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.

1) Strategic Confidence: Having the customer’s voice (with real quotes and hard / quantifiable survey feedback) helps the team have confidence that the business and product strategy are on the right path. In one recent portfolio company example, the team identified a product extension that they believed would help them differentiate and win in the market. But it was just a hunch. Through a program of customer interviews, they learned this problem was far bigger than they originally estimated. The input they received came from a broad cross-section of clients, it was focused in its scope, and it was both quantitative and qualitative. In a word — convincing. As a result, they now have a lot of conviction around, and commitment to, their direction.

2) Credibility / Focus / Alignment: No matter how aligned internal stakeholders seem at the outset of any company initiative (particularly product-related ones), questions and doubts inevitably creep in over time. Such questions include: Are you sure you need that feature for MVP? Remind me again: why are we building this? What is the actual ROI / impact of this effort? Such post-agreement re-trading can be devastatingly corrosive (as discussed in this blog here). Instead, the best defense against such doubts is being able to point to concrete client input that was gleaned in a thoughtful way at the outset of the project.

3) No Round Heels: Pressure to undertake (or not) certain projects comes from all sides, particularly from customers. In another recent example, a large customer demanded that the business build a specific feature (raise your hand if this has happened to you…it definitely has). Instead, the company agreed to do a usability study with end-users, and included that customer in the process. The results were overwhelming, and took them in a totally different direction that was more aligned to company strategy. Such studies enable companies to push-back on client “requests” in a thoughtful, data-driven way…and avoid the “round heel” problem where customers are able to push the company around with very little ability for them to resist.

4) Thought Leadership for Realsies: Many early-stage SaaS business claim to be thought-leaders in their vertical or segment. Fewer have the goods to back up those claims. Genuine, ongoing client input through such engagement groups is the most sustainable way we’ve seen for informing legitimate thought-leadership. And this has utility far beyond product input. Rather, findings from customer research can be used to enrich sales decks, blogs, webinars and conference presentations.

5) Hidden Gold: Every once in a while, you can discover a gem that is pure upside. This happened recently when a portfolio company begun to spend many hours scoping out a prospective client-requested feature. With less than two hours of usability testing with a user group, they subsequently learned that the main customer benefit of that feature was something that could be solved with data that already existed in the system. They were ecstatic, and so were the customers — hidden gold that would have gone undiscovered without the input of that group.

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:

1) Start Small: This seems obvious…but that doesn’t make it any less important. It’s common for small-scale SaaS businesses to enthusiastically launch a customer advisory group with much fanfare and grand pronouncements for the future. Avoid that. Far better to start out with some surveys or interviews, and then work your way up to some initiative-based (short duration) groups. This allows for ongoing iterations based on learnings along the way.

2) Manage Expectations: Nothing can more quickly undermine your good-faith efforts to engage with customers than misaligned expectations. Accordingly, it is critical to set accurate expectations with whichever type of group you are convening. What is the group’s primary goal and area of focus? How often will it meet; what are the time commitments? How long is the term? Laying these out clearly up-front will allow you to hold people accountable to those standards. Failure to do so makes it hard to do so. Finally, and most importantly, be crystal clear up-front with participants exactly how you will and will not use the data gleaned from these efforts. And…no matter how small the initiative, be sure to follow-through / close the loop with those customers after you’ve concluded the effort.

3) Balancing Brains v. Bravado: As mentioned earlier, you’ll rarely, if ever, have enough information to make decisions based on statistically significant data. So, judgement is required. Specifically, it’s important to acknowledge the ongoing need to balance following your gut / assumptions ( the “Bravado”) versus waiting to collect ever-more data to inform decisions (the “Brains). It is indeed a balance, and this tension / imperfection needs to be both acknowledged and actively managed.

4) Budget…Just…Budget: These are not cost-free endeavors. No matter how scrappy and lean the effort is, these require an investment of time and hard-expense. Embrace that reality and set a reasonable budget to be managed by the people responsible for it. Otherwise, the expenses from this effort will by-definition eat into other initiatives, thereby fostering resentment and undermining organizational commitment from the get-go.

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:

o User Testing: This is the process by which a company endeavors to validate the demand for a product or service. The earlier this happens, the better.

o Usability Testing: This is the practice of evaluating the functionality and design of your product or service (or website) by observing visitors’ actions and behavior as they complete specific tasks while using it. Although also important to do early, this generally happens a bit later on.

· 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:

1. Strategic Advisory Board: This is a market-focused body, usually comprised of more senior client leaders. It is designed to provide strategic insights on the industry and offer informed, high-level feedback on strategy and roadmap.

2. Product Expert Group: This group shadows the SaaS company’s product management team and offers product feedback from roadmap creation, MVP definition, story finalization, and sprint updates. It tends to include super-users and expert system administrators. Meetings should be recorded for other members of company to listen.

3. Project Steering Group: This forum provides deep subject matter expertise for a specific project, product capability, or design approach. Such projects have specific kickoff and end dates. These often include more tactical users of a B2B SaaS solution.

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.

Client Groups by Size / Frequency / Duration

To summarize:

· A strategic advisory board is a longer-term commitment (often a couple years or more) for a very small group of people who meet only a couple times a year.

· A product expert group is comprised of a small group that tends to meet more frequently, but whose tenure can be shorter than the strategic group.

· A project steering group should provide a lot of data from a broad group of people on a tightly defined problem or project for a finite period of time.

The table below adds some quantifiable detail around how we tend to think about and structure programs for each of these types of groups.

Client Group Distinctions

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:

· Company resources responsible for / assigned to leading each group

· Funds budgeted to supporting each group

· Modality for how each group will meet (e.g. in-person, remote, hybrid, at Users Conference)

· How / to whom to internally distribute the information received from each group

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:

· Selecting / enlisting client participants

· Scheduling / coordinating attendance

· Setting agendas / managing participant expectations

· Preparing for the research / ensuring that what gets collected will be actionable

· Hosting / managing meetings (note: this can get expensive fast, depending on meeting modality)

· Follow-up communications / secondary research

· Actually IMPLEMENTING the feedback (you are now largely on the hook to deliver)

· Various clients with different objectives; different perspectives / different agendas

· Truth can hurt: any participating party may learn things they aren’t quite prepared to hear

· More harm than good (an extension of the prior point), sometimes less engagement is just…better

· Input scarcity: There is rarely enough data to be statistically valid, so some inherent guessing / risk remains

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.

Example ARR waterfall
Example ARR Waterfall

We also like a purely graphical / summary representation of this table, which is likely the source of the term “waterfall:”

Example Graphical ARR Waterfall
Example Graphical ARR 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).

Bad: There are a few downsides here: First, it’s difficult to estimate at the time of initial sale what a client’s exact usage will ultimately be (and, by necessity, they get billed in arrears). Second, customers can decrease consumption (and, in turn, fees paid to the vendor) at any time.

Good: The upside is that customers can effortlessly increase usage/users as their appetite for the solution expands. In this way, value/performance is rewarded with ever-increasing client consumption (and correspondingly rising fees).

Ugly: Unlike traditional flat or tiered subscriptions, no indisputable dollar amount is tied to a new booking (sale). As a result, businesses need to estimate both expected future usage and also the timing of how that usage will ramp. At best, this is an inexact art/science that complicates the ARR waterfall.

· 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?

Bad: Vendors cannot contractually “lock in” customers for a specified period in this model, which tends to freak out SaaS investors.

Good: Customers no longer face a lengthy commitment up-front, thereby reducing friction in the initial sale. Likewise, clients have no contractual end date forcing them to evaluate whether or not to continue using a SaaS solution. This can benefit vendors, particularly in disruptive economic periods, as we saw in the early days of the pandemic.

Ugly: This approach can camouflage churn. Because there is no set renewal date, churn can appear artificially low, even while customers slowly wean down their use of the solution over time. The result is a blurring of the lines in the ARR waterfall between contraction and churn.

· 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)?

Bad: The downside of this approach is that the unit economics of these two offerings can differ significantly (i.e., managed services generally have a lower gross margin).

Good: The upside is that offering a managed service can open up new segments, particularly among smaller, less resourced customers who will more readily adopt a solution with ongoing admin assistance from the vendor.

Ugly: This situation introduces complexity in the sales cycle and also in terms of cost tracking. In this situation, not all ARR is the same, which undermines the tidiness and related utility of an ARR waterfall.

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:

1. Define: First, be very explicit about defining terms within your ARR waterfall. What EXACTLY do terms like New Bookings, Upsell, and Downsell specifically mean in your business’ waterfall; and how EXACTLY do those terms differ from the commonly accepted usage of those terms.

2. Align / Refine: Explicitly agree among all stakeholders (company leadership, the broader team, the board, and others) on the above definitions and periodically review them to ensure their ongoing validity and usefulness.

3. Baseline: Measure your ARR and all of its contributing elements the same way over time. This will allow the creation of a baseline and offer stakeholders context for truly understanding any future changes over time.

4. Trend line: Always be sure to keep a graphical representation of the ARR over time. For all of us visual learners out there, this is the single best way to actually see how the ARR has evolved and to spot the key trends for the single most important metric in any SaaS business.

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 hereherehere, 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 ExcellenceChalmers 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:

· “I will do X and Y differently next time, based on what we’ve learned this quarter.”

· “I take responsibility for managing this challenge that we are facing.”

· “I plan to focus my energy on improving my skills / performance in the following three areas this year.”

For effective leaders, there really is an “I” in team…it gets spotlighted when modelling 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:

· “You didn’t do what I asked.”

· “The organization needs more out of you.”

· “You guys really have to step-up.”

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:

• A description of various aspects of personality related to such things as sociability, ambition, open mindedness, desire for learning. These speak to behaviors that drive CEO success.

• Insights regarding likely performance in the workplace including such issues as managing stress, interacting with others, approaching tasks, and proactively addressing problems.

The HDS identifies the following:

• Interpersonal behaviors that could potentially undermine or “derail” effective relationships and careers, especially when a person is stressed, bored, or fatigued.

• Insights regarding blind spots that may trigger unproductive behavior.

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 ability to recognize assumptions and determine those that are likely to be true or not.

• The ability to evaluate arguments objectively without allowing a confirmation bias (the tendency to look for and agree with information that confirms prior beliefs) that leads to poor decision-making.

• The ability to draw sound conclusions that are logical and consistent with the evidence at hand.

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:

1. Awareness versus Selection: Perhaps surprisingly, we do NOT use these assessments to evaluate or select CEO candidates. Rather, we use them purely to support execs’ professional / personal development. Leaders complete these diagnostics only once they have been selected / accepted the job, and are in-seat at a business. We find that this completely changes the exec’s perception of the diagnostic. As opposed to being a test to be endured or “passed,” it becomes an investment in a set of tools that can help execs succeed in their new roles.

2. Is there a Doctor in the House? These are highly nuanced diagnostics; and it is critical to engage a qualified professional to interpret them. We always work with a psychologist who is a certified testing expert to provide a detailed analysis and briefing of the results. And, even before that, a critical step in the process is for the CEO to do an extensive 90 minute “get-to know” session with the psychologist. Again, this is in service to making the whole experience valuable for the exec; and this approach goes a long way toward opening minds toward this as a worthwhile endeavor for them.

3. Give Good Feedback: If a primary objective of this initiative is to raise CEO self-awareness and self-management, then the feedback loop back to the exec must be exemplary. This feedback comes from both Lock 8 and the aforementioned experts. In either case, key aspects that need to be present include:

a. Feedback must be in the context of the role at hand, i.e., not generic leadership advice

b. Recommendations needs to be actionable, i.e., changes in behavior that can be readily observed and measured

c. Observations should be accompanied by a means to recognize the “triggers” that cause unproductive behavior

d. Comments are most useful when they both raise self-awareness and drive a tangible action plan

4. Not Sharing is Caring: For this to help CEOs, a safe space needs to be fostered in connection to what should be confidential assessment results. No CEO wants a broad population of people accessing highly sensitive information that might reveal deeply personal vulnerabilities. So don’t share it broadly. We have committed to a policy where only three people having access — the executive, the psychologist, and Lock 8’s managing partner (me). That’s it.

5. Many Happy Returns: This is not shelf-ware. Rather, the results of these assessments should be used repeatedly; and it is critical to revisit them on a regular basis. When CEOs are looking to build out their leadership team, it should be with an eye toward addressing gaps that may have been revealed via the diagnostic. When doing semi-annual exec performance reviews, it ought to be informed by these assessments. Assessments cost both time and money, so these should be viewed as resources that assist in optimizing some of the company’s most important “assets” — key executives.

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:

1. Ask Hard Questions: It’s common practice to evaluate someone’s “want-to factor” by explicitly asking why they want to land the job we’re trying to fill. Nowadays, we clearly need to go further and also ask (repeatedly) why they are looking in the first place, what is motivating them to consider leaving their current gig, and what it will take to get them to jump? We also need to fight our own long-held biases in assessing responses to such questions. Historically, attractive candidates often already had good jobs and weren’t looking for new ones. But in the upside-down world we now inhabit, that’s problematic. Unless someone is discernably motivated to leave their current situation, the risk is high that they won’t ultimately end up doing so. Why? Because desperate current employers (especially big company ones from which small-scale SaaS businesses often recruit talent) are desperate to keep high-performing team-members. Accordingly, the incumbents have temporary license to throw money at the problem and counter-offer employees with big pay-bumps aimed at convincing them to stay.

2. Expect a Counter: Given the point above, it’s critical to prepare candidates to expect a counter-offer from their current employer. We’ve found this to be particularly true with more junior professionals, who are surprised and disarmed when their current employer makes a concerted effort to retain them. Our experience is that an ounce of prevention is worth a pound of cure against company counter-offers. Specifically, when employees are forewarned in advance to expect a counter-offer, they are forearmed with how to graciously sidestep them. Alas, if unexpecting employees give oxygen to counter-offer discussions, we as “newco” often find ourselves in a bidding war that we can rarely win.

3. Recall the Past: As part of preparing candidates to expect a counter-offer from their existing employers, it’s key to remind them what led them to job-seek in the first place. Revisiting responses to the “hard questions” above is certainly fair game. It’s also worth asking candidates where their employer was hiding all of those salary-escalations and title-bumps prior to their having given notice. While these can certainly be delicate conversations, they are often effective when handled deftly. At the very least, they should give job-stayers pause to consider how their career will progress at their current company (particularly a year or so down the line when the labor market inevitably cools a bit).

4. Sell the Future: It’s also important to ABC (Always Be Closing) by reminding the candidate of the exciting opportunity ahead. The autonomy, breadth of responsibility, opportunity to elevate their role in a smaller organization are often appealing aspects of the move they had been planning. Likewise, key differentiators of the new opportunity include contributing centrally to building a business from an early stage and participating in an options plan that rewards value-creation. For the right candidates, there are few things more enticing than that…but they may need reminders to help them make the leap.

5. Speed to Close: In an effort to avoid counter-offers entirely, try to not mess around much with thenumber of days between interviews. It can be worth sacrificing a bit on getting unanimous team buy-in in exchange for moving quickly (we learned this the hard way after losing good candidates by waiting too long to produce an offer. If you see someone you like offer) ASAP…even to the point of closing before candidates leave the interview. It shows they are not in second place and you mean business — like all of us, candidates want to be wanted! At the very least, it is more important than ever to stay connected to the candidate between offer acceptance and start date and eliminate any lulls in communication.

6. Pre-Boarding Starts Now: Our portfolio companies are having success initiating small scale and lightweight “onboarding” steps even prior to the candidate starting. This starts with the hiring manager keeping an on-going dialogue to monitor the candidate’s tone, level of excitement and reconfirm the resignation process is on track. Quickly this transitions to inviting them to meet their colleagues (e.g.; company or team meeting or virtual happy hour), sharing pre-reading materials and/or casual discussions about ongoings in the business they will have the opportunity to be part of, or even lead.

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 thisthis, 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: supportflexibility, and empathy. Accordingly, Lock 8’s portfolio companies have prioritized “other” initiatives, policies, and benefits that seek to embrace and advance these themes.

Support: This feels like a natural counter-balance to the concept of autonomy, which Pink describes as “freedom among employees to be self-directed.” Sure, we all want to be self-directed, but not alone and stranded (as many felt over recent months amid the pandemic). Such support can take countless forms; here are a few that we’ve focused on:

· Leadership: Lean heavily into training company leaders / managers — this has the double-benefit of providing valuable professional development to all, while also elevating managers’ ability to lead, mentor, and retain talent. After all, loyalty (or lack thereof) to one’s supervisor inevitably tops the list of factors in employee retention.

· Health Care: Among rapidly rising health care costs, the company steps-up to cover increases to premiums. There may be nothing more important right now than supporting employees’ physical / mental health, especially if this can also support their financial wellbeing.

· Savings: Offer 401-k company contributions that go beyond more standard matching programs. Company contributions help employees (particularly entry-level ones) get into the habit of saving for the future, irrespective of whether they themselves enroll in the 401-k.

· Creative Destruction: Per Smith’s point, employee departures can be a catalyst for productivity enhancements. When people leave businesses, a silver lining exists in the form of opportunities to find new ways to do things. Whether through “digital transformation” (a term we dislike) or general process improvement, there is a chance to adapt and grow. With this approach, companies can turn a negative into a positive, and demonstrate valuable support for employees who remain after departures (and for those on whom an added burden so often falls).

Flexibility: At this point in the pandemic, it’s easy to think that tech companies have universally maximized flexible work. But there is always room for refinements well beyond simply allowing WFH. This is particularly true among small-scale businesses that tend to have less mature HR infrastructure and policies. Some recent changes among our partner companies include:

· Flex-PTO: Surprisingly, many small-scale SaaS businesses have not yet formally adopted flexible policies for vacations / holidays / time-off. Doing so, while also setting clear expectations around how such a program can work effectively for all, is a big step. (This also removes inherently inflexible practices such as use-it-or-lose-it and vacation carry-over).

· Uniquely Defining Health: It’s long been true that employers desire a healthy workforce — everyone benefits. But healthy living means different things to everyone. With this in mind, a popular policy change has been to offer a per-employee stipend. This can be used at each person’s sole discretion, with broad latitude toward supporting individual health.

· Uniquely Defining WFH: This same flexibility has been extended to home office expenses and reimbursement / stipends to cover related expenses. There is no one-size-fits-all in terms of home office needs, so flexible reimbursement has been a welcome change from what had previously been somewhat prescriptive.

Empathy: If Pink’s concept of mastery is about developing a comprehensive knowledge or skill in a subject, then empathy brings a human touch to such competence. Empathy is the ability to understand and share the feelings of another; and we all desire that from the world around us. Team members certainly expect that from employers today, and a few consequent changes have been well received.

· Culture Committee: For many people, culture-building events can feel like “mandatory fun.” This is particularly true today, where virtual happy hours and remote events can feel like nothing more than awkward obligations for more screen-time. What helps is when the company gets out of the way. Empower — with a reasonable budget and clear authority — a group of people (often more junior team members) who are excited about organizing experiences for their peers. The results are consistently authentic and fun; and the approach demonstrates a respect by the business for what the team actually wants to do.

· Policy Audit: Inevitably, there are aspects of the work experience that are imperfect — policies, communication practices, benefits, reward structures — and these rankle people. Proactively convening a cross-functional group to regularly review and propose changes…and then thoughtfully considering and implementing the resulting recommendations…is a great way to demonstrate empathy to what the team values. Admittedly, this can be perilous for company leaders depending on the team’s recommendations; but even just cultivating such discussions is better than not.

· Giving Back: Businesses everywhere give back to their communities and demonstrate admirable corporate social responsibility. Historically, that has meant supporting employees’ efforts to give their time and treasure to a specifically identified company cause. And, while this still holds true, it has evolved in order to allow far more individuality for people to select the organizations and causes that resonate most profoundly with them personally…or even to opt-out entirely without judgment or penalty if that just isn’t one’s cup of tea.

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.

Are we speaking the same language? Let’s talk.

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