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Bruce Lee says your new VP Sales will Fail
By Angel Mehta, Managing Director, Sterling-Hoffman Management Consultants
I was treated with suspicion last year at an industry event in San Jose when a venture partner expressed surprise that our firm was in fact expanding - despite the economic slowdown. Every other search firm seemed to be downsizing, he said. His expression changed from one of surprise to recognition after glancing at my name tag, however.
“Sterling-Hoffman…You’re the guys that recruit sales executives for software companies?”
“That explains it. We fired every VP Sales in the portfolio last month.”
I did a double-take and pressed him for details; surely he was exaggerating, I thought. (We weren’t doing that well!) But he stood by his story, and asked for a business card – which I happily handed over.
When I relayed the details of this conversation to my associates, none of them seem surprised. All of their clients seemed to be holding their VP Sales directly accountable for failing to make their revenue numbers. It’s become almost cliché: with the CEO forced to admit to the board that the company will miss target next quarter, the immediate question is: what are you doing about it? After some preamble about the state of the market and certain ‘unforeseen circumstances’, out it comes…. “We might need a change in sales leadership.”
Of course, there are plenty of occasions on which a ‘change in sales leadership’ is required simply because the current sales leader is incompetent. But incompetence alone cannot account for the sheer volume at which VP Sales candidates are being turned over. What amazes me is just how many VP Sales candidates in enterprise software are able to offer positive references from the very CEO that ordered them out of the company in the first place. During the reference validation stage of a recent search, our team encountered just such a scenario. I pushed the CEO to explain – off the record - why he was willing to provide a ‘thumbs up’ when he himself had terminated the candidate only 3 months earlier. This particular CEO was refreshingly blunt: “Because he got screwed for being in the wrong place at the wrong time.”
So what’s behind the witch hunt?
The most common story heard around Sterling-Hoffman’s war room is that of the ever present disconnect between the product visionaries (aka techies) and VP Sales. The former believes that his or her team has created technology worthy of permanent placement in the Louvre, while the latter simply relays the message that “this isn’t what our customers want.” Of course, the truth is somewhere in between. Sales executives are often far too eager to modify their powerpoint presentations in order to coax money out of the CIO’s purse. Given free reign, business intelligence tools become perfect for supply chain automation and the answer to ‘Does it have X feature?’ is always an enthusiastic ‘yes.’ Similarly, technologists are often loathe to give up the fantasy that their creation is already the next killer app. (‘If only the stupid customer would use it THIS way…’).
A second explanation may be that board meetings that take place after a failed quarter have a tendency to be like murder trials: the first order of business is to assign blame. It’s usually not until after the task of assigning blame is complete that the really productive work of fixing the situation begins. Given that achieving revenue goals is literally written into the sales executive’s job description, they become easy targets. Especially for newly hired CEO’s under pressure to demonstrate to the board that some form of action is being taken to get the company back on track. In a moment of rare candor, one CEO confessed a shocking story: he had terminated his VP Sales purely to create an alibi against future missed revenue targets, which he viewed as inevitable given market conditions. The absence of (and resulting search for) a VP Sales would provide a distraction for the board and buy some time during which he hoped the market might turn around.
Whatever the cause, nobody disputes that the costs of a revolving door in sales leadership are profane. Any duration for which a company goes without having a competent executive to drive the sales process is too long (with one exception to be discussed in another article.) Further, each change of the guard at the VP Sales level is followed by inevitable turnover within the sales organization itself. When a new VP Sales is finally hired, a ramp up period of 2 – 6 months is customary; and of course, replacing the individual contributors that followed the incumbent sales leader out the door is an entirely new project that can take up to 3 months in and of itself. I could comment on the additional costs of retaining search firms to backfill the openings but out of loyalty to my own, I’ll stop there.
The goal of this article, then, is to offer some insight into how software companies can increase the chances that a new executive hire will actually succeed. It is simply not enough anymore to coach a CEO or entrepreneur to ‘hire the best people’. The phrase has been repeated so many times, in so many ‘how-to’ books and keynote speeches, that it almost sounds silly. This article is not for CEO’s that seriously believe they’ve managed to build a team of only A+ players. This article is not for venture partners that believe their portfolios are staffed with superstars. It is a fact that the vast majority of companies currently in existence are staffed with average management teams. Why? Because by definition, only 10% of executives can rank within the top 10% of their field or function. It follows then that 90% of the CEO’s and/or executives in any industry must automatically be less than exceptional. Business leaders that are open to accepting this logic should find some value in the following paragraphs, as I am convinced that executive turnover can be reduced a great deal by executing on a few basic strategies.
1) Take the ‘Jeet Kune Do’ approach to Executive Search.
Jeet Kune Do is a martial arts system that was originally created by Bruce Lee, based on the premise that each battle is unique and therefore calls for a customized approach. In other words, the ‘correct’ fighting strategy is a variable – not a constant. This principle is also embedded within Geoff Moore’s high tech strategy classic, “Inside the Tornado”, which states repeatedly that the correct strategy during one phase of the technology adoption life cycle is the wrong strategy during the next.
The corellation for venture investors seeking to hire a CEO, or for a CEO seeking to hire a new executive, should be obvious: the skills or temperament required to win at one stage of corporate development are completely different than the skills / temperament required to win at another. Further, the vast majority of executives do not morph accordingly; they have neither the patience nor the inclination to remake themselves every time their employer’s business model changes. Most executives prefer instead to join another company where the business needs more closely reflect their existing skillset. There is nothing wrong with this sort of mercenary approach. It provides our industry with optimized specialists. Executives come preconfigured, in a sense, for dealing with very specific types of business problems. I spoke with Tom Kippola, Managing Partner at the Chasm Group, recently and he summarized the point as follows: “An executive who enjoyed tremendous success in the tornado does not necessarily possess the skills required to succeed in a pre-chasm scenario.” This is why software companies that use personal income history to measure the success of a VP Sales candidate often make terrible hiring mistakes. Is a VP Sales candidate that achieved W2’s over $800k per year with Oracle in the late 90’s likely to be a star in an early stage emerging technology venture? Not likely.
The key is to identify the competencies required to succeed given market conditions and then evaluate executives accordingly. For example, if your company is competing on customer intimacy, I would suggest placing domain expertise (regarding the technology, vertical, or both) at the top of the list. If, however, operational efficiency is the name of the game, domain expertise becomes less important. (For further elaboration on optimizing operational models, see “The Discipline of Market Leaders” by Michael Treacy and Fred Wiersema.)
All this begs the question: what should a CEO do if he/she is not yet certain of the appropriate operating model? I wish the answer were as simple as ‘Don’t Hire’, but every company needs to start somewhere. If you are unclear as to the operating model, then you are by definition unclear as to the required competencies. Any hiring decision made under these circumstances is nothing more than a crapshoot. Assuming you manage to convince an executive to take the gamble, just be truthful about the fact that it is in fact an experiment – and be prepared to offer a reference if things don’t work out.
2) Think M&A: Hiring is like Acquiring.
Most experts agree that success in M&A has more to do with integration strategy (post-transaction) than with valuation on the front end. Similarly, whether a new executive succeeds or not will depend in part on the process used to integrate the new recruit into the existing team. Most investors and CEO’s focus the majority of their time on analyzing any given candidate’s skillset – and seem to lose interest after the offer has been signed. This is perhaps the single biggest mistake that search committees make. Why? Because every company has it’s own unique culture. Many executives have spoken to me about feeling as if they had to learn an entirely new language just to fit in. The key to successful integration lies in helping the new executive learn your company’s unique language as quickly as possible.
The best way to do this is for the CEO to proactively create opportunities for the new executive to learn about and bond with the other members of the management team. Over the first six weeks, we suggest that a new executive spends six hours with each member of the current management team. If there are six executive team members, this means that 36 hours of the new addition’s first six weeks will be dedicated to the integration effort. (If you’re thinking that this will be tough to sell to your management team, you’re right.) So for those readers already starting to cringe, you may wish to skip the rest of this section.
Here goes: 50% of the integration time your new executive spends with the other managers must be focused on personal bonding. For example, one of our clients created a ’20 questions’ orientation session that required each executive to share their life story with the new hire, and vice versa. It is particularly easy for left-brained executives to dismiss this exercise as too ‘touchy-feely’, but consider: One common characteristic of quality relationships is the extent to which both parties are comfortable being blunt with each other about their thoughts and feelings. This lack of pretense emerges because once two people have connected personally, their insecurities tend to be marginalized as neither feels the need to maintain a facade. The best CEO’s will readily admit that direct, blunt communication (one former client referred to it as ‘straight talk’) is a critical part of organizational success. It follows then that the best way to foster a ‘straight talk’ environment is to ensure that the relationships between members of your executive team are at least stronger than the relationships that each individual manager may have with his/her direct reports. (See Pat Lencioni’s ‘The Five Dysfunctions of a Team’ for simple yet brilliant elaboration on this concept).