a16z Podcast: Stories and Lessons in Enterprise Sales

0:00:03 Hi, and welcome to the A16Z podcast.
0:00:05 This episode is a conversation between Mark Leslie,
0:00:08 former CEO and chairman and founding team member
0:00:10 of Veritas Software and a lecturer
0:00:12 at the Stanford Graduate School of Business
0:00:14 and A16Z general partner, Peter Levine.
0:00:16 In the conversation, which is based on an event
0:00:18 held at Andreessen Horowitz for Veterans,
0:00:21 Peter and Mark talk all about sales and entrepreneurship
0:00:23 from what makes a good salesperson
0:00:25 and how to best incentivize them
0:00:28 to how to build a culture that engenders loyalty and trust.
0:00:30 To learn more about this subject,
0:00:32 check out Peter Levine’s video sales primer
0:00:34 on how technical founders should think about sales
0:00:37 on A16Z’s YouTube channel.
0:00:38 We teach at Stanford together,
0:00:41 we’ve sit on boards together, we’ve worked together,
0:00:43 and so this is one of those occasions
0:00:45 which is super awesome for me to be here
0:00:47 and super awesome to have Mark here.
0:00:51 You often talk about the importance of authenticity
0:00:52 as an entrepreneur.
0:00:54 What do you mean by that?
0:00:57 To me, authenticity in that context
0:01:00 means that the person whose idea it is
0:01:03 and the thing they wanna craft and do
0:01:07 comes from real experience.
0:01:08 That they’re solving a problem
0:01:10 that they personally experience,
0:01:12 that they see their customers experience,
0:01:17 and it has a real kind of substance to it for those people.
0:01:19 There’s a lot of people who are really smart
0:01:20 and look at the world and say,
0:01:23 “I think there’s a problem over there that I can solve.”
0:01:24 I don’t think that’s authentic
0:01:28 and I think that the probability of success is much lower
0:01:29 when you’re trying to solve a problem
0:01:31 that you’ve never personally experienced.
0:01:34 So you have people come from a company
0:01:35 that’s in a similar technology,
0:01:37 they have a network of people,
0:01:41 they have seen the problems that they themselves experience
0:01:42 that are experienced in their company,
0:01:43 the companies or their customers,
0:01:48 and then they say, “Aha, I see something that no one else sees
0:01:49 and it can make a difference
0:01:51 and I can go build a company about that.”
0:01:52 So that’s what authenticity means.
0:01:55 Now, that’s for starting a company.
0:01:57 There’s another word of authenticity
0:02:01 having to do with leadership, separate concepts.
0:02:06 And authenticity in leadership is being a real person,
0:02:08 being comfortable in your own skin,
0:02:12 being willing to admit when you make a mistake publicly
0:02:15 and to take responsibility for that,
0:02:17 and having a human touch.
0:02:19 And it’s a crucial element of success in leadership
0:02:22 is being an authentic person, being a real person,
0:02:25 being someone who doesn’t try to be something they’re not.
0:02:26 They are who they are
0:02:29 and they are kind of internally accepting of that.
0:02:32 – I’m curious, you think this authenticity can be,
0:02:34 is it something that can be taught
0:02:38 or is it innate in people coming into an environment?
0:02:41 Yeah, you talk about it, but how do I know?
0:02:44 Am I authentic or not and can it be taught?
0:02:46 – Yeah, so one of the things I say
0:02:49 is that you can teach an entrepreneur
0:02:51 how to go start and build a company,
0:02:54 but you can’t teach someone to be an entrepreneur
0:02:55 who’s not an entrepreneur,
0:02:57 has to do with an inner drive
0:03:00 and their personal ambitions and desires
0:03:03 and their risk tolerance, their willingness to go
0:03:06 put themselves at risk to accomplish something.
0:03:10 So can you teach someone to be authentic?
0:03:11 I don’t think so.
0:03:14 How they deal with the rest of the world around them
0:03:16 and people and their social interactions
0:03:17 and all the things that go with that
0:03:19 and their business habits,
0:03:22 all those things together describe character.
0:03:25 And I think character, my personal opinion, is as immutable.
0:03:28 I don’t believe that you can change behavior of people.
0:03:31 I think people can change their own behavior
0:03:32 if they’re so motivated,
0:03:34 but that’s a long, hard journey
0:03:36 that people embark on by themselves,
0:03:38 but I don’t think you can beat it into people.
0:03:39 I think they are who they are.
0:03:41 And my view has always been
0:03:42 when you have a bunch of executives
0:03:43 that have different jobs, you say,
0:03:47 well, how can I get the best from each
0:03:50 and amplify their strengths?
0:03:53 And how can I reduce the impact of the problems,
0:03:56 meaning attenuate their weaknesses?
0:03:58 And so I always think of an organization
0:04:00 as having a lot of lines in it
0:04:02 and then the job of the leader of the organization,
0:04:04 it’s to blur the lines
0:04:07 to do that amplification and attenuation.
0:04:11 We often back technical founders or founding teams
0:04:14 that have very little sales expertise,
0:04:18 yet it becomes a critical part of a company.
0:04:20 So how do you think about approaching sales
0:04:22 from the perspective of a founder
0:04:24 who’s never done it before?
0:04:27 So the first thing you have to do
0:04:30 is sell someone on becoming your partner.
0:04:32 Then you have to sell friends and family
0:04:34 on providing you with the seed money.
0:04:36 Then you have to go sell individuals
0:04:40 to give up their career and invest their future in you.
0:04:42 Then you have to go out and raise money
0:04:47 by selling venture capitalists shares for money.
0:04:48 That’s the selling thing.
0:04:49 I’m gonna give you shares
0:04:50 and you’re gonna give me money, right?
0:04:52 So we were selling.
0:04:53 And then you develop your product
0:04:55 and then eventually you go out and meet customers
0:04:57 and you gotta go sell them.
0:04:58 But at this point in time,
0:05:01 there is nobody better equipped in a startup company
0:05:06 to talk about the beauty and the benefits of the product
0:05:09 and the vision of the future that we’re painting for.
0:05:11 There’s nobody better equipped to do that
0:05:14 than the founders who started the company for that reason.
0:05:17 Sales in the very early stages can’t be subcontracted.
0:05:19 Even if you hire a sales person,
0:05:20 they don’t know anything when they get there.
0:05:22 They have to go learn about the product
0:05:24 and the customers and the market and everything like that.
0:05:25 And where does that knowledge comes from?
0:05:28 It comes from the founders and the company.
0:05:31 So one of the things that technical founders,
0:05:33 they’re pretty good usually at the vision thing.
0:05:36 They’re not so good at asking for the order, right?
0:05:39 And in sales, you go spend time,
0:05:40 you tell them about all this stuff and you say,
0:05:43 “So look, I think you guys are interested
0:05:45 “in why don’t we kind of do a deal here, right?”
0:05:47 And make something happen.
0:05:49 They’re not comfortable kind of getting to that point.
0:05:50 So you have to get to that point.
0:05:55 Now, you are gonna sell for the rest of your life
0:05:59 in business, you’re gonna sell your ideas.
0:06:02 The higher up you get, the more opportunities you have
0:06:06 to represent your company and its mission and its ideas
0:06:07 and its product and everything else
0:06:10 in front of important people.
0:06:13 You will be selling all of your life.
0:06:15 When you are a leader of a company,
0:06:17 you define the mission and the vision
0:06:20 and then you evangelize that to the company.
0:06:22 The way you get people to subscribe to it
0:06:24 is you get them excited about it
0:06:26 and that’s another version of selling.
0:06:30 So it’s persuading and yielding from the persuasion
0:06:32 some outcome that has benefit to you
0:06:34 and you’re gonna do it all of your life.
0:06:37 And look, it takes a village to make a company, right?
0:06:39 You gotta have people to do all kinds of things
0:06:42 and it’s fine, but if you wanna go do that,
0:06:45 you better learn how to sell, present, persuade, et cetera.
0:06:47 – Perhaps a follow on question to this
0:06:49 is what makes a great salesperson
0:06:51 and is it a viable on-ramp, let’s say,
0:06:54 into a company joining a sales group
0:06:57 as opposed to marketing or engineering?
0:06:58 – This is a chicken and egg thing, right?
0:07:00 You show up and say, I wanna be a salesperson.
0:07:01 I say, well, what have you sold so far?
0:07:03 – Well, this would be my first time.
0:07:05 You should never be embarrassed about that.
0:07:06 – Everyone’s gotta start somewhere, right?
0:07:07 – Everyone’s gotta start somewhere.
0:07:10 – So I think the way, if you wanna break into sales
0:07:12 and the Valley, I think the place to where there’s
0:07:14 the most tolerance for that is what they call
0:07:16 inside sales, you dial for dollars,
0:07:20 you’re scripted, you have a manager that’s close by.
0:07:22 And what happens to people in inside sales,
0:07:26 the people who show promise and have energy and ambition,
0:07:29 they always get promoted to account executives
0:07:31 that have more responsibility.
0:07:35 So the typical, what they call OTE on target earnings
0:07:40 is today around $300,000, half in base, half in incentive.
0:07:42 And then if you sell more than your quota,
0:07:45 you can make a lot more than your 300K.
0:07:49 And it was always my privilege as a CEO
0:07:51 to bring someone up on the stage and say,
0:07:52 you made more than me this year,
0:07:54 here’s your check for a million dollars.
0:07:57 It’s a very highly paid profession.
0:08:00 So I’ve worked with people who come from an engineering
0:08:02 background and say, well, why does sales people
0:08:03 make so much money?
0:08:06 It doesn’t seem right ’cause engineers are smarter.
0:08:09 And then I say, so do you wanna be a salesperson?
0:08:11 And I say, no.
0:08:12 I say, that’s why they make more money.
0:08:15 (audience laughs)
0:08:17 There’s a large quantity of people out there in the world
0:08:19 that, you know, someone says no to them
0:08:21 and they’re just like crushed.
0:08:23 And if you’re in sales and someone says no,
0:08:25 you just dial the next guy.
0:08:27 – You know, often there’s this interesting perception
0:08:29 between sales and engineering,
0:08:32 that constantly sort of butts heads a little bit,
0:08:35 especially since companies typically are founded
0:08:37 by technical engineers.
0:08:39 And then you bolt, quote unquote,
0:08:41 bolt on a sales organization.
0:08:42 Everyone’s worried about culture
0:08:45 and kind of the changes and all of that.
0:08:46 Eventually everyone gets through it
0:08:49 and you have sort of a normalized kind of situation
0:08:50 where you have sales and engineering
0:08:53 and everyone, you know, mostly works together.
0:08:55 But that’s very typical in the Valley here.
0:08:57 – And one of the jobs of leadership
0:09:00 at that stage in a company is to build the bridges
0:09:01 between those two.
0:09:03 You know, there’s kind of a built in on both sides
0:09:04 and like, huh, who are those guys
0:09:06 and I don’t get them and everything.
0:09:07 And you build bridges.
0:09:11 You tell each one why the other one’s more important, you know.
0:09:13 So one of the big complaints you always get is,
0:09:16 you know, the sales guy say, the product’s late.
0:09:18 I’m a sales guy, I’m accountable.
0:09:19 How come nobody’s accountable?
0:09:22 So my experience with engineering projects
0:09:25 is that they can either be on time,
0:09:30 they can be fully featured or they can be high quality.
0:09:33 I’ve never seen it all come together on the same day.
0:09:36 So over years, I became very zen about the whole thing.
0:09:37 I was like, hey, look, it’ll be ready when it’s ready.
0:09:39 Let’s make sure it’s a great product
0:09:41 and got the features in it and we’ll just, you know,
0:09:43 manage the company around the fact that, you know,
0:09:47 I don’t know if you know about engineering chronology,
0:09:49 engineering time, you know about engineering time.
0:09:53 If an engineer says, we’ll definitely have it by next year,
0:09:55 that means December 32nd.
0:09:58 If they say I’ll have it this quarter,
0:10:00 that means March 32nd.
0:10:03 I mean, it’s the last possible moment of the time.
0:10:05 There’s always a way they kind of do the clock and always.
0:10:07 – For sure.
0:10:09 I was an engineer at Veritas when I started there.
0:10:12 And I had this lunch meeting with Mark.
0:10:13 He doesn’t even remember.
0:10:15 It’s one of those meetings that I remember.
0:10:17 By the way, there are often meetings in your life,
0:10:19 we talk about this a lot,
0:10:22 where you as the recipient of that meeting,
0:10:24 remember it as if it were yesterday
0:10:26 and the person who’s dispensing the advice
0:10:28 doesn’t ever remember that they even had the meeting, right?
0:10:29 That happens a lot.
0:10:33 So we go out to lunch and Mark was talking to me
0:10:34 about what do I want to do in my career?
0:10:37 I said, I wanted to run a company someday.
0:10:38 And he said, you don’t know what you don’t know
0:10:39 about running a company.
0:10:40 You need to know how to manage
0:10:42 and you need to know how to sell.
0:10:45 I was an engineer, didn’t know anything about sales, nothing.
0:10:46 Like I wrote code, that was it.
0:10:49 And I had no idea how money came in,
0:10:51 who was a customer, nothing.
0:10:54 So Mark said, well, why don’t you try sales?
0:10:57 So I’m like, all right, whatever, I’ll try sales.
0:10:59 I had no idea that I could be persistent
0:11:00 or any of this.
0:11:03 And so I would go out and go to all these crazy places
0:11:05 around the world to go get orders.
0:11:06 And I actually got a lot.
0:11:10 And the key was I was more afraid to come back
0:11:12 without an order than to go sit at a customer site.
0:11:15 And Mark would set it up where he would say like,
0:11:17 don’t come back until you have an order.
0:11:18 He didn’t even say, I’ll be really upset.
0:11:21 But I refused to come back because I knew people
0:11:24 would be more upset when I came back
0:11:26 than just sitting there at the customer site.
0:11:28 So I literally, when I would go to customer,
0:11:30 I swear that this is what happened.
0:11:33 Customer would often ask, well, when’s your flight back?
0:11:34 When are you going home?
0:11:36 I’m like, I’m not going back until I get the order.
0:11:37 And I was serious.
0:11:39 I would sit there for weeks.
0:11:42 Every day I’d show up and sit in the cafeteria.
0:11:43 I’d chase people into the bathroom
0:11:46 because I was more afraid to come back
0:11:49 with the wrath of Mark Leslie, like, where’s the order?
0:11:52 So I would just sit there until something happened.
0:11:53 It actually worked.
0:11:54 I mean, that was kind of my–
0:11:56 – So let me tell you, we have the NCR story,
0:11:58 which is like all these stories.
0:12:00 – So we’re at the end of the quarter,
0:12:02 and we’ve got to get this deal done at a–
0:12:03 – South Carolina.
0:12:05 – You know, young new salesman.
0:12:08 And we have this conference call on a Friday afternoon.
0:12:10 He says, yeah, it’s all set up.
0:12:11 We’re getting to the deal, that, out of that.
0:12:13 And I said, like, we don’t have an order here.
0:12:15 Like, I don’t know why you think there is,
0:12:16 but there’s no order here.
0:12:18 So I said, you need to be there Monday morning
0:12:20 when, you know, when business opens over there,
0:12:22 and you need to go and find out what’s going on
0:12:24 ’cause we don’t have an order.
0:12:25 And Wednesday is the end of the quarter.
0:12:27 – So we’re kind of like up against it over here.
0:12:30 – Right, I was gonna fly back to San Francisco on Friday.
0:12:33 – And I said, you can go anywhere you want.
0:12:35 But Monday morning, you gotta be over there,
0:12:37 and don’t come home without the order.
0:12:41 So he’s sitting in the lobby over there, right?
0:12:43 He’s a fixture.
0:12:45 And Monday goes by, no one will see him.
0:12:47 And Tuesday goes by, no one will see him.
0:12:49 And then the VP of sales walks out,
0:12:50 and he goes into the men’s room,
0:12:53 and Peter follows him into the men’s room.
0:12:55 I said, Russ, you’re a sales guy.
0:12:56 You gotta help me, I’m dying over here.
0:12:58 I gotta go see somebody, can you help me?
0:13:00 So he did, and then we got in,
0:13:03 and we closed the quarter successfully, it was great.
0:13:05 And it was a great learning experience for Peter, right?
0:13:06 – Yeah, yeah.
0:13:07 We did this big deal with Microsoft,
0:13:09 and it took months and months and months.
0:13:12 I mean, to where I basically lived in this guy’s office.
0:13:14 Every day, I’d show up and sit in his office
0:13:16 in a white chair.
0:13:17 And as I remember, one of those recline,
0:13:20 kind of 80s reclining chairs.
0:13:22 And I sat there for months, and every day I’d show up,
0:13:25 and I’d be there, get him coffee, whatever,
0:13:27 and he’d kind of shepherd me through, I swear.
0:13:30 And it became such a joke that after we did the deal,
0:13:33 and he left Microsoft, he actually sent me the chair.
0:13:37 Because he said, he said, no one has sat in this chair
0:13:39 more than you have in your entire life.
0:13:42 – Peter was a fearless warrior for the company.
0:13:46 We ran into a very, you know, difficult problem
0:13:48 the quarter after we went public.
0:13:50 And we were kind of stretching for,
0:13:51 where can we get some business?
0:13:54 And it turns out there was an accountant in UK
0:13:57 that was scheduled to do something in the following quarter.
0:13:58 And if we give him a nice discount,
0:14:00 we can bring him into this quarter.
0:14:02 And so we’re sitting in the staff meeting,
0:14:03 the executives, and we call Peter and say,
0:14:05 you know what’s going on, we’re like in trouble, right?
0:14:07 He says, yeah, we were in a lot of trouble,
0:14:09 and it was our first quarter of the public company.
0:14:11 It was a real dark day for the company.
0:14:13 And we said, yeah, so we understand there’s this deal
0:14:16 over there, do you think we could go close a deal?
0:14:17 Is it a 250K deal?
0:14:19 Can we get 175K if we do this quarter?
0:14:21 And he says, well, I think so.
0:14:23 I said, do you have your passport with you?
0:14:24 He said, yes.
0:14:27 Now he’s wearing flip-flops, short pants, dirty t-shirt.
0:14:29 And I said, listen, take your passport,
0:14:33 drive to the airport, we’ll have a ticket waiting for you.
0:14:35 And you go to UK and get a deal.
0:14:39 And so he says, okay, and gets in the car, drives in,
0:14:40 while he’s in the car, he takes out his cell phone,
0:14:42 he calls up the guy on the other side, he says,
0:14:45 I’m coming to do a deal, I have no place to sleep,
0:14:47 I have no clothes, and no toiletries,
0:14:49 can you help me out?
0:14:52 Actually, when I got to Customs at Heathrow,
0:14:54 they asked me where my bags were,
0:14:55 and I’m like, I don’t have any.
0:14:57 I almost got arrested because I’m on a mission.
0:15:00 That’s these stories that live on forever and ever,
0:15:03 at least for me, and I know in an environment,
0:15:07 they really do define a lot of how you go make things happen.
0:15:09 Not unlike the military.
0:15:12 People talk about in the military,
0:15:14 you kind of take care of each other.
0:15:16 In business, in all startups, there are dark days.
0:15:18 And the companies that come through that together,
0:15:22 and survive and thrive after that, have those memories,
0:15:24 and those are very powerful binding forces
0:15:26 among the people who are involved at that time.
0:15:30 Every company goes through some cathartic event,
0:15:33 where it’s the pit of despair.
0:15:36 Nothing can go well, and the companies that pull out of that
0:15:39 actually come out much stronger as a result.
0:15:43 It is not a straight line up into the right by any stretch.
0:15:46 And that gets to the topic of loyalty and commitment
0:15:48 to a team.
0:15:51 And I know loyalty and commitment to a team is paramount
0:15:54 when you’re in the service and in the military.
0:15:56 So how does that transcend into a company,
0:15:57 and what does that actually mean?
0:16:00 How do you build that in an organization?
0:16:05 – I think you engender loyalty by being loyal first.
0:16:09 I think you engender trust by trusting first.
0:16:12 Some people don’t like to trust,
0:16:14 because they might get betrayed.
0:16:16 And I always look to say, you know,
0:16:18 if you go first and you trust,
0:16:21 and somewhere along the way that trust is betrayed,
0:16:23 you have to weigh that cost
0:16:26 against the benefit of having expressed trust
0:16:28 to people before.
0:16:29 So one of the things we did at Veritas,
0:16:31 we were highly transparent.
0:16:33 We used to have a company meeting,
0:16:34 and we told them, you know, these are the good things,
0:16:36 these are the bad things.
0:16:38 I remember the company grew, we got public,
0:16:41 you know, we had limitations on what we could do,
0:16:43 and we’re sitting and kind of talking about this problem
0:16:46 of kind of expressing trust and sharing information,
0:16:49 and we had 5,000 employees at the time,
0:16:51 and I said, hey, why don’t we,
0:16:53 this staff meeting that we have,
0:16:57 why don’t once a month let every manager in the world
0:17:00 have a call and number and listen to what we talk about?
0:17:02 ‘Cause, you know, right now you close the door,
0:17:03 and everybody stands outside,
0:17:05 waiting for a little puff of white smoke
0:17:06 to come out of the chimney, right?
0:17:09 So we did that.
0:17:11 One of the questions you asked yourself in a company,
0:17:13 you run a company, should we tell people this?
0:17:15 Is this something we should talk about?
0:17:17 And we actually changed that question and said,
0:17:19 is there a good reason why we shouldn’t talk about that?
0:17:21 Is there any good reason why we shouldn’t tell people?
0:17:24 And that bought a lot of loyalty.
0:17:27 Now, the other part of buying loyalty is success.
0:17:30 People much more loyal to successful companies
0:17:32 than to unsuccessful companies,
0:17:35 but the importance of building trust,
0:17:38 I think of trust, I think of it as a bank of trust.
0:17:40 So in a bank of trust, you can make a deposit.
0:17:45 Meaning you can express trust and give people that sense.
0:17:47 In times of need, when things are bad
0:17:50 and you need people to stand by you,
0:17:52 you can make a withdrawal from that bank.
0:17:54 But they don’t make any loans.
0:17:58 So if you don’t make a deposit,
0:18:00 there’s nothing there when you go to the bank.
0:18:02 And that’s the way I think about it
0:18:04 in terms of running a company.
0:18:09 I think leadership is authenticity, loyalty, trust,
0:18:12 honoring people, fair play in all things,
0:18:16 meaning compensation and stock options and stuff like that.
0:18:17 Everybody understands the rules
0:18:18 and then you abide by the rules.
0:18:20 That doesn’t mean everybody gets the same amount of money,
0:18:25 but everybody gets treated in the same paradigm, right?
0:18:27 And all that responsibility falls
0:18:28 on the senior people in the company to do that.
0:18:32 Every day, culture in a company has nothing to do
0:18:34 with the values that are published.
0:18:37 Culture in a company has to do with what happens
0:18:40 in a company when things get bad
0:18:42 and people have to make decisions and how do they react.
0:18:44 And what they do in those days
0:18:47 determines what that company’s character is.
0:18:48 So when you think back to your career,
0:18:51 is there a moment that you remember
0:18:53 on a leadership challenge,
0:18:56 how you addressed it and what you learned from it?
0:18:57 There is a moment I think of,
0:18:59 and it’s actually part of that same story
0:19:00 that I told a little earlier.
0:19:04 I was away from the office on a Friday in February
0:19:06 of our first quarter as a public company.
0:19:10 And I was with my aunt and uncle who had come to town
0:19:11 from the East Coast and my wife,
0:19:13 and we were up in Point Reyes.
0:19:14 And it’s very beautiful.
0:19:16 And we didn’t have email then.
0:19:18 So I’m calling in all the time to get my voicemail
0:19:19 and I get a voicemail that says,
0:19:24 “Sequing computers canceled their $350,000 order,”
0:19:26 which was a development order
0:19:28 that we had been working on for a year
0:19:30 and we were taking it to revenue in the current quarter
0:19:32 and it canceled it.
0:19:34 Our goal for that quarter was about $2.5 million.
0:19:37 So it was a big hit, it was a 15% hit to the quarter.
0:19:38 And you can’t make the quarter,
0:19:39 you gotta exceed the quarter.
0:19:41 We’re a little company at the time, and public.
0:19:42 So the rest of the day,
0:19:45 I kept calling in for more news and there wasn’t any.
0:19:46 I kept calling in to find,
0:19:47 this is maybe something good happened.
0:19:48 There was no good news.
0:19:49 And the rest of the day,
0:19:51 I’m walking around with a rock in my stomach
0:19:53 and my wife and my aunt and my uncle
0:19:55 are all talking to each other
0:19:57 and I’m living in a silent movie.
0:20:00 I have no idea what’s going on.
0:20:03 So they had the weekend and that wasn’t in the office.
0:20:05 And it gave me time to think about it in a way.
0:20:08 And I said, this is a leadership opportunity.
0:20:12 And I came into the office and the first thing I said was,
0:20:14 we deserve to get canceled.
0:20:15 This isn’t the executive staff name.
0:20:16 We deserve to get canceled.
0:20:18 We did a terrible job.
0:20:20 And we need to figure out what we did wrong
0:20:21 and how to make it right.
0:20:23 But I don’t want to do that right now
0:20:25 ’cause I don’t want to go fix the blame.
0:20:26 I want to actually do a post mortem.
0:20:27 Let’s do that in a month.
0:20:29 So we kind of took that off the table.
0:20:31 And then I said, we got a $350,000 holds.
0:20:32 Anybody have an idea?
0:20:34 And the room did look just like this.
0:20:36 Everybody’s looking at me and nobody has an idea.
0:20:39 And I said, I have an idea.
0:20:44 I said, my idea is we go ask Sequin for $100,000.
0:20:48 And everybody’s kind of like, huh?
0:20:49 I said, so three things.
0:20:52 I said, first, we give them a clean release,
0:20:54 which has value to them.
0:20:58 Second, we understand that there’s guilt on both sides
0:20:58 when something fails.
0:21:02 So we don’t necessarily do anything with that,
0:21:04 but we make sure that we understand
0:21:06 that there’s failure on both sides.
0:21:09 And I said, the last thing we do is we beg for mercy.
0:21:12 We go up there and we say, hey, we’re a brand new company.
0:21:13 It’s our first quarter.
0:21:15 Give us $100,000.
0:21:17 You remember when you were a young company,
0:21:18 it will save our life.
0:21:21 And we go get on our knees and we beg.
0:21:22 And there ain’t nothing wrong with that
0:21:23 when you’re in business
0:21:25 that’s doing the right thing for your company.
0:21:26 And then we did the Peter thing
0:21:28 and then we did the other things.
0:21:32 And it was a moment in time at eight o’clock in the morning
0:21:34 it was black.
0:21:36 There was no hope, it was all despair.
0:21:41 And we came through that and that team remembers that day
0:21:43 and was a better team and a more loyal team
0:21:45 instead of a tragedy for the company.
0:21:47 So that was a leadership moment for me.
0:21:49 – My question was a little bit in response
0:21:52 to both of the last discussion you all were having on loyalty,
0:21:53 but specifically on incentives
0:21:56 and incentives around sales organizations.
0:21:59 Specifically, how do you structure incentives
0:22:01 such that your sales organization
0:22:05 is optimally competing outside rather than inside
0:22:08 and making sure it’s not cannibalizing profits
0:22:09 that could have been had?
0:22:10 How do you think about incentives in general
0:22:13 to maximize the overall company gain?
0:22:17 – Sales incentives are usually kind of structured economically.
0:22:19 You make your goal, you get this much.
0:22:20 And once you pass that,
0:22:22 you get an accelerator and stuff like that.
0:22:24 And the question is, are they behaving right?
0:22:25 Okay.
0:22:28 And the reason that sales people don’t behave right
0:22:31 relative to their compensation plan,
0:22:34 it’s not the salesman, it’s the compensation plan.
0:22:36 What a company needs to do is find out
0:22:39 what they want the sales people to do
0:22:41 and then pay them for that.
0:22:44 And to do that in a way that is simple.
0:22:45 So I’ll give you an example.
0:22:47 I was on the board of a SaaS company
0:22:49 and we have all kinds of sales plans.
0:22:50 And finally, one day I said,
0:22:53 “Look, the most important thing that we measure ourselves
0:22:55 “and the world measures on is ARR,
0:22:56 “the annual recurring revenue,”
0:22:58 or MRR monthly recurring revenue.
0:23:01 I said, “Why don’t we just pay for that?
0:23:03 “Why don’t we give each person a territory?”
0:23:06 And it said, “On the exit date last year,
0:23:10 “the ARR from this territory is $1.7 million.
0:23:13 “Your job is to get to $2.7 million.
0:23:16 “If you lose something along the way, it’s on you.
0:23:17 “Go figure it out.”
0:23:20 And you pay very simply
0:23:22 on the thing that’s most important to the company.
0:23:24 So the problem that most companies have
0:23:26 is that they don’t know what’s important to them.
0:23:27 And then the second problem that most companies have
0:23:30 is that everybody, particularly as a company gets larger,
0:23:32 everybody has a hobby horse that they wanted,
0:23:34 salespeople that they wanted to do this,
0:23:36 they wanted to sell this new product they wanted to do.
0:23:39 It’s incumbent upon the people who are in charge
0:23:41 to have clarity of thinking
0:23:43 and to express that in the compensation plan.
0:23:45 I think a compensation plan should be
0:23:46 on a three by five card.
0:23:48 This is what your base is, this is how much you’re getting.
0:23:51 These are the kind of notches as you go up the thing.
0:23:54 And here’s what we’re paying you for, go to work.
0:23:57 I had a very interesting little side story.
0:23:59 Sun Microsystems was a very big company
0:24:01 with a very big sales force.
0:24:03 And every year they had a new compensation plan.
0:24:04 And every year they worried about like,
0:24:08 “Ugh, what are the holes in it that we can’t see?
0:24:11 And what are the unintended consequences?”
0:24:14 So they got their five top salesmen in the world
0:24:16 and they brought them into the home office.
0:24:20 And they say the guy who breaks the compensation plan
0:24:23 most significantly gets a gold Rolex.
0:24:25 (laughs)
0:24:28 It worked, they found out all the holes in the plan, it’s good.
0:24:31 – So in the past, you’ve talked about the idea
0:24:34 that being the CEO or founder is not necessarily glamorous
0:24:37 and they used to like have to wake up at 2.30 in the morning
0:24:40 to go to do your like media call for the East Coast
0:24:41 and all that.
0:24:44 But when you’re fighting for sales talent specifically,
0:24:46 you kind of need to show up a little bit of the glamorous side.
0:24:50 How did you navigate those two of kind of showing that
0:24:52 this might not be the most glamorous thing,
0:24:53 but sales talent are kind of looking
0:24:55 to be a little glamorous at times?
0:24:58 – Sales people love to get sold too.
0:25:01 (laughs)
0:25:05 So I actually understand success in sales
0:25:07 having been through the whole thing myself.
0:25:08 It’s a very simple thing.
0:25:12 The most successful people go to work for a company
0:25:14 whose product people want to buy.
0:25:19 The second thing they do is they get a great territory.
0:25:24 The third thing they do is walk around
0:25:25 kind of talking about how bad things are
0:25:28 so that they get a great quota.
0:25:30 And then the rest of what they do
0:25:32 is the things they do every day,
0:25:35 which if you’ve done the first three, it’s a layup.
0:25:36 You just do it, right?
0:25:38 It’s just, you just roll it up and you do it.
0:25:41 So sales people want to feel like you got a hot product
0:25:42 in a hot market.
0:25:44 They want to feel like they’re gonna make a lot of money.
0:25:47 They want to feel like they can hit the million dollar mark.
0:25:50 One of the things as sales forces
0:25:51 kind of get a little bigger.
0:25:54 One of the things you think about is
0:25:57 what percentage of the people do we expect to make goals?
0:26:01 So the company knows what the productivity is
0:26:02 and they know what the mean and the median
0:26:03 and they know all this.
0:26:05 It’s my belief that you want to have a company
0:26:08 where 75% of the people get to 100%.
0:26:10 Then you have a reputation that this is a company
0:26:12 where people make money.
0:26:13 A lot of people say, well, let’s have,
0:26:15 let’s get ready to stretch goals.
0:26:17 You already stretch goals, everybody walks away,
0:26:19 only 30% of the people make it.
0:26:21 And then you got a downer, right?
0:26:24 You build a culture of success by managing
0:26:26 these things, you manage the environment.
0:26:29 Certainly when you start in the very beginning,
0:26:31 I have a belief that you look for,
0:26:34 there’s most sales people are what we call coin operated.
0:26:37 You hire them, you give them all the materials
0:26:39 and the territory and all this other stuff
0:26:40 and then they send you orders.
0:26:42 The more they send you, the more you pay them.
0:26:44 And I consider that to be the infantry
0:26:46 to translate it to you guys.
0:26:49 You do it with process and procedure
0:26:51 and rules and regulations and stuff like that.
0:26:53 But when you’re just starting out,
0:26:55 you want Delta Force.
0:26:59 You want resourceful people who have minimal resources
0:27:00 and can react in a way
0:27:02 and can pull other people in the company
0:27:04 and can do amazing things that you can’t,
0:27:06 that you don’t, you know,
0:27:09 a big sales force is a sales factory
0:27:12 like the infantry is a fighting factory, right?
0:27:14 But little sales force is really
0:27:16 a bunch of very, very special and unique people.
0:27:18 – Okay, with that, thanks Mark.
0:27:18 – Okay, great.
0:27:22 (audience applauding)