Lessons in Creating a Culture of Meritocracy to Build Sales Leadership
11 min read
Earlier this year, Cisco announced its surprise acquisition of application intelligence company AppDynamics* just before the company was set to go public. But what’s less well-known is how the company built out such an effective enterprise sales force, which led directly to record-breaking revenue growth. It’s one reason, I believe, the company was such an attractive acquisition target.
My team and I had a chance to catch up recently with Dali Rajic and Chad Peets, two key executives who helped build the go-to-market machine at AppDynamics. Dali became the company’s chief revenue officer in 2016 after starting as the VP of West Coast sales. Chad, the CEO of sales-focused search firm Peets & Associates, worked closely with Dali and his team to help enable the rapid headcount growth of AppDynamics’ sales force. Their lessons on whom to hire, how to hire, and how to organize and incentivize a growing sales team is instructive for any enterprise software company looking to hit massive scale.
This is the second part of our interview, focused on sales leadership.
Let’s talk about frontline managers. How do you think about hiring from within versus outside?
Dali:
My philosophy is to create a meritocracy where people understand they can thrive within the company. They can build their career, and grow intellectually, professionally, and financially. When you build that culture, people go above and beyond their day-to-day jobs. Because the challenge of building and creating something new is so rewarding people become incentivized to execute above their scope of responsibility and to do things outside their role at a high level. So, I believe in developing management tracks that prioritize growth and development from within.
Many people make a mistake and say, “this rep performs at a high level so of course they’ll be a phenomenal manager.” The challenge with that is the rep might be self-centered in action and thought, and only care about driving a number for their personal gain. That is a strong quality for an individual contributor but not a manager who needs to lead, develop and mentor others.
When you promote from within, you need insight into their managerial AND their leadership abilities. To do that, you need to build a development program that helps individual contributors demonstrate and grow their leadership skills before they become a manager. We do that by assigning mentoring roles for the reps who are interested in management tracks. Then we define development milestones focused on recruiting, retention, and driving results through others. We invest a lot of time building up our next group of leaders, and work with them so they’re eager to and have the patience to develop others.
However, if you’re growing fast and scaling, you will eventually hit a natural inflection point where you need to bring in talent from outside the company. It comes at a different time for everyone, but if it’s not managed properly it could derail the company. For some companies this happens when they run out of internal people to promote. For others, it’s when they deplete the ranks of productive reps and lose capacity. Regardless of when or how it happens, it’s a critical, sales-org defining decision.
What should you look for when hiring managers from the outside?
Dali:
When bringing in experienced, well-seasoned sales talent from the outside, I think most hiring managers make the mistake of only looking at overall performance at the expense of culture and process fit. For example, if you are hiring somebody who has sold primarily within a big company, or managed in a big company, their muscle memory is very different than the needs of a small company.
In my career, I have found that the most high-impact sales leaders share similar traits, which oddly enough are not perceived as traditional sales rep characteristics. Number one, they must have followed a scientific sales process somewhere in the past. Number two, they must have had some exposure to a structured qualification methodology. Third, they must have entrepreneurial interests because they essentially become a GM of a business unit. They have experienced the challenges of building something from the ground up outside of a big company safety net. They also understand that pain is natural so they don’t let it stop them from moving forward. In fact, they lean into it. You simply cannot compromise on culture, coachability, character or IQ — these serve as the foundation upon which everything else is built. If you hire people with the right foundation it should feel like you’ve promoted from within because they have the same values that serve as the foundation of your organization.
Chad:
One of the things I’ve always focused on is that you have to find managers who want to be hands on in front of customers and with their reps. Some people are not accustomed to rolling their sleeves up and getting involved in the business. You have to find people who at times are almost going to act like super reps, and there are a lot of managers out there who don’t want to do that. That was always a key criteria for me.
Dali:
Finding the right people at the right stage of your growth is not easy. Chad helped me filter through this process. With his help and by developing a sales organization that prioritizes growth and development from within, we were able to maintain our velocity and quality standards in a period of sustained high growth.
Should external hires have frontline management experience before you bring them in? Or is it OK if they do not have that experience, but they’re a great rep?
Dali:
I would not hire someone who was a good rep somewhere else to become a leader here because it undermines the entire meritocracy culture we live by. If we’re bringing someone in from outside the company, they have to have leadership experience. In fact, we have had individuals with second- and third-line experience and asked them to step back one or two levels. We asked them to rebuild the same sized businesses that they’d left behind, while offering them the opportunity to speed up their career velocity over the next 5 years.
How do you make that pitch to a second-line manager?
Dali:
First, you have to be specific with the type of people you’re looking for. We look for people who are passionate about creating and building something new. We want people who are laser-focused on driving impact and creating something, and not primarily interested in the title on their business card. Once we’ve found the right person the rest becomes much easier. If a salesperson is interested in building something net-new we empower them to create their own company as the GM of their business. We give them the framework, culture, tools, processes and formulas for success and empower them to create the legacy they want. How do you say no to that?
Chad:
You tell them to focus on opportunity and not the title, and at that point you also want to sell the company. Look at what we’re doing. Look at the market we’re disrupting. Look at how quickly we’re growing. Near-term, maybe you’re taking a step back, but look where you’re going to be 18 months from now and look at what you’re going to be a part of.
Being process-oriented and being entrepreneurial often don’t go hand in hand. A lot of entrepreneurial people aren’t very good at process, and the process people may be looking to execute the playbook, but not come up with a playbook. How do you think about that?
Dali:
If you’re looking at it from a sales and operational standpoint, you would be amazed at how many “process people” can succeed being entrepreneurial within a framework. We don’t refer to it as process, but a path to success with specific steps and a sequence of actions. You allow them to execute against it based on their own creativity, skill set, and how they want to build it out. There is an individual component while de-risking the journey and improving the probability of success.
There’s absolutely a bit of a conflict between the two. But when you combine them synergistically, you have growth and attract top performers who know that a little bit of both can supersize their outcomes.
Chad:
That is where the intellect comes in. Another way to say it is that you’re not giving them the process, you’re giving them the tools. The smart ones figure out how to use the tools and not think about it as burdensome, but a way to get to success.
How do you hire a VP of sales and put the right senior leadership in place?
Dali:
That is the number-one question and anyone who creates a company or wants to turn one around should ask themselves: how do you hire a great VP of sales?
Chad:
The single greatest mistake I will see a CEO make is looking for a big resume. If you have a company doing $10 million in annual revenue today, and you have a field sales organization with 10 people in it, many people will look at a person’s resume and say “well, gee, they are managing a $250 million business today and have 300 people beneath them. That’s really where we want to get to three or four years from now, so we need to be talking to that individual.” To me, that’s a mistake. It’s great that’s where the company wants to be. Undoubtedly, if and when they get there, that person could be a great VP of sales for them. But you have to hire for the job that you have today, and today you’re a $10 million company with 10 reps. You need somebody that is going to roll their sleeves up, get involved, understands how to implement process and methodology, and somebody that’s still comfortable getting in front of customers.
So, you hire a VP of sales for the next 24 months, and hope that after that time period, that person can scale beyond that. I think I did 14 CRO searches last year, and that’s where we’ll begin. We need to focus on the next 24 months and finding somebody that can excel in that position for that time. And if he or she goes beyond that, wonderful, but don’t hire somebody that you think is going to be your VP of sales for where you think the company will be in 5 years.
The problem with those individuals is that the first thing they will look to do is hire somebody beneath them to do the job you’re hiring them to do.
How transparent are you with the candidates that someone will likely come in over them once you hit another level of scale?
Chad:
You’re up front about the possibility of it, and maintain a continuous feedback loop throughout a leader’s career evolution. You tell them “We’re hoping you’re the person who can get us from $0 to 50 million in annual recurring revenue (ARR). That’s the plan. But understand there is a possibility that when we get to $25 million in ARR, we may bring someone in on top of you. That doesn’t mean we’re going to take you out, or your growth stalls. Right now you’re the VP of sales.” By the way, that’s always the title I suggest. Go with VP of sales, not “North America” or “Worldwide,” not “CRO” because you can take a “VP of sales” and scale it up or down. So, you say you’re the VP of sales today, and understand that in two years if this is really successful and we feel like we need somebody that has a little bit more scale and scope to help us all, it’s possible we bring in a CRO on top of you and make you a VP of North American sales. That’s not our plan, but you should know that’s a possibility. When you build a true culture of team and collaboration, people welcome top-notch players being brought in so everybody can learn from each other, and we can grow together.
Do you lose a lot of quality candidates at that point?
Dali:
We haven’t yet, as they know another opportunity will open up and it was a fair competition for the role. But it is critical that you be transparent throughout the process. We hire people who are highly entrepreneurial who love competing and are betting on their success. And with success comes some bumps and bruises along the way. They key is attracting, recruiting and retaining the right high-character individuals who have the fortitude to self asses if they miss a goal and will come back even stronger.
Chad:
All they are thinking is “don’t worry, they’re not going to need to bring that person in. I’m going to take this thing to 100.”
Dali:
Again, a meritocracy culture is key. If you build it right, even if somebody does not get a promotion, reach a certain goal or someone gets hired above them, they will understand why you did it. Everyone will continue working hard and continue building for the business. There can never be a surprise, because that is when doubts start creeping in. A meritocracy allows you to make changes without breaking the system. It’s very agile, because you can move and pivot and people don’t take it personally. Everyone understands it’s for the greater good of the business and will create more opportunities for individuals down the line.