I decided to run some posts on different areas of companies, and what I have found are the issues running them. These mostly apply to smaller companies, since in a large company, any senior position is basically running another level of management, and is just managing people. The VP Engineering in even a 100-person company doesn't really do much engineering, and in a 1000-person company does none. Since the Cadence salesforce is all at their kickoff in Arizona this week, it seemed a good place to start. Despite being a writer these days, I'm an engineer by background. But I have managed salesforces, too. If you get promoted to a senior-enough position—a regional manager, COO, CEO, etc—then you will end up doing this. Of course, if you are a salesperson yourself, this won’t cause you too much problem; instead, you’ll have problems when an engineering organization reports to you and appears to be populated with people from another planet. Managing a salesforce when you’ve not been a salesperson (or “carried a bag” as it is usually described) is hard when you first do it. This is because salespeople typically have really good interpersonal skills and are really good negotiators. You want them to be like that so that they can use those skills with customers. But when it comes to managing them, they’ll use those skills on you. Managing a Sales Team One thing I've heard about the difference between engineers and salespeople is that the salespeople are more emotional. My experience is the opposite. If you change a sales commission plan on Friday, then all the salespeople will be re-arranging their schedule for the following Monday. Cancel an engineering project, even if it is obvious to everyone that it is never going to be a profitable exercise, and the engineers will be moping around for weeks about having their baby killed. When I first had to manage a salesforce (and, to make things more complicated, this was a European salesforce with French, German, English, and Italians) I was given a good piece of advice by my then-boss. “To do a good job of running sales, you have to pretend to be more stupid than you are.” Sales is a very measurable part of the business because an order either comes in or doesn’t. Most other parts of a business are much less measurable and so harder to hold accountable. Engineering can always ship a product on time if you don't care about quality, for example. But if you start to agree along with the salesperson why an order really slipped because engineering missed a deadline, say, then you start to make them less accountable. They are accountable for their number. At some level, which business they choose to pursue, and how it interacts with other parts of the company, is also part of their job. So you just have to be stupid and hold them to their number. If an order doesn’t come for some reason, they still own their number and the right question is not to do an in-depth analysis with them about why the order didn’t come (although you might want to do that offline), but to ask them what business they will bring in to compensate. Creating a sales forecast is another tricky skill, again because an order either comes or doesn’t come. One way of doing it is to take all the orders in the pipe, along with a percentage chance they’ll close. Multiply each order by the percentage and add them all up. I’m not a big believer in this at all since the chance of a 10% order closing in the current period is probably zero and it’s easy to fool yourself that one out of ten of them will close. Yes, the occasional blue-bird order comes out of nowhere, sometimes so much out of nowhere it wasn’t even on the list. I’ve never run a huge salesforce with hundreds of salespeople; the law of averages might start to work a bit better then, but typically a forecast is actually built up with the judgment of the various sales managers up the hierarchy. Another rule I’ve learned the hard way is that an order than slips from one quarter to the next is almost never incremental. You’d think that if the forecast for this quarter is $500K, and the forecast for next quarter is $500K, then if a $100K order slips that you have a bad $400K quarter now but you’ve got a good $600K quarter coming up. No, it’ll be $500K. Somehow the effort to finally close the slipped order comes out of the effort available to close other orders and you are wise not to count on a sudden blip in sales productivity. Salespeople are a pain to hire because you have to negotiate with them and they are better negotiators than you are. It’s even worse in Europe where, if you don’t simply lay down the law, you can spend days negotiating about options for company cars ("I insist on the moon roof"). At least in the US, most of the negotiation is over salary and stock, which are reasonable things to spend some time on. Getting Orders Salespeople really only respect sales managers who have themselves been salespeople in the field. Not marketing people who have become sales managers, not business development people who’ve become salespeople. It’s probably partly camaraderie but sales seems to be something that you have to have done to really understand. You want your sales manager to be respected by the salespeople because you want them to bring him or her into difficult sales situations to help close them, and they won’t if they don’t trust and respect their manager. If you are the CEO, as I have been, then they will bring you in. But it is more for "peer bonding" since your presence forces the customer company to deliver someone senior to meet with you. When going to meetings like that, I have a couple of questions I like to ask the salesperson on the account. The first is "Who is the decision maker for this order?" It is a red flag about the salesperson's competence if he or she doesn't know the answer to that question. The second question I like to ask sounds like it might be the same but it isn't. "Who is the holder of the budget that will pay for this order?" It is surprising how often you get a blank stare. But some orders are made by, say, a design group, but it comes out of a CAD group's budget. It might look like the design manager is the decision maker, but probably the CAD manager is at least as important if not more so. Often, of course, the decision maker is one person but the budget holder is the VP of the division, who obviously needs to be on-board. Another good question to ask a salesperson is who wants the competition to win the order, the enemy, as it were. One of the most difficult types of order to close are ones where the person who benefits and the person who pays are not the same. "If you, Mr Design Manager, will pay for tools to create good models of the chip, then the company will save a lot of money on embedded software development." That is the type of order that drags on for so long that the potential savings evaporate along with the order. Another challenging type of order is one with legal issues, usually around IP. "We absolutely need this library in six weeks," is what the design manager says, but the company can still spend four weeks in legal review before they will give you the PO by which time an unnecessary crisis has been created. $2M per Salesperson I should also point out that I am talking about the type of salesforce that we have in EDA. This is a high-touch environment in which salespeople make calls on the customers, along with teams of application engineers who support evaluations, installations, and customer success. This type of approach would not work with, say, mobile games. There the ideal salesforce is a website (or not even that, just put the game on the Apple and Google app stores). A good rule of thumb for sales in an EDA startup (or an investment in an EDA startup) is that the company will succeed if each salesperson brings in $2M per year and will not make it if it is less. Of course, it will be less at the beginning, but unless there is a route to sales productivity of $2M per year, then the economics will not work. I like Steve Blank's definition of a startup as a company looking for a repeatable business model (as opposed to an established company like Cadence, which is a company executing on a repeatable business model). But that repeatable business model needs to generate $2M of bookings per salesperson to create a scalable EDA company. Hunters and Farmers There are really two types of salespeople that I like to call hunters and farmers. A startup salesforce is all hunters. A big company salesforce is all farmers. Some individuals are able to make the transition and play both roles, but, in my experience, generally salespeople are only comfortable operating as either a hunter or a farmer. This can cause problems when a large company like Cadence acquires a small company. Hunters operate largely as individuals finding just the right project that can make use of the startup’s technology. Think of a salesperson trying to find the right group in at a big company, or find the right small fabless semiconductor company. Farmers usually operate in teams to maximize the revenue that can be got out of existing relationships with the biggest customers. Think of Cadence running its relationship with a large multi-national semiconductor company. Given that most of the hunters are not going to become good farmers, or are not going to want to, then most of an acquired company’s salesforce will typically not last all that long in the acquiring company. But they can’t all go immediately since they are the only resource in the world that knows how to sell the existing product, that has a funnel of future business already in development, and probably have deals in flight on the point of closing. One typical way to handle things is to keep some or all of the existing salesforce from the acquired company, and create an overlay salesforce inside the acquired company specifically to focus on helping get the product into the big deals as they close. However, this rarely works well, and is too expensive to keep in place for long. The challenge is always that the existing salesforce doesn’t really want a new product to introduce into deals that are already in negotiation. They have probably already been working on the deal for six months, and they don’t want to do anything to disrupt its closing. Adding a new product, even though it might make the deal larger, also adds one more thing that might delay the deal closing. The new, unknown, or poorly known product, might not work as advertised. When Cadence acquired Ambit, this was definitely the dynamic. Even though strategically Cadence wanted to aggressively sell the Ambit synthesis tool, the salesforce was comfortable trying to close everything-but-synthesis deals like they had for years. I have to say I'm pretty pleased that I don't have to manage a salesforce today. It never became part of my comfort zone. The Book I've not read that many books on sales management, and there are lots out there, ranging from MBA textbooks to books that are more about pumping sales guys up to go out and win. Many books on sales management are from other industries. Despite the jibes, sales in EDA and technology in general really is different from selling used cars. The best book I have read is Cracking the Sales Management Code: The Secrets to Measuring and Managing Sales Performance . There are also many books on sales compensation, all of which I have not read. As I said above, to set up a sales compensation plan, if you have never run a salesforce before, then find a friend who has, or pay a consultant who has. This is not a place to learn by your mistakes (or from a book, but I repeat myself). Sign up for Sunday Brunch, the weekly Breakfast Bytes email![]()
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