A Recovering Economy? A Sales Recruiter Sees an Increase in Hiring

Are you moving from a “flat is the new up” mentality to a more optimistic outlook for sales in 2009? Have you used the down economy as an incentive to shift sales strategies and reduce cost of sales?  How has this affected the all-important “people” side of your sales organization: candidate profiles, hiring, and compensation? These are critical elements in new sales organizations, when sales reps are making first impressions and testing assumptions, positioning and messaging with your customers. Even in established companies, it is not enough to define job descriptions, ideal candidate profiles, and comp plans once; it’s a good idea to revisit them when market conditions, customer preferences, and company goals shift.

I spoke to David Sterenfeld at Corporate Dynamix this week to discuss these topics as well as get his general thoughts on Sales 2.0. David and I first “met” when I was a new sales manager at Oracle, building the fastest growing sales organization in the company in the mid-1980’s and he was a Southern-California-based recruiter.  Hiring managers in the know told me that David was the guy who could help me build an organization of Oracle-worthy superstars. As I was in the San Francisco Bay Area and David was then in Marina del Rey, our meeting was virtual – which was less common then than it is now, but appropriate given my sales division was selling by telephone. I chose to work with David at a time when my job depended on fast growth.

Several years ago, David followed his dream of relocating to a golf Mecca and re-established himself in Scottsdale, AZ. He remains the “go-to guy” for many a sales manager in Silicon Valley and all over the western United Sates, further proving that strong business relationships don’t require meeting face-to-face. Over the years, I’ve called David many times to get his perspective on the job market and trends in hiring and compensation. This time, I asked him what he saw coming in the second half of 2009.

Anneke:  I’m hearing reports from some clients and partners that the economy is starting to recover. Are you seeing this reflected in an uptick in hiring?

David:  Yes I am.  I saw this beginning the first week back after the July 4th holiday.

Anneke:  That’s great news! Do you think this is a harbinger of more good things to come?

David:  Yes. Because I believe hiring is a lagging indicator. What I’m observing in my clients is a more positive view toward their ability to achieve their numbers. And they’re much more forward thinking and looking at revenue instead of backward-thinking, looking at expenses. That’s translated slowly into additional job openings.

Anneke:  How has the economic downturn affected hiring profiles and compensation?

David:  Most of the openings in the first six months of this year and through July have been replacement hires. Very few companies are in expansion mode. These companies have used the downturn as a reason to cut expenses and in some circumstances clean out the bottom 20% of sales people. After layoffs in Q1, most companies did not hire back in Q2, but they are starting to do so in Q3. However, they are requiring that candidate profiles be very close to an exact fit to their specifications. They are being very stringent about the criteria. For example, if managers have five hiring qualifications, candidates need to have four out of those five. If they do find the right person, though, they now have budgets to hire back.

Anneke:  What about compensation? Has the economy had any impact on sales rep earnings?

David:  I haven’t seen compensation affected at all. Sales people’s base salaries have stayed consistent for the most part, but as always, most of the compensation is made up on the back end as commission. There aren’t that many variables to change around. However, in some cases, quotas may have been adjusted downward to make the on-target number a little more realistic because of the downturn.

Anneke:  What about sales organizations? Do you see more inside sales groups starting up? Are field sales teams shrinking?

David:  Field sales teams are shrinking, but not necessarily because of the economy. I see field sales organizations declining because of other factors including Sales 2.0 methodology, and more products being sold to the SMB market, in a hosted environment. When the cost of a product is lower, companies can’t afford to have a large field sales team and they try to do as much selling as possible by phone and Web with a lower cost sales organization.

Anneke:  In my interview with you for my book, you indicated that you were seeing a rise in the hiring of multi-talented hybrid reps (inside sales reps who can visit customers when appropriate or necessary). Is this still the case?

David:  Yes. In fact it becomes more and more the case as the larger enterprise companies look to build their own hosted or online solutions. Startups selling Software-as-a-Service (SaaS) have already embraced the hybrid or “inside/outside” delivery approach.

Anneke:  Are you seeing any other emerging trends?

David:  I’m seeing a different trend following this recession compared to the downturns following 9/11 and dot com crash. Unlike in the past, companies have continued to spend money on lead generation specialists. In 2002, businesses stopped hiring lead generation or sales development reps during tough times because they thought of these positions as an expense rather than a revenue producer. Instead of hiring pipeline-filling professionals, they hired more experienced, senior field sales people who unfortunately didn’t do a good job at prospecting. In this downturn, I have not seen that happen. Most sales managers now understand the importance of sales development in the sales cycle.

Anneke:  You recruit all over the western United States, mostly for technology companies. Where geographically do you see the best availability of sales talent? And where do the most cost-effective candidates reside?

David:  The San Francisco Bay Area, which is 75% of my focus, has the best availability of talent both in terms of people aggressively and passively looking because of all of the technology companies located there. A number of my clients are moving their inside sales organizations from Northern CA to lower cost of living locations in CO, NM and AR. But I don’t know how successful they are going to be because the talent pool is limited in those locations and it’s very difficult to recruit there. It certainly will be less costly and salaries and commissions will be lower, but the sales results are unknown. I wonder if being removed from corporate headquarters and the visibility of a VP Sales will affect their effectiveness and efficiency.

Anneke:  What are your biggest challenges in attracting the best candidates for your clients?

David:  My biggest challenge is addressing the fear factor that candidates have of being the last person in and first person let go in a shaky economic climate.

Anneke:  What advice do you give your clients for how to best work with recruiters?

David:  Most managers in this economy tend to very fearful for their own jobs and favor hiring reps who can come up to speed fastest to ensure their own personal safety. I would advise them to hire the best available sales athlete they can, because this will serve them better over the course of a year than worrying about who’s going to hit the ground running in the first 90 days.

Anneke:  What do you think of the emerging Sales 2.0 trend? Is it generally recognized by your clients? Is it here to stay?

David:  Sales 2.0 is recognized by my clients – both the venture-backed start-ups as well as the established companies – and it is definitely here to stay, largely because customers have embraced a new way of researching information, interacting with sales people, and buying. I believe that as old line, legacy organizations take a look at their ability to sell downstream, they will have to change the way they sell. It will be customer-driven.

Anneke:  Do you personally practice Sales 2.0? In what way?

David:  I have been a virtual headhunter for 20 years. Most hiring managers are happy that they don’t have to spend the time to meet me and we can accomplish our work together via the phone and e-mail.

Anneke:  What works better for you– the phone or e-mail?

David:  The phone enables me to ask more pointed questions and gather additional referrals. But e-mail has become a huge tool for me to work 24 by 7 and communicate any time of day or night. Also, my client base is fond of BlackBerries and laptops and is used to working long hours answering e-mail.

Anneke:  Sounds like selling in the way the customers want to buy, a key tenet of Sales 2.0!

David:  Exactly.

Anneke:  Is there anything else you have to share with the Sales 2.0 community?

David:  As more and more companies jump on the Sales 2.0 bandwagon, more and more sales people will be organically grown and there will be a new generation of sales people who will be ideal hires over the next 5 years. Today in many cases we’re trying to put square pegs into round holes, as company sales models change.

Are you hiring sales staff in the second half of 2009? How have you aligned your hiring profiles, recruiting processes and compensation plans with your Sales 2.0 practices?

Tags: compensation, hiring, incentives, SaaS, Sales 2.0

Lead Scoring 2.0: Measuring Prospect Behavior

Last month, I spoke to a group of Silicon Valley Chief Sales Officers about Sales 2.0.  After my presentation, I invited the attendees to share some of their approaches to reinventing the way they are selling, given changes in customer preferences, the market and economy.  Bill Binch, VP of Sales and Customer Success at Marketo, had a lot to offer.  He is the first to admit that some of his practices are non-traditional, or in his words “edgy”, perhaps the ultimate of compliments to members of Generation Y.  I asked him these questions:

Anneke: For context, tell us a little about your sales organization and how it is structured. Who do you sell to, what is your average sales price and average sales cycle, etc?
Bill:  We use several Sales 2.0 concepts at Marketo. We’ve expanded the standard sales cycle into what we call the “Revenue Cycle,” which means we measure the combined sales AND marketing cycles to learn how our customers want to buy. By measuring from their first interaction, we understand how our prospects behave and how they want to be sold to, and deliver them timely, content-specific information based on their interests and activities.  The result is that marketing provides the sales team with a nurtured, sales-ready leads, complete with their demographics, activities, and behaviors.  Which is really what Marketo as a company is about – we help companies convert, nurture, and prioritize their leads, resulting in better alignment between sales and marketing and higher revenues. So we currently have Enterprise (field) reps who call on accounts with revenue greater than $500 million as well as Territory (inside) reps who are geographically organized that sell to the VP of Marketing and VP of Sales.   Our typical Revenue Cycle runs about 100 days from identification to close with an annual subscription price of $40,000.

Anneke: You mention lead nurturing several times, which is a key concept in a Sales 2.0, marketing and sales aligned company in which measurement, tracking, and accountability are part of the sales culture.   How do you distinguish between leads that your tele-qualification team calls and leads you simply nurture using Marketo.  In other words, how do you determine who gets a follow-up call and when?

Bill: All leads are nurtured in Marketo, prior receiving a call from a tele-qualifcation rep.  Leads are ranked by a score, according to best practices which are published on our web site, and once they reach a certain score, they go to tele-qualificiation for follow up.  If tele-qualification determines a prospect to be “sales -ready,” that prospect is referred to sales. If  prospects are not “sales-ready”, they are put into a new nurture program based on their needs and purchase timeframe.

Anneke:  Tell me more about your innovative approach to scoring marketing-generated sales opportunities according to how likely prospects are to buy.
Bill: The 2.0 process requires the marketing team to provide greater detail and insight for their sales team — what influenced and drove the lead to your site, did they look at your pricing page, your videos, download whitepapers?  Who is your prospect, what company are they from, what size company, what industry, what is their title and role?  What assets are influencing the prospect to select your product and what is their propensity to buy?  By having a closed loop process, we can measure what is influencing our customers, what programs are helping reinforce our message, and what does a typical buyer profile look like.  We can then adjust our messaging and marketing spend to focus on the best sources and processes for gaining new customers.

Anneke: How does this lead scoring system compare to traditional approaches to prioritizing opportunities?
Bill: The 1.0 process was to qualify leads as A, B, or C leads, or at best case a static numeric basis.  In the 2.0 world,  sales reps need to understand the demographics, behaviors, and activities of their prospect.  They need to understand their urgency level.   These can be delivered as individual scores that move up or down dynamically — if a prospect is very active, their urgency is greater and and the sales rep should be alerted to react.  It is the combination of activity level -which shows readiness to engage – and demographic fit that determines the best qualified leads.

Anneke: What is the difference in the results you’ve seen since implementing the new approach?
Bill: The big result is in productivity – our sales team sells.  Instead of burning time researching, prospecting, and back office work, they are focused on engaging with qualified leads that want to speak with them.  By using Marketo and our tele-qualification team, we are able to keep the sales team highly utilized and the majority of their time is customer facing.  The “Revenue Cycle” process has yielded us over 200 customers since launching the product in March 2008.
Anneke: What are some of your biggest selling challenges today and how are you addressing them?
Bill: In the mid 90’s, many companies didn’t have CRM (Customer Relationship Management applications) and didn’t think they had a need, yet today it’s hard to imagine any company not using CRM to run their sales business.  The marketing side is similar – it’s been under-served and not optimized as well as it could be.  So our challenge is redefining how sales AND marketing can work more closely together to have a greater impact on revenues.   SaaS (Software as a Service) has been an enabling paradigm to get software into the marketer’s hands, but similar to what Siebel Systems (now Oracle) and salesforce.com experienced, we need more than technology.  We need to educate customers on new best practices and strategies to help solve today’s sales and marketing challenges.  So we’ve focused on hiring people with that DNA in their background, and that skill has really helped fuel our growth.

Anneke: Are you implementing or testing Sales 2.0 strategies, practices, or technologies in addition to your own product?
Bill: Yes, there are many great technologies out there that are helping us.  We use Zuora for integrated order configuration, order entry, and billing, which is critical in a subscription business.  Echosign is an electronic signature tool integrated to salesforce.com, which speeds up the contract process and reduces redlines and legal changes.  And we use Jigsaw and Tippit for research and industry expertise.
Anneke: And what are the results?
Bill: I think the biggest result is the adoption of the Marketo platform by our customers.  There had been several offerings in this category, but in 3 years we’ve gone from start-up to the 2nd largest player in our space.  Our technology, combined with usability, domain knowledge, and execution has put us on the trajectory to be the leader in the next 18 months.   Customers have been wanting a product that is usable today but also offered the sophistication and growth path for the future, and we’re uniquely positioned to provide that solution.
Anneke: Your web site describes Marketo as “marketing automation that helps B2B marketing and sales drive revenue and improve accountability”.  Can you give me some examples of results your customers are seeing?
Bill: A recent example is a manufacturer who within 30 days of starting with us, launched a campaign that yielded 500% improvement of their click through rates.  A 5X improvement is going to fill the funnel with more opportunities, which will lead to more at-bats for their sales reps.  And that’s just the first 30 days!  We have another customer, Plexus Systems who saw pretty tremendous results, which they documented on their VP of Marketing’s blog. Their results include better understanding of their buyer, better sales productivity and prioritization, and of course more leads, more deals, more revenue.

What lead scoring system do you use?  How has it helped your sales productivity and results?

Tags: CRM, EchoSign, Jigsaw, lead scoring, marketing, marketing automation, Marketo, Oracle, revenue cycle, SaaS, Sales 2.0, salesforce.com, Tippit, Zuora

The Emergence of the Hybrid (Telesales/Field) Sales Rep

In Sales 2.0, the lines are blurring between traditional telesales and field sales jobs.  Inflexible rules about what constitutes a telesales or field sales opportunity are no longer working for companies or their customers. Some companies are experimenting with their sales models, allowing sales reps that are primarily inside reps the flexibility to leave their phones and computers when customers require and warrant a face-to-face visit.
I talked to veteran sales executive, Bill Lohr, to learn about his recent successful implementation of a hybrid inside/field sales model in his last position heading sales for the global leader in on demand Web Content Management (WCM). Bill refers to the new model as the “tweener” model: in between an inside sales model and a field sales model.
AS: What do you call this new kind of inside sales rep?
BL: Given my background in professional services, I gave them the title “Client Executive”.  I think of Software-as-a-Service companies as services businesses, not software businesses. Software is the tool by which to deliver services to customers. Yes there is software involved, but the things that really matter are creating value and trusted relationships.
AS: What made you decide to employ an inside/field sales hybrid model and how do you implement it?
BL: The majority – if not all –of the sales cycle at my last company was conducted over the phone.  However, some customers needed a face-to-face visit if the first year revenue amount was very large, the customer was strategic, or the deal was complex. In general, inside sales reps could make field visits if an annual order size exceeded $500,000. One example is a major newspaper for which we went onsite twice in order to close the deal.  For our first visit, they had 25 people in the room. We were able to establish relationships with key decision makers, who championed our solution internally and allowed us to sell into other departments.
AS: What percentage of your customers required face-to-face visits?
BL: For Enterprise Accounts, probably 50%.  But other than the final closing steps, the rest of the sales cycle could still be done by phone and online.  The fact that the company has no field offices encouraged us to minimize travel.    We even closed accounts in Australia and Holland without ever meeting the client.  You can do a lot with the phone and online tools such as web collaboration products.
AS: How is your sales team structured and what are the responsibilities of each team member?
BL: Given the monthly recurring revenue model, the customer’s need for a consultative sales approach, and the company’s many different kinds of buyers, I needed flexibility. Inside sales reps in most companies don’t have the ability to leave their desks and that didn’t make sense to me. I think of the Client Executives as expert “set up” people while my role as SVP of sales was to help close sales and play a first line mentor and coach role.  I would go to all face-to-face customer meetings with my reps and provide support and education.
AS: Contrast your sales productivity before and after you implemented the new sales model.
BL: When I started, it took only 18 days to qualify an opportunity and 56 days to close. By designing a more sophisticated sales process and implementing the hybrid model, it now takes 26 days to qualify but only 42 days to close.  I lengthened the lead qualification process but ultimately shortened the sales cycle.  The monthly revenues increased exponentially as well because we were doing a better job qualifying prospects out of the funnel early in the sales cycle.
AS: What is the profile for your new hybrid sales rep?
BL: Someone who has experience in telesales (on quota sales) positions, is confident on the phone, and is able to engage customers in phone and web meetings and conduct web demos and presentations.  Our reps also need to be able to navigate an organization by phone, have meaningful conversations with all levels of buyers, and coordinate these buyers– often up to 15 or 20 –within a company.  Ideally, candidates have been in the top echelon of inside sales at a company like salesforce.com and their next step is a field sales position.
AS: What is their quota and target compensation?
BL: Quota is based on one month of the monthly recurring revenue (MRR) for a one-year deal and goes up for a two-year agreement, e.g. a deal that is $20,000/month for one year would get quota credit and the rep would be paid on $20,000.  The MRR can justify this model. Target comp is over $150,000/year at quota.

(Note: For more information on best practices in inside sales quota assignment and compensation, have a look at the annual inside sales compensation survey report conducted by Phone Works.)
AS: Would you hire someone who came from field sales?
BL: I’m not sure I would.  I don’t think they’d fit the mold I need.
AS: How did you organize sales territories? Do the reps close new business as well as work with existing customers?
BL: Sales territories are structured by industry, not geography, since we target named accounts in specific vertical markets.  The client executives just close new business. I have a separate team – Customer Success – that is responsible for customer adoption, upselling, and renewals. The reps on this team are called client managers.  Their job is to do the right thing for the customer; they are not on quota (although thy get paid on the deals they find). Once a sale is made, the customer is immediately handed off from the client executive to the client manager.
AS: Did you have technical sales engineers supporting the reps?
BL: No, but we used technical resources on the client services team to assist the sales team.
AS: What metrics did you track?
BL: My sales organizations are very metrics-driven. I tracked call volumes, activities, sales stages, time in stages, pipeline flow, weekly changes and more.
AS: What sales tools and technologies did you use?
BL: Among others, we used salesforce.com, Jigsaw, Hoovers, GoToMeeting, LinkedIn, Eloqua, and EchoSign.
AS: How did you choose those particular products?
BL: I had two reps that came from salesforce.com, who were familiar with a number of products that integrate with salesforce’s product.  I also attended the Sales 2.0 Conference last fall, which showcased new technologies.
AS: How did the Sales 2.0 technologies help you sell?
BL: Lots of ways.  Jigsaw and Hoovers helped alert us to who the players are in a given account.  LinkedIn got us to the right people faster and increases their response rate because an individual reaching out to another individual makes the outreach more personal. EchoSign accelerated the contracts cycle.
AS: How much cold calling did your team do?
BL: I didn’t want my sales team spending any more than 20% of its time cold calling.  It is too costly to use these resources for that purpose.  Instead, Marketing generated leads for us by running email marketing and other campaigns.  Also, we had sales development reps chartered with cold calling.  Telesales reps are responsible for targeted account selling into vertical industries including high tech, financial services, and media. Their calls are warmer because they are based on research and knowledge.
AS: What have your sales results been?
BL: When I started, we were producing $20,000/MRR.  Two and a half years later, with the same sales team, the productivity increased to $700,000/MRR.

What are your experiences with hybrid sales reps? How do you detemine what telesales sells and what the field sells?

Tags: Bill Lohr, EchoSign, Eloqua, field sales, GoToMeeting, Hoovers, hybrid sales model, inside sales, Jigsaw, LinkedIn, SaaS, Sales 2.0, Sales 2.0 Conference, sales metrics, sales tools, telesales