I remember how silly the board looked that day. Reviewing the slide with performance by salesrep, an alpha board member impatiently shouted the seemingly obvious conclusion: “Look, only one rep — Joe Schmedley — is performing. Everyone else is struggling. The solution to our problem is quite simple: we need more Schmedleys.”
I had to kick about three executives under the table to prevent them from bursting into uproarious laughter. The last thing we needed, the team knew, was more Schmedleys.
Joe Schmedley wasn’t a bad guy. A competent, if somewhat bumbling, enterprise rep. Affable. Could talk about local sports teams. Not a bad guy to have a beer with. Not a particularly good guy at driving paperwork through procurement. Average to a skooch above in most respects. The last thing we needed to do was define our hiring profile by his background and tell a recruiter to go find ten more of them.
So what was driving this false signal in the data? The numbers don’t lie, right? And by the numbers, Schmedley was crushing it. Consistently our top rep.
What’s going on here?
What if I told you:
- Schmedley was hired to manage the company’s largest account.
- That account was originally sold by the founders.
- That account was effectively managed by the execs, specifically, the CRO, CTO and VP of professional services
- That account was quite successful with our technology and expanding their use of it every year
- Schmedley had little to no success outside that major account
Like some successful salesreps, Schmedley had found himself in the right place at the right time. We knew it. Heck, he wasn’t arrogant, I think he knew it. The only people who didn’t know it were the board, who was actively telling us to hire ten more Schmedleys, making him the archetype for all future sales hires.
The problem was, of course, that the big customer was effectively a “house account,” and Schmedley merely a steward. We were in the midst of the transition from founder-led sales to sales-led sales and the board was confusing the account’s success with Schmedley’s.
What can you do to avoid this problem?
- Don’t hire affable stewards. No early-stage startup should. If you somehow convince yourself that all you want is an account manager, then hire a CSM or TAM. Not an salesrep.
- Hire smart, aggressive salespeople who want to learn about success in order to replicate it. They shouldn’t be there to milk the house account. They should be there to learn deeply about it, so they can find ten more.
- Don’t use a highly leveraged compensation plan. If you’re just running a house account, there is a serious question as to whether you should earn typical enterprise sales compensation — e.g., $300K on-target earnings (OTE). Personally, I’d take the $150K variable, put $50K on OKRs for managing the house account, and the remaining $100K on a leveraged new business plan.
- Be consistent. You can’t tell the board in the morning that Schmedley’s success proves the industrialization of our sales model and then, three hours later, say that he’s just a steward. Most CEOs and CROs walk themselves into this problem by trying to have it both ways. Pick one.
- Get ahead of the problem with metrics. Don’t make slides that lead the board to the incorrect conclusion. Pull out the house account from analytics. Split Schmedley’s new business performance from his house account performance. While we all made fun of the board for saying, “we need more Schmedleys,” we did create the slides that lead them to that conclusion.