High Cost of Sales Attrition and What to do About it

Sales force attrition ranks among the top concerns for Chief Sales Officers because of the two-headed monster it quickly becomes, particularly for how attrition insidiously affects annual sales plans and the make-up of your team. Here are some key numbers:


Attrition – Sales force attrition has a near 50/50 split between voluntary departures – those sales reps you don’t want to lose – and involuntary dismissals, typically underperformers who are not working out. According the CSO Insights, the premier sales survey firm that surveys 4,000 CSOs each year, attrition is averaging 25.8% (see Figure1).

annual-rep-turnover

Cost per Rep – The cost of sales force attrition may be more than you think. Companies that closely follow their attrition rates determine a cost per departed sales rep to be from $500k to over a $1M. If that sounds high, think about what happens when you lose a star sales rep, particularly to the competition.

  • They take the clients with them
  • They were trusted yet they left- big morale question for the remaining
  • Their departure implies a problem

Recruiting/On-Boarding – On-boarding new reps cost you development time and money. The ramp time for seasoned reps is still at least six months. As a sales leader if you are reacting to the loss, you are in recruiting mode instead of selling and lost revenue potential is assigned to others further burden on their plan.

Less than “Full Employment” –  Most sales plans fail to properly account for attrition because they assume “full employment” against their plan (see Figure 2). It’s easy to figure out if you lose your stars to voluntary attrition and you keep your laggards who should be involuntarily let go. This creates a real problem because you are attacking the sales plan with a less than 100% team. You keep your laggards hoping for a miracle to make plan. In essence you are putting the destiny of success in the hands of the “60 percenters” to perform at 135% of plan.

It gets worse at the beginning of the new year when you’ve been talked into a sales plan increase and then the departures begin. You never get ahead. In fact, you’re behind before you get started and oftentimes never catch-up.

Cost of Sales Attrition – Part 1

The High Cost of Sales Force Attrition: And What to Do About It

Sales force attrition ranks among the top concerns for Chief Sales Officers because of the two-headed monster it quickly becomes, particularly for how attrition insidiously affects annual sales plans and the make-up of your team.

Here are some key numbers.

Attrition – Sales force attrition has a near 50/50 split between voluntary departures – those sales reps you don’t want to lose – and involuntary dismissals, typically underperformers who are not working out. According the CSO Insights, the premier sales survey firm that surveys 4,000 CSOs each year, attrition is averaging 25.8% (see Figure1).

Cost per Rep – The cost of sales force attrition may be more than you think. Companies that closely follow their attrition rates determine a cost per departed sales rep to be from $500k to over a $1M. If that sounds high, think about what happens when you lose a star sales rep, particularly to the competition.

They take the clients with them
They were trusted yet they left- big morale question for the remaining
Their departure implies a problem
Recruiting/On-Boarding – On-boarding new reps cost you development time and money. The ramp time for seasoned reps is still at least six months. As a sales leader if you are reacting to the loss, you are in recruiting mode instead of selling and lost revenue potential is assigned to others further burden on their plan.

Less than “Full Employment” – Most sales plans fail to properly account for attrition because they assume “full employment” against their plan (see Figure 2). It’s easy to figure out if you lose your stars to voluntary attrition and you keep your laggards who should be involuntarily let go. This creates a real problem because you are attacking the sales plan with a less than 100% team. You keep your laggards hoping for a miracle to make plan. In essence you are putting the destiny of success in the hands of the “60 percenters” to perform at 135% of plan.

It gets worse at the beginning of the new year when you’ve been talked into a sales plan increase then the departures begin. You never get ahead. In fact, you’re behind before you get started and oftentimes never catch-up.

In Part 2 of this series we’re going go give you a Four-Part Plan: Stop the Silent Profit Killer: How to Create a Retention & Redeployment Strategy.

How to Navigate a CSO Departure Without Losing Revenue Momentum

The voluntary or involuntary loss of a head of sales can be one of the most disruptive events for any company, particularly a startup. Revenue plans for the quarter and the entire year immediately become more uncertain, even if your head of sales was shown the door. Also, several trends specific to securing tech sales and marketing executives add even more pressure to the organization, including:

  1. Shorter Tenures – Average tenure for a Chief Sales Officer is now less than 24 months (almost as short as a CMO).
  2. Historically High Turnover – Shorter tenures and higher turnover rates go hand-in-hand. More executive sales jobs are opening up with fewer of the right people to fill them.
  3. Longer Searches – Expect 4-5 months to complete an executive sales or marketing search, with another several weeks for onboarding and ramp-up.
  4. Lack of Internal Successors – In most cases, companies have fired the previous CSO and they don’t have an internal successor to fill the gap.

Download the PDF – CSO Comparison: On Demand vs In House

The net result is a one to two quarter gap in sales coverage. Sales coverage — no matter how badly lacking previously — will have holes even when an executive team, board and/or founder attempt to step in to bridge the gap. Even more problematic is when the issue behind poor sales is not just sales management performance but a breakdown in the sales supply chain that may include problems with the overall strategy, product or service, the target market, marketing programs or customer success processes.

The comparison chart/infographic we include here for download is less about replacing your CSO with an interim executive for the long-term and more about what you will do between in-house CSOs.

With interim or fractional CSO support, TechCXO enters engagements knowing that our role includes helping in the search for our replacement. We come in with the understanding that our job is to stabilize revenue, identify revenue supply chain issues, recommend necessary strategic and tactical repairs, to help implement changes, and help restart momentum while the client is looking for a permanent placement.

Peter Biro – Why choose TechCXO?

Why would an accomplished entrepreneur, CFO, Stanford MBA with an engineering degree from Duke choose the TechCXO on-demand executive model for his career? We asked him (Peter Biro).

Peter Biro is an experienced operating and financial executive and entrepreneur with deep experience in enterprises from pre-revenue to $100M. Peter is focused on early-stage infrastructure, software and SaaS businesses in need of assistance in fundraising and transaction execution, scaling their finance and sales operations processes functions, and taking their businesses global.

He specializes in financial transactions, from financings to M&A to optimizing economics of different sales channels, for companies up to $50M in revenue.  He also specializes in assisting Israeli-based technology companies.

He has served in a variety of operating roles in technology companies:

  • CFO of ObserveIT – An Israeli security software company backed by Bain Capital Ventures.
  • VP of Business Development of syndicated data provider Restaurant Sciences (merged with GuestMetrics).
  • COO of of Lyris, Inc. (acquired by Aurea) – A publicly-traded digital marketing software, which he helped create through a number of complementary acquisitions.
  • Co-founder of Five Guys Burgers and Fries – The Northeast’s largest franchise group.
  • Entrepreneur in Residence – General Catalyst Partners. Peter vetted transactions and helped launch Icelandicdata center company, Verne Global.
  • Founder of The Cowper Group – A management consultancy focused on buy-side M&A for middle market technology companies

He began his career in IT on Wall Street.  Peter holds a BSEE from Duke University and an MBA from Stanford.

Robotic Automation Leader and TechCXO Client Soft Robotics Raises $20M

Soft Robotics’ proprietary materials and machines are doing incredible things for food, beverage and advanced manufacturing industries. The company’s innovation allows a robot to grasp and manipulate items of varying size, shape and weight, including a tomato, bagel (see images) and even cupcakes. TechCXO is proud to have assisted Soft Robotics’ capital raise of $20M in an oversubscribed funding round.  Boston-based TechCXO Partner Peter Biro has been assisting Soft Robotics in accounting and finance functions, as well as advising the company on its capital raise.

The following is from Soft Robotics’ press release:

CAMBRIDGE, Mass., May 2, 2018 /PRNewswire/ — Award-winning industrial robotics company Soft Robotics announced today that it has raised $20M in an oversubscribed funding round. The new investors include Scale Venture Partners, Calibrate Ventures, Honeywell Ventures, Tekfen Ventures, Yamaha Motor Co., Ltd., with Hyperplane Venture Capitalleading the round. Existing investors include Material Impact, ABB Technology Ventures, Taylor Farms Ventures and Haiyin Capital. Joining the Board of Directors will be Rory O’Driscoll from Scale Venture Partners and Kevin Dunlap from Calibrate Ventures.

Soft Robotics unlocks robotic automation for large, meaningful markets and labor starved industries such as food and beverage, advanced

Soft Robotics’ machines can grasp delicate items

manufacturing and e-commerce. Leveraging patented material science and AI algorithms, Soft Robotics designs and builds automation solutions and soft robotic gripping systems that can grasp and manipulate items with the same dexterity of the human hand. Since the company’s inception, its technology platform has experienced substantial customer validation and adoption, with over 80% year over year revenue growth and production installations running 24/7 for Fortune 500 companies and Dow 30 components, including Just Born Quality Confections (maker of Peeps).

“We’re proud of the team’s work to date to scale up the Soft Robotics’ technology platform and gain significant commercial traction across our customer verticals, said Soft Robotics CEO Carl Vause. “We’ve been able to address some of our customers’ largest supply chain and automation challenges, from picking and packing fresh produce and raw proteins, to bin picking and retail order fulfillment.”

ABB, a leader in robotics and industrial automation, sees the investment in Soft Robotics as part of ABB’s overall strategy to shape the future of industrial digitalization and the automated warehouse.

“We saw early on that the Soft Robotics solution is a paradigm shift in the way our machines interact with their environment, especially in their ability to grasp deformable, delicate, binned or otherwise complex items,” said Grant Allen, Head of Ventures at ABB Group. “As a leader in industrial manipulation with over 300,000 robots deployed, ABB sees a huge number of amplifying automation solutions but the intuitive control software Soft Robotics has created combined with their agile gripper is a linchpin of the automated warehouse.  In an era of increasingly high mix, low volume production cycles coupled with the need for pain-free automation configurability, we are also extremely excited about the direction Soft Robotics is taking their core technology with SuperPick, allowing ABB arms to do more with less training, greater accuracy and increasing autonomy.”

Soft RoboticsThis funding round comes at a pivotal time in Soft Robotics’ growth. Having proven the economic benefit and scalability of the technology, the company is today at a critical moment of accelerating its commercial penetration plans and new product roadmap.

“As investors we aim to match innovative technologies with major, unmet market needs,” said Rory O’Driscoll, Partner at Scale Venture Partners. “The $40B industrial automation market is large and growing, but largely limited to industries like automotive and semiconductor. Existing rigid robotic technology just doesn’t work for industries such as food and beverage or e-commerce, because of the variability of the product and the unstructured nature of the environment. With so many industries facing mounting pressure to automate, we aren’t surprised that there has been such rapid adoption of Soft Robotics’ technology.”

For more information about Soft Robotics, please visit www.softroboticsinc.com.

About Soft Robotics

Soft Robotics designs and builds soft robotic automation systems that can grasp and manipulate items of varying size, shape and weight. Spun out of the Whitesides Group at Harvard University, Soft Robotics is the only company to be commercializing this groundbreaking and proprietary technology platform. Today, the company is a global enterprise solving previously off-limits automation challenges for customers in food & beverage, advanced manufacturing and e-commerce. Soft Robotics’ engineers are building an ecosystem of robots, control systems, data and machine learning to enable the workplace of the future.

Contact:
Elyse Winer
Company Representative
Phone: (617) 645-5183
ewiner@softroboticsinc.com
www.softroboticsinc.com

Additional News Stories

Cambridge-based Soft Robotics to hire, move HQ following $20M raise

Soft Robotics raises $20 million to expand operations

 

How to Keep the Payroll Toothpaste in the Tube

One of my colleagues who is a long-time CFO relayed a rule he had in his companies about people who see payroll data.  Which is: you cannot get another job here that doesn’t involve payroll.  Once you see how much everyone makes, you either stay in that role, or you have to leave the company.

This seemed extreme when I first heard it.  But the more I consider it, the more sense it makes.

In truth, many build stage companies trust this extremely confidential information in the hands of office managers who double as the people who “do” HR, which includes running payroll.  Few of these people have bad intentions.  Many are inexperienced.  And not many things blow up culture faster than exposing this information in the wrong way.   Once that toothpaste is out, you cannot put it back in the tube, and it is very difficult to clean up.

Nothing blows up culture faster than exposing payroll information in the wrong way

So, today I plan to have a reminder conversation with everyone who works with me and handles payroll data.  Not because I don’t trust them – mostly because once you’ve seen this information a thousand times, you can lose sight of how sensitive it really is and how important it is to keep it confidential.

On a related note – another build-stage company payroll risk I frequently see is the “single press of a button” problem.  Meaning, one person can both enter payroll and submit it without an approval step.  I understand why this is tempting in the early stages, and yet: it is a really terrible idea.  (The same goes for bill pay and especially wires, by the way).

Systems like TriNet and ADP actually make it hard to do an approval step in their PEO implementations, which I don’t really understand.  That said – always put in a second pair of eyes on this.  That pair of eyes too is probably bound by the same rule that my partner puts in place: once you see payroll, you can never go back.

This article was adapted from a post that originally appeared in Peter Biro‘s Build Stage CFO blog.

Board Financials

What to include (and leave out) in Board financials

Many a post has been written about rules of thumb for holding effective Board meetings.  People should be present, meaning actually focused on the meeting and not doing other work (this one from Brad Feld at Foundry).   There should be an Executive Session scheduled with plenty of time for it (this one via Fred Wilson of USV).  I’m going to focus in particular how presenting financials can be done in order to maximize value and keep things focused on what is really important.

First of all, whatever you present as the CFO, it needs to be distributed ahead of time, preferably at least 72 hours.  This is one hard and fast rule that I try not to violate whenever possible.  There is nothing worse as the CFO than numbers that go out the night before an 8am meeting.  It’s not just Board members that hate this.  It invites scrutiny and questions, and is a signal – I am big on signaling – that management doesn’t quite have its act together.

[This story was originally posted on Peter Biro’s Build Stage CFO blog]

What should be in the package?  Here are the things I minimally include in businesses that have a meaningful monthly cadence – which most build stage companies do.  For some it’s weekly; an example is an app where week-over-week growth is a meaningful metric.

  • Last month’s P&L vs. original forecast, and YTD vs. forecast
  • Last month’s P&L vs. prior month – dollars view
  • Last month’s P&L vs. prior month – unit economics view (meaning, take your P&L, and divide everything by the unit that’s most important in your business.  Could be square feet, available days for appointments, hours sold, hats – you name it)
  • Meaningful YoY stats by product line, location, or some other way to give investors an idea of where growth is (or is not coming from)
  • Headcount summary – by department, where are we against plan?  For many startups, this is where cash either gets burned (hiring too fast) or revenue growth is thwarted (because you can’t find the right head of marketing and while this saves you money in the short run, it means you are not driving top line in the medium-term)
  • Rolling forecast vs. original projection – meaning, if I re-forecast the business for the rest of the year (which you should be doing on an almost constant basis), where am I going to end up
  • Cash projection

If you have these ready to go 3 days ahead of time in well-formatted slides with pithy color commentary, you’ll serve everyone well.  You might need to add a few more based the particular business that you’re in, but this should get everyone grounded in the results and communicate how things are going.  Investors will have the opportunity to look through the numbers and draw some initial conclusions, which will make the financials review section of the meeting much smoother. Your goal as the CFO is to let the strategic discussion take center stage and let the numbers support that discussion.

Caveat: sometimes you will have Board members/observers who do not read numbers early no matter how early you provide them, and are going to ask nitpick questions about one obscure figure that you know is not vital to anything.  Take a deep breath and go with it.  It’s not constructive behavior, and with any luck, the other Board members will talk to this person offline about expectations.  Your role is to set them high, and keep them there.

What’s in a name? It depends what you put into it

We all understand the risk of Bill Lemon opening up a used car dealership under his name or Messrs. Dewey, Cheatum, and Howe launching their own law firm. Given the power in a name, it’s surprising how little attention is often given to developing the best company or product names.

Having split my marketing career between B2C and B2B companies, I’m often amazed (or maybe disillusioned) at how few of the customer-centric B2C marketing disciplines are adopted by B2B firms. One in particular: Naming. Whether creating names for a new product or for a company.

There is often a failure to recognize that a name can be a tremendous asset. A name can help communicate value, can contribute to why a customer chooses a product or company over another.

Unfortunately, too often the naming exercise is all too brief, without investing the effort that is warranted. “Hey, everyone in the conference room—let’s brainstorm on the name of the new product we are launching next month because our sales materials are due at the printer.” Or worse yet, an email is circulated to team members: “Here are some ideas for names, anyone want to add to this list?”

You’ve seen some of the most egregious errors:

  1. A company is named after the founder: Unless your name is Vidal Sassoon and you’re a famous stylist selling hair care products with a multimillion dollar ad budget, how is your name going to help your sales team sell product?
  2. Company name is based on city or even street name. I was VP Marketing at Manhattan Associates just after they went public. It was (and still is!) a great company with great products and a great team but the name wasn’t an asset to leverage. Besides, there was plenty of confusion: most thought it was because we were based in NYC but we were based in Atlanta. And, actually, “Manhattan” referred to Manhattan Beach, where the company was founded.
  3. Too many products/companies have made up names that mean nothing to the buyer and aren’t connected in any way to any delivered benefit.

Important considerations when developing a naming strategy for a product or company

  1. Your naming strategy should flow from your marketing and positioning strategies (if you don’t have a positioning strategy, please see me after class). What should the name connote? What is the character of the name (e.g. sophisticated, fun, etc.)?
  2. Should the name be more about what the company is or what value it can deliver?
  3. Easy to say and Easy to spell
  4. If possible, one-on-one research with your target audience can be helpful in both name generation and validation.

B2B Names That Are Better Than Others

The name doesn’t have to be literal, nor should it be. It doesn’t have to have any innate meaning. It needs to be something that you can leverage in communication where it will make sense in context.

  • Both “Evergage” (The Real-Time Personalization Platform) and “Reflektion” (Real Time individualized commerce) work as an asset in the website personalization category.
  • “Logility” was launched to offer logistics in supply chain.
  • TechCXO client “PokitDok” makes sense once you learn it is a cloud-based API platform designed to make healthcare transactions more efficient and streamline the business of health.
  • “Chainalytics,” does supply chain consulting and analytics. In a morass of consulting and analytics companies, this name stands out and implies an expertise a buyer might be looking for.It’s easy to see how these names can be leveraged in conveying the values delivered by the company.

The Big Finish

You should look at every customer-facing opportunity to demonstrate why your products and services are better than others.

Strong names provide a differentiating advantage over competitors, and can be effective for promoting the business.

Will the names you select be a real asset that contributes to success—will they resonate with your customers?

Is it time for a Fractional CMO? 5 Scenarios

There is a consistent thread on where the need arises for a fractional CMO. Interestingly, this is consistent whether the company is 2 or 15 years old, whether it’s B2B or B2C, whether they have under $5 million in revenue or over $100 million.

Profile:

  1. Growth has stalled (yet still can be quite profitable)
  2. Objective is to find way to significantly accelerate growth (e.g., double revenue or more)
  3. Only junior to mid-level marketing staff on board, as few as 1 person in the “department”
  4. Marketing plan doesn’t exist
  5. Marketing exists to service sales and/or the CEO

These companies typically have been quite successful but have plateaued. Growth has stalled in part due to the fact that no one in the organization owns the customer across functional silos, someone to champion customer interests and needs, someone with an eye on and in touch with the target market at all times.

Growth has stalled because no one owns the customer across silos

Success has been driven by strong product/service and/or sales effort. And to be successful, plans were developed and adhered to: product development plans, sales plans, financial plans, etc. So it isn’t surprising that marketing hasn’t contributed when there has been no investment in putting together a marketing strategy or plan to fuel growth. “Let’s go to that trade show,” or “let’s advertise on Facebook” falls far short of a plan.

It’s only now that these firms are beginning to recognize the role and value of a CMO and his/her department. In recent posting on www.cmo.com, Jake Sorofman, a research VP at Gartner describes how the “most progressive CMOs think like CEOs.”

He does a great job highlighting how the role is critical to success: “More often than not, CMOs take the lead or substantially contribute to digital commerce, customer experience, and innovation projects, and most CMOs now own or share P&L responsibilities….Customer experience is the new battlefield for competitive differentiation; innovation cycles have compressed; and consumer expectations for personalized and tailored products and experiences are growing rapidly. Marketing is now data-driven, technology-dependent, broader in scope, and more accountable to business metrics than ever before.”

As for the marketing department, Sorofman describes: “The pressure and responsibility is shared across the entire marketing organization. Today, marketers are expected to be both broad and deep…They have utility skills in many aspects of data, technology, design, brand, etc. They don’t need an army to accomplish a whole lot. And they focus their efforts through the lens of the customer and specific KPIs. There’s no hiding behind the veil of internal goals and highly specialized roles anymore.” The full article is here: http://www.cmo.com/interviews/articles/2017/3/3/quick-chat-with-gartners-sorofman-the-most-progressive-cmos-think-like-ceos.html

I was fortunate to have landed my first job at Procter & Gamble where we “owned” the business results of our brand (for me it was Crest and then Vidal Sassoon) as we worked across all functions to ensure brand revenue growth. Subsequently, forward thinkers in B2B and B2C companies hired me to build marketing organizations that were responsible for and led company growth.

In these cases, the CMO became the right hand of the CEO, involved in every decision that impacted the customer which meant every critical decision.

If you lead an organization, ask who “owns” the customer? Is your organization customer-centric? Is there an advocate for what’s right for the customer in every executive meeting? Is there a marketing strategy that clearly positions your firm as different and better for a specific target audience? How thorough is the marketing plan and does that plan lay out a path towards profitable growth?

Clearly, organizations recognize the growing importance of marketing and how CMOs area of responsibility now covers more of the sales/enterprise P&L and customer success functions. In fact, just recently I was engaged in a meeting with a bunch of sales executives across different companies and industries who acknowledged that their relative role is shrinking while marketing might influence as much as 60% of the sales process.

One challenge in this evolution is that CEOs have CMOs and marketing staff without the skillsets to handle the evolution, becoming more frustrated and impatient as expectations increase.

CEOs grow more frustrated and impatient with their CMOs as expectations increase

For small to mid-size companies that can’t afford the risk of failing to find the right CMO who thinks like a CEO (thus risk a bad hiring decision), it is often most expedient and productive to turn to a fractional CMO. This interim executive can instill confidence with the CEO and has the experience to help the organization become customer/marketing-led. He/she can lead existing staff, begin demonstrating the revenue impact of marketing strategies and plans, and establish a structure that can be handed off to a full-time executive.

This creates a natural transition for your on demand/interim CMO who can prove the concept but won’t cost a loaded salary.  Best of all to limit the risk – you can terminate easily at any time.

The Crucial Computer Science Skills Employers Are Craving

You’ve spent a lot of time around technology. Whether through formal training or pursuing your natural interests, you have likely developed a skill set that employers all over will value. But if Computer Science is your subject of choice and potential career direction—you might well wonder if what you have is enough.

What computer science skills matter most? What do you need to land a job in one of the many careers a degree in Computer Science can lead to? How can you demonstrate your abilities to potential employers and turn your skill set into a salary?

Whether you are considering a career in computer programming, web development, software development or one of many other careers tied to this booming field, you want to make sure what you learn will match what employers want. Keep reading to find out which computer science skills matter most to hiring managers and a few bonus skills that will really help you stand out.

This article appeared on Rasmussen College’s website. TechCXO Partner Kevin Carlson is quoted.

The technical computer science skills employers want

We analyzed nearly 3,000,000 online job postings that sought applicants with Computer Science degrees in the last year to find out which technical skills employers were most commonly seeking.* Note that these skills aren’t pulled from listings for a specific job role—they reflect the skills identified in any job postings that are seeking candidates with a Computer Science degree. These are the desired technical skills listed:

  • Java™
  • SQL
  • Software development
  • Project management
  • JavaScript™
  • Software engineering
  • Linux operating systems
  • Python™
  • Business process analysis
  • Information systems design

But hiring managers and experts in various fields assure us that technical skills, while sometimes required for a position, aren’t necessarily the green-light signal job applicants might hope for.

“I care most about an applicant’s ability to solve a problem, how they think through a task and communicate with those around them,” says Kevin Carlson, vice president of development at DataFinch Technologies. “This shows me how they’ll work with the team long-term. I couldn’t care less if they can pass a pop quiz on a certain technology.”

Carlson explains that too many candidates think about meeting short-term needs and whatever is trending in the moment, when hiring is really a long-term play. In technology, constant learning is almost guaranteed, so some employers will be less concerned about which specific technical skills you have and a lot more interested in the soft skills and less-tangible traits and abilities you bring to the table.

Remember, an employer can always teach you a new process or platform—but it’s hard to teach someone to be a team player or a motivated problem-solver.

Continue reading the article

How to Build a Tech Culture that Makes People Want to Stay

One of the first things to suffer when things take off, is culture. Rapid hiring that ignores cultural norms can introduce new attitudes and expectations. Some good, some bad, the worst of which can deteriorate trust and breed a culture of fear — and fast. So how can you start to repair a tech culture?

One of the most effective ways to build efficiencies in a technical team is to focus on culture. It’s said that culture trumps strategy. Why? Because the execution of any strategy by a dysfunctional team, will be poor.

Some of the signs of cultural problems within a technology organization are:

  • Poor communication between development teams
  • Lack of visibility to the business
  • Ability to avoid accountability
  • Avoidance of meaningful conflict
  • The ridicule of ideas

If you’ve spent any time at all working within a technology team, you’ve seen several of these problems.

So, let’s get started. Below are three things I do to get things moving.

Prove that Conflict and Vulnerability are Acceptable

People often avoid conflict because their leadership taught them to. It’s that simple.

Many situations occur where someone disagrees with leadership and they are dismissed. Worse, they could face ridicule in front of their peers. The effects of this type of behavior are fast acting and long lasting. In such a culture, the best ideas often die before they’re ever explored.

Many years ago I was co-writing a song with a very talented writer who said to me, “Give me any ideas you have an I’ll give you mine. Some are going to be awful, but you never know what other ideas an awful one will spark.” It was a little uncomfortable at first, but I soon recognized my ideas weren’t getting an eye-roll. That motivated me to dig deeper. We agreed, we disagreed. There was meaningful conflict. We were kind to each other, but didn’t hesitate to disagree.

It was an impactful experience that I carried into other areas of my life.

And that’s exactly how to approach it in the tech world. Prove that conflict is acceptable by welcoming new ideas. Avoid any response that could make a person regret their decision to be open.

More important, the team should see you do this with other leaders. Show that you’re not afraid to be vulnerable and introduce conflict. Above all, show your team how to do that while being kind.

Praise Those Who Take Accountability, Whether for Success or Failure.

One of the best signs of an improving culture is the admission of failure. In a recent client engagement, a team member sent me an email telling me of a problem they caused. It cost the company customers and money.

Here’s what I did next:

  1. Immediately thanked the person for bringing the issue to my attention
  2. Asked for their recommendation on how to solve the problem
  3. Requested they quantify the impact to the company and share the detail with me

This person knew they made a mistake. There was obvious regret. But they had the courage to step forward and make things right. No need to make them feel any worse.

It’s important in this situation to express gratitude that you’re now aware of the issue. Learn what went wrong. Hear recommendations from the person that brought it to your attention. You will get the best from your team if they can be honest with you without fear of retribution.

Quick story: A CEO and CFO were talking about a new salesperson. The CFO was angry that the rep messed up a $2 million dollar deal and recommended he fire the salesperson. The CEO responded, “Why would we fire someone we spent $2 million training?”

Be Open in Your Interactions with Everyone

A few years ago, I had been coaching a 25 person development team on the importance of building trust. I wanted people to admit when they didn’t know how to do something. I wanted them to be open when they made a mistake.

Then it happened.

I had been upgrading a Jira instance and something went wrong. Long story short, every single bit of data had been completely wiped from the system. Not realizing that had happened, I decided to head home and get back at it the next day.

The next morning everyone was frantic. Luckily, one of my colleagues saved me from embarrassment and restored Jira from a backup. Things were up and running again. All was good with the world, right?

Not at all. I needed to prove to the team that everyone, including and especially me, needed to be open. At a team meeting that afternoon, I opened with, “We found out who deleted the data from Jira.” A nervous silence enveloped the room as people looked around and tried to guess who was in trouble.

“It was me”, I said. “I made a mistake during an upgrade and I apologize if it caused anyone any trouble.”

The team was gracious and accepted my apology.

From that point on, people new that it was OK to be honest. That they could trust I wouldn’t hold myself to a different standard than I expected from them. Communication almost immediately began to improve.

You must be the example you want your team to follow. Asking people to be accountable, yet avoiding it yourself is only going to build cynicism in the team.

If you’re in a position of leadership, prove that you will hold yourself accountable. And prove that the standard isn’t any different for you than it is for your team.

It’s an Ongoing Process

You can have significant impact and begin to repair a tech culture by taking these straightforward actions. But it doesn’t stop there.

As a leader, you are the guardian of the culture you want to have. You will have to make occasional adjustments to process, technology, and, yes, people.

Sometimes they will be painful decisions. But make them anyway and learn as you go.

And when you’re wrong, tell the team, adjust, and keep moving. I promise you, it will be worth it.

[This post originally appeared on TheFractionalCTO.blog]

How a Recruiting Process Exposes Your Authentic Values

If you’ve ever looked for a job, you know.

You know what it’s like to put time and effort into a resume, research a company, and write a thoughtful cover letter. You send it off and wait. And wait.

And a response never comes, or comes long after you’ve already found another role.

In one case, I received a rejection email from a company a full 6 months after I had already landed another role. And yeah, I’d already figured out they weren’t interested by then…

The funny thing was that this company heavily sold their culture in the job posting. They said that people were their focus, they valued communication, and acted with a sense of urgency.

Unless you’re an applicant.

Well, OK, I added that bit, but you get my point. My experience with that company conflicted with who they wanted me to believe they were.

[The article was adapted from Kevin Carlson‘s original blog post]

Show Applicants They’re Important: Respond

A few years later, I found myself in the position of being responsible for the recruiting process. The roles I posted to job boards generated hundreds of responses. Of those I received, many were not qualified and some didn’t appear to have read the job description.

Even so, I remembered my earlier experience, and wanted to make sure I responded to everyone, even if it was to give them bad news. As applications piled up, the task seemed like a tough one to tackle.

“I’ve been there”, I thought. “I know what it’s like to face rejection and now I have to do the rejecting.” It’s a normal reaction to want to avoid this step in the process. If that’s how you feel, congratulations, you’re human.

The solution for me was two-fold:

  • First, use the Applicant Tracking System we had to organize things. If you don’t have one, I’ve listed affordable options and alternatives at the end of this post.
  • Second, recognize that my silence helps neither the company or the applicant.

Use the Right Tools to Make Responding Easy

We used our Applicant Tracking System to post jobs to job boards and to our web site. It organized responses and made it easy to move candidates through the pipeline. It also made it very easy to send candidates a response.

Applicant tracking systems allow you to create email templates that request a phone conversation, an interview, or let someone know they haven’t been selected. Take the time to create a template for each type of communication you might want to send a candidate, including those for rejection.

As a rule, I would go through the new resumes first thing in the morning, and send each applicant an email:

  • We received your resume and are reviewing your qualifications…
  • We’d like to set up a phone conversation…
  • Could you answer a few questions for us…
  • Thank you for your resume. Unfortunately, you have not been selected as a candidate.

The first three? Pretty easy.

The last one is more difficult to send, and here’s why it’s so important: How you treat people outside of your company says volumes about the real values inside your company.

Actions show Authentic Values

Wall posters that display company values — we’ve all seen them.

Integrity. Honesty. Collaboration. Blah, blah, blah.

Seriously? Those values are table stakes.

If you have to tell people that you like to collaborate, are honest, and act with integrity, that’s a pretty low bar. When I see that, I’d rather ask your customers what they think your values are and get the real scoop.

Values must be in your heart and mind, not on the wall. People you interact with will talk about how they experience your values and culture. Your actions and inactions will have an impact.

How many great candidates don’t apply because a friend ridiculed your recruiting process? Might be only a few. Might be only one.

AND IT MIGHT HAVE BEEN THE ONE CANDIDATE THAT MATTERED.

So, take the time. Write the responses. Send the appropriate email now. With an Applicant Tracking System, it’s easy. Doesn’t matter if there are hundreds or even thousands of applicants. If you’re actually looking at the applications, it takes three seconds. And most savvy candidates know this.

What if Someone Responds to a Rejection?

You’ll get responses to rejections, no matter how tactful and kind you are. For me, they’ve varied from, “Your loss” to “Can you explain where I fell short?”

No, I didn’t respond to the first one. I have responded to many of the second type, though. Taking the time to help a candidate understand the skills or experience they need may result in their eventual hire. Ignore them and when they have the experience, they may ignore you.

The responses don’t have to be long. Send a simple note explaining there were candidates with more experience in certain areas (name them). Or perhaps tell them they need to brush on specific interview skills. It may help them and give them a little confidence to continue the hard work of looking for a job.

The “Thank You” Paradox

You’ll almost always receive a nice thank you note from those you hire or interivew. That’s common practice. Almost expected.

Yet I have received at least ten times as many emails from those that didn’t make the cut. The top responses may surprise you:

  • “Thank you for letting me know.”
  • “Thanks for your guidance.”
  • “Thanks for the encouragement.”

When this happens, you have preserved a future candidate. You may have given someone the boost they needed to write yet one more cover letter. You may have let them know that someone actually cares about the hard work they’re doing to find a job. They will remember you and your company. Your recruiting process, even in rejection, is showcasing your company’s values and takes a long-term view of candidate viability.

Recruiting is Early Proof of Your Values

When you’re faced with a lot of applicants, I encourage you to take the time to respond. You will prove your values and show that the culture you talk about is real. As I mentioned in a previous post on tech culture, you are the guardian of the culture.

Screenwriters have a mantra: “Show, don’t tell.” It’s the same thing when it comes to company values.

So, do what’s right and not what’s easy. Let candidates know where they stand so they can progress or move on. It will prove to them that your company — and you — are worth talking to.

INFO ON APPLICANT TRACKING SYSTEMS AND ALTERNATIVES

If you don’t have an applicant tracking system, don’t despair. There are a lot of them on the market with varying price ranges. Some cost as little as $25/month or charge a reasonable per job posting fee. Well worth the money. Below are links to a few that I have used or have that colleagues recommend.

If you’re on a tight budget, you can use something as simple as Excel to track candidates and responses. A little tedious, but worth it.

If I’ve missed an ATS that you have used with good results, please provide a link and your comments below!

Three Non-Technical Things a CTO Must do to Survive Growth

A growing company is a great place to be. It’s fun to see customer acquisition rates and revenue increase. You’re excited for each new day, each new customer, and each new employee that joins. You’re working like crazy, but it doesn’t feel like it.

And then it happens.

Your team isn’t getting as much done. Quality drops. Employees feel stuck in maintenance roles. It’s a very common occurrence in a growing business and it’s one that you can’t solve with technology alone.

You’re heading down the straightaway and it feels great. That corner you’re approaching is going to be a challenge. The good news is that you can prepare for it. The bad news is that everyone may not make the turn with you.

Below are the top three things that you as a CTO must do — all non-technical — to help a company survive rapid growth. By the way, they’ll help you survive it, too.

Pay Attention to Process

I used to think process was boring. That it stifled creativity. I was a young man, a software developer. And I was quite wrong.

It wasn’t until I worked for a great manager, one that understood techies and was one herself, that I learned. Process is not only necessary, it enables growth.

[The article was adapted from Kevin Carlson‘s original blog post]

Defining a process takes the guesswork out of knowing when something is complete. At a meta-level, each process should mesh with the next stage of work so that handoff errors are minimal.

Here are a few places where processes can usually improve:

  • Development: How does a story, a bug, an enhancement flow through your team? Who handles a task and when? When is it done?
  • Communication: What events do we need to communicate? When? To Whom?
  • Hiring: What roles do you need? How are they approved? Who is interviewing which candidate and when? How are we communicating the each candidate and hiring manager?

Process is nothing more than describing how things move from concept to completion. It’s also not static. Review the effectiveness of a process and make changes, as needed.

Process helps teams align on how things work and will help the entire team function in a focused way.

Define Metrics and Share Them

Every development team I’ve worked with has shied away from publishing metrics. It’s a common theme.

Here’s how development teams learn to dislike providing data:

  • Development publishes a release date.
  • There are unforeseen technical difficulties or unplanned additions.
  • Development misses the release date.
  • The business blames development for being late.

Common result? Yes, but the on-time metric doesn’t tell the whole truth. Metrics can tell the entire story, if you track a holistic set and report on them.

I worked with a team in the past that was being criticized for Sprint velocity decreases. When we began tracking hours, it was evident that the decrease in velocity was due to the unplanned. Bugs, enhancements, and other issues were devouring an increasing part of each Sprint.

When the management team had the entire picture, it was clear that a lot of people played a role in the delay. So they took steps to make things better.

Anyone can stand on the accelerator and get a car to top speed. If speed is your only focus, good luck getting through the next turn.

Everyone wants to track velocity. The problem is that, in and of itself, it’s meaningless. You should also track metrics that uncover issues with quality, bottlenecks, and unplanned events.

It’s true — what you measure is what matters. So measure things that tell the whole story, not a fraction of it. Then, tell the story to everyone.

Hire for the Long-Term

It’s normal to have a cafeteria-style list of skills when looking for a new hire. It’s important to make sure you hire people that have the skills to do the job. But watch out for the pitfalls with taking only that approach.

I’ve participated in many interviews with clients that are more like a pop quiz than an interview. If your goal is to figure out how much someone knows about a given technology, sure, ask the questions. But if that’s your only goal, you are focusing on short-term benefit at the expense of long-term value.

Yes, they have to be able to ramp up in a reasonable time frame. No, they don’t have to have encyclopedic knowledge of an SDK (they publish that stuff online, you know).

Focusing on the skills of problem solving and communication provide longer term benefit. Avoid the temptation to skip this bit when technical needs are critical. Also critical, make sure your recruiting process is communicating your values.

During the recruiting process, ask questions that drive inquiry. Find out if the candidate asks thoughtful questions or if they jump right into code? Do they prefer the details of NodeJs or do they ask about the user?

Make sure to ask questions that can uncover problem solving ability. Experiencing how a candidate thinks through a problem, and how they communicate with others, is the best indicator of long-term success I have found.

Enjoy the Ride

Hard work, great colleagues, investors, and advisors contribute to building toward rapid growth. Enjoy that and realize that rapid growth may require a shift in focus.

A CTO’s role is one that needs to change as the company moves from one stage to another. You may have been the superstar coder and founder that built everything in the early days. Now, you have a team that requires a different focus and skill set.

Focusing on these non-technical tasks will help ensure you survive the transition.

Andersen Alumni TechCXO

The Andersen Alumni Association recently featured TechCXO and its co-founders, Kent Elmer and Mike Casey The article includes the backstory of the founding of TechCXO, including its first days at TechCFO, how the spirit of Andersen lives on within the firm, the success TechCXO is enjoying today.  The full story follows.  You can also read the story on the Andersen Alumni website or download a PDF.

Entrepreneurial Spirit: TechCXO, Pioneers in the On-Demand Economy

Six in 10 Americans recently told a Harris Poll that professional control of where, when, why, how and with whom one works is the new version of the “American Dream.”

But back in the early 2000s, in the aftermath of the internet bubble, Andersen alumni Mike Casey and Kent Elmer weren’t thinking about creating dreams; they were thinking about making a living.

From the Dot Bomb Rubble

Casey, who worked with Andersen Enterprise Group from 1985-1991 was winding down iXL, one of Atlanta’s most high-profile dot-bombs, as its CFO. Elmer had been with Andersen Enterprise Group from 1990-1993 and had just moved back from California after joining Broadcom’s M&A team through the acquisition of the early-state company of which he was the CFO. They both had successful stints as CFOs but re-entering public accounting or joining another public company held limited appeal. They both enjoyed the buzz and promise of early-stage companies.

“I was delivering outsourced fractional and project CFO and accounting services to a number of early stage and established technology companies as I looked for another full-time assignment.   Mike’s company, Mapics, was one of my clients, “ said Kent Elmer. “The more we talked, the more I realized that Mike already had a vision for the business model that I was executing – he even had the named already picked out. He convinced me that this could be more than just an interim gig while I looked for my next job – it was my job and career!”

TechCFO is Born

TechCFO was born. The premise was to present high potential companies with proven CFOs and support in an interim or fractional model. A few years after taking the plunge, the fledgling firm added more Andersen alumni, including Casey and Rick Lynch.

Those early TechCFO partners traded on their professional reputations to secure clients. Early on, clients warmed more slowly to the model, and then became fans as partners delivered service that exceeded expectations. An ecosystem of VCs, attorneys, bankers and even regional accounting firms was starting to build. The informal collection would network and refer to one another promising early-stage companies who needed guidance. The model was taking hold.

The Spirit of Andersen Lives On

Expansion followed into Boston and then Raleigh-Durham. Clients then began asking for other services, including sales, marketing and technology. The firm brought in sales executive Rick Nichols, who had ties with Andersen, launching the SOAR global account strategy and planning initiative. Nichols was drawn to the spirit and quality of the firm, which felt Andersen-like in many ways.

The company rebranded as TechCXO in 2012, and added a complement of interim and fractional COOs, CTOs, CROs, CSO and CMOs to its ranks.

Today, it is highly likely that a successful startup in Atlanta or the Southeast has the fingerprints of a TechCXO partner somewhere in their corporate profile. The Boston office has become a mainstay within the biotech and medical device startup communities, and the New York, Nashville and Midwest offices are growing quickly. TechCXO has roughly 85 partners and another 50 staff.

The firm recently celebrated its 15th year in business and has been named a 10-time Honoree of INC’s Fastest Growing Private Companies in America. The firm estimates it has assisted more than 1,000 clients and assisted on more than $5B of transactions, including M&A and capital raises.

Kent Elmer says the appeal is straightforward.

“We’re lean and flat. Because we rely on our partners’ networks to generate business, partners retain 80- 90%-plus of what they bill (see the TechCXO Prospective Partner Guide. They get to choose the clients they work with, and there’s a very strong entrepreneurial vibe in the firm, even though we’re a collection of mostly 50-plus-year-olds,” Elmer said. “We’re a casual and collegial group, too. Lots of cross-marketing takes place, and we really put our shoulder behind new partners.”

The No (Jerks) Rule

Internally, a well-worn proclamation is Rule #1: The No (Jerks) Rule. The plan for the future is simple: more partners in more markets. The firm says it’s generating more than $25 million annually.

“Every quarterly meeting, we show the same growth metrics. We didn’t start this thing to be a gig economy pioneer – it just kind of evolved into that. We’re getting to the point now where we need some more processes and infrastructure, but the basics are the same: partners are the product,” Elmer said. “Companies are getting an executive or team with no learning curve who can impact their business positively very quickly and for a fraction of the cost of a full-time department.”

Right for Andersen Alumni?

And would TechCXO appeal to Andersen alumni?

“Absolutely,” says Mike Casey. “If you’re a buyer, you’ll recognize the quality and rigor. If you’ve got some gray hair, have a strong entrepreneurial strain in your DNA, and enjoy business development, while being connected to great peers, TechCXO is a great later-stage career choice.”