall — and, finally, some closing thoughts around how to manage such messiness:
· What if your business offers usage-based pricing, whereby clients get billed based on an amount of actual usage over a given period? Note: usage can be measured in countless ways (number of users, volume of transactions processed, database calls executed, and others).
· What if a benefit of your SaaS offering is the ability for clients to terminate contracts at their convenience and/or that these are evergreen contracts with no set renewal date?
· What if there is a mix of pure subscriptions (where clients manage their use of the software) along with technology-enabled reoccurring managed services (where the vendor provides admin and management of the solution on customers’ behalf)?
Before going any further, I’d offer that these situations are surprisingly common in the SaaS world. Many SaaS businesses, particularly those that Lock 8 invests in, offer such contractual nuances that go against traditional commonly accepted SaaS “best practices.” Although SaaS purists tend to poo-poo anything less than straight subscription revenue, customers often appreciate and ascribe value to these nuances (as Jason Lemkin wrote compellingly about here); and smart companies make the conscious decision to manage the tradeoffs described above. Some of the best companies we’ve worked with do exactly that. But…there is a catch. If your revenue model deviates from pure subscriptions, then it’s important to take steps to manage and monitor ARR reporting with great intentionality, as follows:
Now for the big finish to this post, please queue audio from TLC’s classic, and former Billboard #1 hit, “Waterfalls.” Per TLC’s timeless wisdom: “Don’t go chasing waterfalls”…instead, carefully Define, Align / Refine, Baseline, and Trend Line your own.
Pronouns have been a hot topic for some time (as evident here, here, here, and here). The use of pronouns is an important issue with serious social implications. However, those are not the focus of this post. Rather, this piece more narrowly tackles pronouns in connection to a separate but related topic: the language of leadership. It may seem like a leap, but please bear with me here:
In his amazing work, Language and the Pursuit of Leadership Excellence, Chalmers Brothers makes the case that leaders get paid to have effective conversations. In this TedTalk, he goes on to explain: “Leaders create and continually sustain and cultivate this non-physical, but very real and very powerful thing called corporate culture. Not with tools and fertilizer, of course, but with the conversations they have, the conversations they require, and the conversations they prohibit.” Totally agree…as touched on here in a prior post on this blog. An important part of such conversations revolves around how leaders address or reference themselves and others; and a critical linguistic device for doing so is this thing called a pronoun. Although pronouns tend to be short / small words, they can have an outsized impact on relationships; and this post offers some observations around how pronouns can either support or undermine leaders’ efforts to build culture and deliver results.
Let’s first cover third-person pronouns (he / she / it / they, and related derivatives), since these are the ones that have received by far the most popular attention in recent years. That notwithstanding, third person pronouns are actually NOT the main focus of this post, save for one very important point: effective leaders will take pains to refer to people how they want to be referred. Period. Although this seems like a basic gesture of human respect, it gets botched and not just via presumptive use of traditional pronouns. When multiple teammates share a common name, leaders sometimes innocently call one or many of them by different versions of that name. For this very reason, my father “Rob” was known (annoyingly for him) throughout his entire career as “Bob.” As is the case with an unwelcome pronoun, being called by a name that you don’t like inevitably leads to at least some loss of identity — and lower performance. For this same reason, nicknames in the workplace can be problematic. At one firm early in my career, the name Todd somehow evolved into the nickname “Toddler,” which is how virtually everyone referred to me. I hated it; and it was a contributing factor to my feeling disconnected and disenfranchised at that business. Countless examples abound, and thoughtful leaders work hard to conscientiously refer to people either directly or via third-person pronouns based entirely on their stated preference.
Less obvious to the language of leaders, but arguably even more important, are first-person pronouns (I / we, and derivatives of those). The old saying goes: “There is no ‘I’ in team.” I suppose that is partly true, but with some nuances. Certainly, leaders should avoid taking personal credit for the accomplishments of their organizations. Founders / leaders can create “nails on a chalk-board” moments when they assert things like: “I did $4M in ARR last year,” or “I’m going to deliver ground-breaking new product capabilities in this next sprint.” There is no surer way than appropriating a group’s collective efforts for ego-centric leaders to turn-off their hard-working, under-acknowledged colleagues. Actually, very few stakeholders react well to this habit; we all seem to innately understand the African proverb, “If you want to go fast, go alone; if you want to go far, go together.”
Conversely, the use of the first-person plural pronoun “we” is almost universally appropriate in leadership moments and settings. The term “we” inclusively shares credit and collectively establishes accountability. When in doubt, leaders should consistently default to the term “we” for virtually all stakeholders. This extends beyond a leader’s core team to include customers, prospects, investors, and even competitors. “We” opens a ton of doors, possibilities, and goodwill.
Now…having said all that, strong leaders understand that there actually should be at least one “I” in team — when things go wrong for the organization. When this happens, leaders use the first person singular, as follows:
For effective leaders, there really is an “I” in team…it gets spotlighted when modeling good behavior around embracing vulnerability, adopting a growth mindset, and establishing an environment of accountability…and in encouraging others to do the same.
Finally, the trickiest pronoun of all — second-person (you / you guys / y’all / yinz (when in Pittsburgh), and similar derivatives). When addressing a group, leaders should generally avoid using the word “you,” pretty much…ever. It creates separation from the speaker in a way that is rarely helpful. This is particularly true in a leader’s first 90 days, where using the collective “you” can quickly alienate one’s new team. This may seem innocent enough (“You did this differently in the past than how we’ll approach it going forward.”). But what audiences tend to hear is their leader creating factions within the organization, judging the old-guard, and not yet taking full ownership for the organization as it exists today. This simple slip can sink a new leader before they even get under sail. Even for longer-tenured leaders, I’d contest that the potential costs of using “you” almost always outweigh the benefits. For example:
None of these statements fosters a shared sense of purpose, instead creating an adversarial dynamic. Admittedly, all of the above examples have negative context. Surely “you” can be used in a positive context, such as when praising someone for achieving great results. Right?! I mean…sure, but I’d actually advise against it. Telling someone, “You did a great job,” may sound good on the surface, but it often can be somewhat exclusionary. Specifically, singling out a person (or group of people) runs the risk of undervaluing the countless interdependencies and unseen contributors that are required to achieve any shared goal. This occurred just this week at one of our portfolio companies, in the wake of a successful bookings quarter. One well-meaning exec said to the head of Sales, “Thank you to your team for hitting our bookings number!” Understandably, the head of Marketing, feeling slighted, fumed on the other side of the room. Thankfully, the Sales exec had the good instincts to gracefully point out that it was a team effort across all functions. To emphasize this point, he offered: “Really it’s thanks to all of us; yay for us as a whole…we were only able to beat plan by working together.” Boom! That was an elegant and effective substitution of “we” for “you.”
In closing, like most things, guidelines for the use of pronouns should be followed with a balance of discipline and pragmatism. A bit of attentiveness can go a long way toward avoiding the most egregious or recurring infractions. On the other hand, maniacal adherence to these points can tie leaders in verbal knots, ironically reducing the authenticity and effectiveness of their communications. Leaders should be themselves…and maintain big ambitions for their conversations…but also keep a close eye on those little words, because they / we / you really matter.
A prior post on this blog referenced the use of formal assessments as a vehicle to support first time CEOs. I have admittedly received pushback in the past on this point from experienced CEO-pals who question the value of such instruments. Fair enough; to each their own. But I stand by that position and offer this post in an effort to support it. This piece will double-click into three questions relating Lock 8 Partners’ use of diagnostic tools for execs:
I. What is the general thinking behind using formal appraisals with execs?
II. Which specific tests do we use and why?
III. How do we administer and use the assessments for optimal impact?
The goal here is to share some lessons learned in order to help others optimally position CEOs / execs for success in their leadership roles.
I. General Thinking:
Leadership is critical to organizational performance, and CEOs / execs are key drivers of company success. Likewise, CEO roles — even in small businesses — are enormously complex, with many potential variables ultimately influencing outcomes. At Lock 8, we naturally want to leverage any available resource to help CEOs succeed, particularly the first-time CEOs whom we prioritize hiring.
To be clear, our objective with these assessments is not to weed out the “smart” from the “astonishingly smart” — that’s not what we believe matters most to small-scale SaaS businesses. Rather, we are trying to understand how execs align to a specific role in two main areas: (1) personality factors and (2) problem solving. To do this, it is first necessary to have an in-depth understanding of the particular business and nuances of that particular executive role. Only with that context are we then able to use these two types of information to understand how someone aligns to a given role, builds relationships, performs under pressure, processes information, and makes sound decisions. If an assessment can offer an advantage to our CEOs in this fascinating and high-stakes puzzle, then sign us up for these tests…
II. Which Test(s):
…but, not just any test, and certainly never only one test. The CEO role and the individuals who successfully navigate those roles are simply too complex to rely on any one measure to predict success. It would be the equivalent of saying “choose one thing that makes all CEOs successful” — it just doesn’t exist. Rather, such a multi-faceted endeavor warrants using several different tools, measures, and techniques. Following expert guidance, we have oriented around four tests, with two focused on each of (1) personality factors and (2) problem solving.
Personality Factors: Personality factors speak to the types of preferences and inclinations that determine how a person is likely to behave under normal circumstances, as well as when under pressure. We use two instruments to measure these different aspects of personality; they are the Hogan Personality Inventory (HPI) and the Hogan Development Survey (HDS).
The HPI is a measure of “normal personality” that provides the following:
The HDS identifies the following:
The HPI and HDS provide a more in-depth understanding of the preferences and thinking that drives what many refer to as “Emotional Intelligence” (EI) or “Emotional Quotient” (EQ). They also facilitate a very quick / early understanding of an exec’s communication style, in order to better inform how that person could interact with a team. Research consistently shows that leaders who have higher self-awareness regarding their strengths, opportunities for growth, and biases to behave in certain ways are more likely to be successful. They often build stronger, more mutually respectful relationships with a broader range of people; and this increases the probability of being able to address highly complex issues effectively. For these reasons, we pay close attention to HPI and HDS.
Problem Solving: But it isn’t all just touchy-feely. Problem solving and critical thinking skills are foundational in considering whether or not someone has the capacity to serve in a leadership role such as CEO. This is where the Watson-Glaser Critical Thinking Appraisal II (W-G) and the Raven’s Advanced Progressive Matrices (RAPM) come into play.
The W-G helps us measure the following:
The insights gained from the W-G involve whether an individual can process highly complex information efficiently and make strategic decisions that take into account both short- and long-term consequences. However, the situation and the data regarding it are often ambiguous or incomplete; and this is where the RAPM is useful.
The RAPM helps us accomplish the following:
Combined, these two measures shed light on an individual’s ability to do the “systems thinking” or to “see the bigger strategic picture” that successful CEOs must have. In addition, they allow a CEO to prioritize issues and direct time and resources to those most critical concerns in a timely manner.
III. How To: Handle with Care
Given these robust, valid measures of both critical thinking and key personality factors, the question becomes how these assessments should be administered, used, and shared. The honest answer is: with flexibility, care, and compassion. That said, below are the core takeaways from our experience:
In closing: I’d like to thank Dr. Gary Lambert of Q4 Psychological Associates, not only for his significant contributions to this post, but also for his generosity of spirit in the sharing of his expertise and experience. Gary has been a great collaborator in Lock 8’s efforts to consistently improve our ability to set executives up for success. Beyond all of that, Gary is a pleasure and a lot of fun to work with.
The so-called Great Resignation was the topic of a previous post on this blog, and the following piece is a spin-off from that. That prior post focused on employee retention, as have so many recent articles. But we’ve experienced a separate challenge at Lock 8 that also bears discussion — how to get job candidates to actually leave their old company in order to join ours. To be clear, this isn’t a question of how to craft compelling job offers in an historically candidate-friendly market — that’s also rich topic that has been well-covered. Rather, this is about getting candidates who’ve formally accepted offers to actually follow-through on those commitments and show-up for Day 1 in their new company. Seems simple enough, but this challenge is proving to be non-trivial.
Admittedly, there is always risk associated with attractive candidates reconsidering their acceptances of offers, but we’ve seen an explosion of this practice lately. This appears to be yet another employer-focused disruption amid the broader upheaval of the Great Resignation — so much so that we’ve begun internally calling this practice the “Great Renege-ation.” This trend prompted us to consider tactics aimed at ensuring a higher “start-date” yield among accepted offers. Below are a few of the observations, lessons-learned, and things-we’ll-do-differently-next-time:
Bonus Tactic: While most of this piece focuses on closing candidates, it’s worth finishing with a downstream point about the new employee lifecycle. An element of surprise can be really helpful 6 months into someone’s tenure, such as providing an unexpected pay bump or options grant. Getting some re-enforcement that they are doing a good job and surprising them is a nice way to build stickier relationships with newer team members.
It’s a talent arms-race out there…anything we can do to get a leg-up amid the Great Resignation / Great Renege-ation is worth considering in this high-stakes game.
Countless recent media stories about the Great Resignation (including this, this, and this) make for compelling general reading. But for leaders of small-scale SaaS businesses, the Great Resignation is nothing short of greatly distressing. In a competitive environment that has long been engaged in a talent arms-race, record numbers of job quitters is truly harrowing news for the SaaS world. But this opinion piece from October by Karl W. Smith of Bloomberg (“Workers Who Quit their Jobs Could Improve US Productivity”) helps re-frame this inexorable movement in way that has informed Lock 8’s recent efforts to combat it. The following post hopes to briefly summarize Smith’s article and share some tactics that have shown promising early signs in the face of the Great Resignation.
Smith opens with this observation about the unprecedented level of churn in the job market: “at the heart of this phenomenon is a self-reinforcing cycle that has the potential to remake the labor market. As employers become more desperate to expand their workforce, job openings proliferate and workers become more confident in their options.” The reinforcing aspect of this cycle kicks-in when more workers quit, and their “reservation wage — the minimum they’ll accept — for taking a job” rises. This rise makes workers choosier, which cultivates even more desperation among employers…and, thus the cycle repeats and amplifies. What follows in the article is a macro-economic analysis and an argument in favor of creative destruction to the economy — “the cycle will be broken when employers turn their focus away from hiring more workers and toward increasing the productivity of their existing workforce.” Fascinating…and unassailable in the grand scheme. But what to do in the meantime and in our little small-scale SaaS corner of the world?
Like many articles on the Great Resignation, Smith’s focuses largely on low-cost jobs, macro-economic trends, and traditional definitions of labor, business expenditures, and productivity. While those concepts are universally relevant, variables like highly skilled workers, innovation, and capital efficiency seem more immediately impactful to the world of small software businesses. This brings to mind Daniel Pink’s insights regarding knowledge workers’ motivation being tied to autonomy, mastery, and purpose, a view we have ascribed to for years. This raises the related question: how are the same forces that are shaping the Great Resignation also influencing what employees truly value today?
First, money matters. There is unquestionably upward pressure on wages; and employers need to respond accordingly. But, as Karl points out in his article, “reservation wage” is not JUST about size of paycheck. Thankfully so — if it truly is all about the Benjamins, the little guy inevitably loses. No, we need to think more expansively about how to attract and retain talent. Building on the rock-solid foundation of autonomy, mastery, and purpose, we have observed that employees in late-2021 increasingly demand / appreciate: support, flexibility, and empathy. Accordingly, Lock 8’s portfolio companies have prioritized “other” initiatives, policies, and benefits that seek to embrace and advance these themes.
Attracting and retaining employees amid the Great Resignation is undoubtedly an ongoing challenge — and wage inflation is a reality in this situation. But, as Karl’s article articulates so well, increasing the productivity of the existing workforce is the clearest path toward optimizing performance…and embracing some “other” tactics through prioritizing support, flexibility, and empathy appears to be a path well worth pursuing.
At Lock 8 Partners we spend a lot of time chatting with, and learning from, operators of SaaS businesses. It was in that context that I began trading notes with James Marshall mid-way through the pandemic. In addition to having an impressive track record of leading sales teams, James has generously shared with me his thoughtful views on the never-ending evolution of sales teams. It was on this topic that James and I recently collaborated; and he was kind enough to codify some of his thoughts. Thanks, James, for contributing the following post to the Made Not Found blog!
SaaS sales leaders find themselves in a crucible chapter for B2B sales, as the pandemic has accelerated trends that pressure sales leaders to modernize. To outperform their competition, the best sales leaders will embrace both the 1) digital transformation of their sales organization and 2) the evolution of their sales processes. Although these may sound like daunting endeavors, there are a few easy wins that can have an immediate impact.
Covid-19 and the Battle for Talent:
A limited talent pool and increased competition for candidates is driving sales into a stage of discomfort. Prior to Covid-19, the recruiting battle for sales professionals was already stretching a limited pool of sales talent; and the pandemic has greatly accelerated this trend. Through the normalization of remote work, North America’s hottest tech centers are now empowered to recruit outside their city limits for perhaps the first time in their existence. Fueled by historically sky-high valuations, tech companies from North America’s hottest startup zones have an edge in the battle for a limited talent pool. Put simply, that enterprise sales rep in Knoxville, TN who could historically be recruited by their local startup ecosystem for a $225k OTE (on-target earnings), is now entertaining job offers from Silicon Valley and Austin, TX for $350k OTE.
Technology companies everywhere are being forced to compete for this talent and increase wages for salespeople. However, sales productivity metrics aren’t changing nearly as quickly as a reps’ base salaries. We all know that high OTE’s mean correspondingly high quotas. Studies done by Salesforce have shown that more salespeople expect to miss their FY sales quotas than attain them. According to Gartner, only 6% of Chief Sales Officers are extremely confident about meeting their revenue goals in 2021.
Sales Productivity Must Increase:
It goes without saying that against this backdrop, sales productivity must increase. Fortunately, there is some fruit — while not quite low hanging fruit — that is within reach for businesses that take the time to revisit their sales process. These advantages are found through unlocking the combined benefits of sales technology platforms and sales process innovation.
Platforms: The Digitally Enabled Rep
While it’s often said that today “every business executive is a technology executive,” too often sales leaders have lagged behind their peers. Whereas 84% of marketing teams leverage AI, just 37% of sales teams do. And of that 37%, I commonly observe sales teams with access to a wide array of tools (e.g. an outbound automation platform, a contact database tool, a conversational intelligence platform, Sales Navigator, a video prospecting platform, and a myriad of great plugins for their CRM), but where team productivity is undermined by low user adoption.
Yet the data is clear: companies that leverage AI-driven sales platforms outperform those who don’t. Whereas 57% of top-performing sales teams leverage AI-empowered sales platforms, only 31% of moderate performers and 20% of low-performers leverage AI in their sales process.
Contributing factors to this low-adoption stem from leadership’s comfort level with sales technology. We commonly observe that sales leaders themselves haven’t made the jump into tech-enabled selling. As a result, many 1) don’t feel comfortable coaching their teams to utilize these technologies as part of their sales processes, and 2) purchase technology without accounting for the sales rep’s user experience.
The great news is that SaaS ecosystem for sales has innovated well beyond the current state of its user community. The best sales leaders will evolve their sales processes to support robust utilization of these products, which will bolster their sales reps’ productivity. The return on this investment is swift and certain. More on this in a future post.
Modernize the Sales Process:
The typical B2B SaaS marketing department has evolved to be the data-driven, tech-enabled functional area that it is today. Conversely, the enterprise field-sales process has evolved very little since the industrial age. In the late 19th and early 20th century, John Rockefeller’s Standard Oil ran a large field sales organization where geographically based salespeople opened new accounts and grew existing ones. Unfortunately, the pace of change in our complex world makes it extremely difficult for today’s reps to “do it all,” as their predecessors did. If that sounds like your company’s sales process, I rest my case.
As an alternative, many successful companies divide the sales responsibility into two and three parts (BDR, AE, and to some extent Customer Success). However, even these models fall short of 1) breaking down the motion of sales-led growth into its simplest parts, and 2) assigning those parts to the most competent and cost-effective people and platforms to execute them.
As a quick illustration, let’s look at how a salesperson spends their time and assign a dollar value to their daily tasks. For the sake of argument, we’ll say that this is a “Field Salesperson” who is receives $250k of annual compensation in exchange for 45 hours of their time and attention each week. At $115 an hour, the business has no doubt hired this person for their ability to sell large deals. Yet in 2018, salespeople reported spending just one-third of their time actually selling. The culprit? Data entry is certainly one of them; and in the case of our example rep, date entry comes at a cost of nearly $700 per day. And, that figure comes before we’ve started analyzing how much time a rep spends on building lists, outbound prospecting, creating sales collateral, etc.
By neglecting the work of sales process innovation, companies are overpaying for customer acquisition. We’ve found that clearing the calendar for even one day of planning often allows sales leaders to identify targeted areas for process improvements that shorten the sales cycle and / or lower CAC.
Many startups and small companies will argue that while this kind of role-specialization would be ideal, they are too small to capitalize on it. Fortunately, the white-collar gig economy is stronger than ever through websites like Upwork and Fiverr. Through some simple privacy accommodations, startups are able to utilize this outsourced talent pool, while quickly segmenting their sales process and increase their effectiveness.
In this environment of increasing expectations, sales leaders have two levers which are well within reach. Sales leaders will gain a competitive advantage by 1) driving user adoption from the rich ecosystem of sales automation technologies available, and 2) analyzing their sales process for opportunities to innovate. Today, it’s not hyperbole to say that any startup or midsize SaaS company is just a few tweaks away from unleashing a force of digitally enabled salespeople who are focused on executing their highest-impact revenue activities. When that happens, everybody from salespeople to investors win.
At our pre-wedding rehearsal dinner, one of the groomsmen made the following toast: “A person is judged by the company they keep. And, although I’m not all that crazy about Todd, his friends are truly amazing!” It was one of the best compliments I’ve ever received.
In the 20-something years since, that dynamic persists: I’ve been fortunate to meet, collaborate with, learn from, and befriend many remarkable people in and around small-scale SaaS businesses. Some of them have generously shared their wisdom on this blog (such as here and here). Today that practice continues with some sage advice from Robert Morton.
I met Robert during our shared time at Blackboard; and now the guy just can’t shake me. A true lifelong learner, Robert has continued to expand his formidable skills and push the boundaries around how to build durable businesses and relationships. He recently hung up his own shingle as a growth and customer insight / experience consultant at Highland Advisors (full disclosure, Lock 8 is a proud client). He also recently wrote passionately about the concept of consequentialism as it relates to customer experience. With Robert’s blessing, I share those thoughts below. Thank you, Robert; here’s to consequentialism:
Every time I read another company drone on about “we strive to put customers first”… only to follow with some weasel-ey, anti-customer move, I’m reminded just how badly most outfits need a dose of consequentialism. A mouthful of a word but the gist is this…
Your intent doesn’t matter, what’s in your company heart doesn’t matter… there’s just your actions and what they result in.
If the move you’re making improves customer value, it’s a customer centric move.
If the move you’re making chips away at customer value, it’s an anti-customer move.
That’s it. What you mean, or how well you wax poetic about your customer-centered beliefs, doesn’t count. In this view there are just actions and a tally of outcomes over time that add up to a more customer-centric or more anti-customer bearing as a company.
Over-simple? Maybe. Isn’t intention a mark of seriousness and care in the approach to just about anything? Perhaps.
But I’ll wager we’d have better customer outcomes, with a lot more impact per word, if we at least passed a consequentialist lens over all the customer (employee too, likely) moves we make.
No self-soothing with noble intents or rationale gymnastics allowed. Just the cold light of asking ourselves “is the outcome of this thing we’re planning customer-centric or anti-customer”? And if the latter, “how do we feel about that, what do we want to do about it”?
And if you believe as I do that the conversations you have shape the culture you have, simply posing and wrestling with these questions in the open carries its own very powerful reward.
Because when we do, we change the accepted language and conversation of our orgs. Turning more of our everyday work gabs into open development discussions about the customer (or employee) experience we want to make here.
And that, more than any single CX decision we end up making, may be the most consequential move of all.