SBI recently spoke with Chris Stoddard, the Vice President of Sales for Pulse Secure. Our topic today is Organization Design. What types of reps you need and what is the best organizational chart for you. For our interview, Chris and I followed the Sales Organization phase of the workbook on pages 282 – 284 of the PDF.
I personally found this interview with Chris to be an incredible demonstration of thinking through feet on the street in a new way. This emerging sales organization model is named the pod concept. It’s an innovative approach to deploying capacity and thought provoking in terms of what an AE can perform in a team-based model.
Business is booming at Pulse Secure under this innovative model of organization design. Sales leaders should keep an eye on this approach for a glimpse into the future as well as ideas on how to improve your current structure. This new approach to organization design allows the structure to remain flat and empowers high performing Account Executives to be player-coaches and achieve tremendous teamwork.
Why your organization model matters? Too few reps and you’re going to miss the revenue number, too many reps and you’re destroy profits. Hire field reps when you need inside reps and frustrate customers. Organize in a hunter/farmer model when you need industry verticals or product specialists and the revenue goal will be harder to hit than it needs to be and so it goes and so it goes.
Pulse Secure is in the secure access business of helping people, devices, things, and services connect to corporate networks through laptops and mobile devices and just about everything else. In this article, I share the transcript of Chris demonstrating how to determine the right number of feet on the street by walking us through an emerging sales organization model called the pod model. View the video of our interview by clicking here.
There are seven models that B2B sales organizations typically use. To start on a strong footing, we quickly summarize the seven B2B sales organizational structure models:
- Stratification: This is a pyramid approach where you have your key accounts at the top, your bread and butter accounts in the middle, and your small business customers at the bottom.
- Hunter/Farmer: Hunters go after new business and farmers cultivate cross-sell/up-sell of existing accounts.
- Product Specialist: This is used for complex products where the end customer values the sales rep’s product knowledge.
- Industry specialist: This is used when it’s important for the sales person to understand the problems of an industry at a granular level to be successful, and the customer values that knowledge.
- Role Specialist: This is a new approach to sell by role. This may involve someone who sells to the CEO, someone who sells to the CIO, and someone who sells to the CFO. The benefit is you get to know the persona so well that you can be effective and relevant to that person.
- Geographic: Organized by zip code or geo map where one sales person sells all things to all customers in that area. This approach is a tradition model widely used.
- Hybrid: Some combination of two or more of the organization models listed above.
Chris, which org model do you use and why did you select it?
It might help to have some context. When we carved out and we effectively took this business private about two and half years ago, we had engineering, we had support. We had some core product elements in place but we literally had no sales people. It was me, another partner and a couple of systems engineers. We had a company with thousands of customers. In fact, 62 of the global 100 were customers of ours that they had purchased over the last five or six years under the Juniper banner.
We literally had to get up and get going fast. We are solidly in the stratification model. We decided to go off and hire experienced, professional sales people to rocket into our biggest customers.
You had to start from nothing and you went stratification over these other ones. How come?
We did. It was the most logical model at the time. As I said, we had to figure out where to service the customer segment first. When we came out, there was lots of uncertainty in the market place. A lot of our customers were concerned about what we’d be as a standalone entity. As I mentioned, our priority was to go reassure our biggest, most complex and in some sense, our most tenured customer base which was at the highest end of the marketplace. That isn’t to say that there wasn’t a huge segment of our customer base that still needed coverage. Sort of priority 1B was to get a round of telesellers in place fast to start hitting the phone, calling everyone that we were already touching with the first round of sellers at the high end, to say we’re here, this is what we do. It’s okay to continue to buy and to work with us and here’s our future strategy.
Then, most recently Greg, we’ve introduced a territory account manager to go after that mid-market. We went high first and sort of mid-low of sort of second and now we’ve invested heavily on a territory account manager model for the middle tier of the stratification model.
Okay. Perfect, so a very classic stratification model which allows me to lead into my next question which is if you think about an old chart, what’s on an old chart? What’s on and old chart is roles and boxes and names need to go in the boxes. What types of roles did you have to put on your org chart within that stratification pyramid?
Yes, one of the other core principals as we built out to go to market was we wanted to keep it really flat. We wanted as little distance between the most junior seller and me or my partner who runs our channel business. What we created or built was this concept of a pod, a selling pod, a selling unit. Inside that unit there are five core elements. There’s an account executive or a senior salesperson. There is a territory account manager as I mentioned. There’s an ISR but there’s also a partner account manager, someone dedicated to servicing our channel and evaluated resellers that bring our product to market in a lot of places. Then, we also have the last element, which is systems engineers, technical folks out there servicing and working with our customers. Really, a pod is five core people Greg, and that can scale up or down based on the market opportunity.
That’s a very interesting concept, the pod concept. Does that mean when you’re expanding and you’re going to hire, you hire in a pod? You hire a person in each one of those roles, how does that work?
We do. It’s a great question. We put more accountability into that senior seller than most other companies. That senior seller, when they come on we talk to them about having to be able to operate in a player/coach model. They’ve historically been very, very good at carrying their own weight inside a sales model. Here, because again, we’re not looking to add too much in the middle layer of our management hierarchy, they’re also being as to be mentors, to be part of the hiring process of other people in the pod, as well as the first line of information back to leadership when we think about where to invest, what type of feet to put on the street to the topic of the conversation. We look to them for a lot of that input. Ultimately, they’re being held to account to make sure that pod, that pod unit is working optimally. A lot of them weren’t sure if they’d welcome that responsibility but many of them have thrived in it.
I tell you one of the things I love about my job is I get to talk to so many diverse people like yourself. There’s innovation happening all over and this is a very innovative model. I will tell you, I don’t know if you know this, maybe you do but that’s very rare, that pod model. I can see given the way you described your company and its origination here recently as a carve out, why you would go to this model. My compliments to on not just falling victim to kind of the traditional path but putting this model together, staying flat and empowering that account executive to be that player coach and get that type of teamwork. I mean, those five people, they must be operating as a team very well.
Yes, and where we see what we call pod dynamics, business is booming. We know that the cohesiveness of the unit or said another way, the unit’s only as strong as its weakest link which is an adage we can use in lots of different things in life. We know that that’s the paramount piece from the leadership perspective that we’ve got to manage. You know, the other thing with the pod concept Greg, is you can’t hide in the model. If you’re part of that five-operating unit, you better not be the one that sticks out as the one not pulling your weight.
I don’t mean to say that as a cautionary tale but the pod, ultimately, and we didn’t know what we were going to get, but there’s a ton of pride built up in the pod itself. It’s almost, becomes almost like a franchise where you have this account executive that’s feeling as if they’re a quasi-CEO. Look, it hasn’t been perfect. We’ve, at first, we had to hire really, really fast to touch our customers and we had a couple of mis-hires as we had anticipated. The ones that have now stuck it out have been here for the better part of a couple of years have really thrived.
When you think about head count needed by role, I asked you about kind of deciding when you expand, do you expand by the pod and you said yes. How about within the pod, is it, do you have multiple people in each one of these jobs or is a single person in each one of these roles?
We started with a single person in each one of those roles. More recently, based upon again, where pods have been successful, we’ve gone to that sales leader and said look, in return for performance we’re going to give you first right of opportunity to add to your team, to build your franchise as you see fit. They’d have to justify that there’s an opportunity in the marketplace. In many cases, because we were so small coming out of the gates and because we had so many customers, justifying adding a head wasn’t that difficult. Much of the addition that we’ve made is as I said, into that territory account manager segment, that mid-tier where there’s a hybrid approach between the channel partner servicing that customer segment and our guy servicing that customer segment. That’s typically where we’ve loaded up.
Fantastic. All right, we’re rocking and rolling here today. We’re learning all kinds of new things. I have a new favorite word now, the pod. We’re going to be talking about that one for a while, that’s a great story.
Chris, how do you effectively deploy the sales capacity against the market opportunity? What I mean by that is you’ve got this pod, you’ve got this market with accounts and how do you match the pod to where the opportunity is?
Well, there’s a couple of things. One, Cost Per Revenue Dollar is a big deal here at the leadership level and with our board. We’re always mindful of if we invest a dollar, what is the type of return we should anticipate. Typically, what a lot of companies will do is they’ll take sort of a top down approach and it’s just hard to figure out where the right level of return is on that investment. Instead, we’ve taken the approach that says look, we’ve got people that have been in the field. There’s this pent-up capacity and we look very closely at our deal banding, Greg. Where we have say, sub 20k deals, 20 to 50k, 50 to 100, 100 plus, where we have deal bands that are either constrained or dipping, we have a pretty good sense, based upon historical booking trends that that’s a place we need to put some human touch.
That’s one way to do it. The other way we think about this is in 2017, the year we’ve just entered, we’ve instituted a model where every seller and this is something that I got out of SBI research, roughly should return about 10x OTE. We’ve taken that model and we’ve nuanced a little bit to make it a 12x multiple on OTE. The 12 goes in to fund supporting resources like PAMS and SEs and others. By adopting that model, looking at our deal banding and saying to the AE and the TAMS and the ISRs look, at a minimum you’ve got to think of yourself as a 10x return to the business. As you do that, if you do that, you have the opportunity to over achieve. If you’re telling me based upon the banding and just working, if there’s more capacity that needs to be serviced that we’re not getting to, we go to the account executive or the pod leader and say hey, look this segment of your business is either feeling pressure or it’s growing. Should we double down or should we, where we’re under resourced, should we invest to protect that band?
A lot of it is just looking at historical booking trends, depending of the feet on the street as I said, these folks are empowered to look at their business holistically and come back to us with ideas on where to invest and then once we invest, we have a very simple model, if we’re going to pay you a dollar of OTE, you better can justify 10 to 12x in return to the business. With those sort of simple parameters, we’re allowed to have objective discussions about where to invest, when to invest and what type of returns we should expect. It has worked out better than I anticipated.
Fantastic. I just want to summarize this for the audience because Chris has given us lots of value today. First, you want to be in alignment with your board as a sales leader. If you’re a sales leader and listening to this, Chris knows how enterprise value is created. That is cost per revenue dollar. If you don’t know that sales leaders, you got to figure that out. If you want to be on the executive leadership team and increase the value of your company, drive the share value of your company up, you got to know that.
Second, when you’re thinking about capacity deployment, one way to do that is deal banding. What are the trends, up or down or flat as it relates to deal banding? Not a lot of people do that and it’s a great technique.
Lastly, is this multiple of OTE. If you’re not familiar with that three-letter acronym, on target earnings. If I spend a dollar, to a sales rep, it they earn a dollar are they going to generate 10x or in Chris’ case, 12x to fund some sales support resources? Three very practical things that you can go implement right away to answer the question on how do I deploy my sales capacity?
The next question is determining the sales channels that your buyers want to engage your sales team. When I look at your stratification model, you could make the case that there’s a heavy commitment on channel partners from you because a member of the pod is a partner account manager. Tell me about your channel approach.
The channel is critical to what we do. In one sense, it is the fulfillment engine for our business meaning while we service customers directly, we don’t take our own paper in sales terms. We rely exclusively on the channel to fulfill our business. The channel sort of comes into play along the stratification model. At the very highest end, because of the complexity of the customer scenarios, the expectations of the customers to be serviced directly from the manufacturer, we send our own people there to do those sales calls and to do customer service. Then, typically what we’ll do is we’ll do that with or in coordination with the channel partner. They usually won’t be prime on that type of customer engagement.
As you get lower into the customer segment, we depend on the channel to do more and more of the selling for us. That partner account manager in real terms, should think of themselves as a force multiplier. Meaning their goal in life is to make sure our partners are educated, enabled, invested in our story, in our business and in our future, such that they’re willing to go out and candidly speak on our behalf. A lot of these channel partners have choices in life. They sell other manufacturer’s products. It’s a tricky game but they are critical to how we ultimately service the broader marketplace and candidly, ultimately how we manage top of funnel and ultimately grow the business.
Great example. My next question’s regarding around the, picking the right organization model that supports your buyers. Let me try to give that some context. You have this unique model, this very flat organizational structure. You have this great collaboration across different job categories. You are laser focused on increasing the shareholder wealth and that focus on this multiple of OTE. The theory and let me for a moment, digress and be a consultant. The theory is think about the customer first, how they want to be served and build your org model around that. When you came up with this innovative model, the pod, did you consider that?
We did, of course. As I said, at the highest end, they expect to hear directly from us. In the mid-market and especially as our products and the market changes as cloud and mobile become more and more pervasive across more and more companies, the complexity of how to talk about securely accessing those resources, starts to expand a little bit. That was another reason the territory account manager was the right decision for us. At first, we thought maybe that mid-market could just be served by our channel partners but as the complexity of the solution stack grew, we knew we had to put our own resources in there to supplement what the channel partners were doing in front of those customers.
Now, at the lowest end, like many companies, complexity is not a big issue and so we can service them over the phone through the tele sellers that we ultimately outsourced in the first month of company inception that have worked out great. Then, as we go up into the middle part of the marketplace, it becomes a hybrid approach with our partners or with our direct teams. Then, at the high end, it’s almost exclusively our own folks.
Chris, in terms of specialization, very often we see at times, unfortunately, an over specialized sales force. I didn’t hear and if I missed it, I apologize but I didn’t hear a lot of specialization in your model, vertical specialists, product specialists, etc. Is that true or untrue and what are your thought on specialization?
Yes, it’s true. We don’t have specialists today. We debated that going into this year. Mostly, around how we would sell our network access control. For people who aren’t familiar, it’s a more complex sale meaning the generalists typically need to have a deeper sense of the interactions that product has with other elements of our customer’s infrastructure, IT infrastructure.
In the end, what we decided on was to not specialize, to empower this pod concept through effectively making that technology easier to buy, try and deploy. We decided to streamline the tech, the packaging, and the promotion of it such that it would fit into the pod concept versus breaking up the bet we made on the pod concept and throwing in specialists in the hope of trying to force fit a piece of technology that has typically has been difficult to try, buy and deploy into our customer motion.
We looked at both to be honest with you. We decided to get with engineering and marketing and others to say let’s just streamline how that product segment, where we would have invested specialists, fits into the broader story so that we’re not breaking up the high value story we think we have which is customers adopting more of our piece parts working together.
Yes, so right now I know exactly what my audience is thinking is that they would love to be able to walk into the office of the product leader and say hey, let’s keep this thing simple so I can take and sell it through my existing channel. The brilliant engineer on the other side of the desk says hey, you simple minded sales people go back to your cubicle farm, I’m going to invent a rocket ship that takes us to Jupiter so to speak. How did you win him over?
Well, look it helps to have an engineering minded CEO who was supportive of the model. It goes all the way back to the front which is if CPRD matters, if the OPEX we deploy matters to our board which it does, we just couldn’t guarantee ourselves the type of return on that specialist model that we could be comfortable with. We went back and ultimately, he, with the engineers and the product guys, we looked around the marketplace and the most successful companies in tech and probably outside of tech are the ones that have an easy to buy, try and deploy model. I’m on that mantra hard with my engineers and it’s hard to push back on.
Ultimately, we’re all end users, we’re all consumers of tech and if you think about what Apple and other innovative, end user friendly companies have done for enterprise software over the last ten years, there’s no excuse not to have an easy to try, buy and deploy model. They fell in quick and of course, the CEO effectively agreed with our thinking and it all has worked out. We’ll see how it goes this year.
All right I was going to ask you how you transitioned from the old to the new but there was no old. I’m going to conclude with a different question. I hope that’s okay. When you peek around the corner and you think about your company at different evolutionary points, on the horizon is there any point where the pod model starts to crack? Maybe it doesn’t scale like you wanted it to. What are your thought on that?
We’ve thought about where the market starts to stress, the model starts to stress itself. We really haven’t found it and so we’re not too concerned about it because that territory account manager is a flexible model up or down. If we needed to break the pods apart and create, we have effectively, 20 pods globally right now servicing our global customer segment. The target, the territory account manager ultimately has become the bench for the next round AEs. Organically, it will continue to grow and I think it could grow to three or four or five reporting elements into that AE.
That would drastically change. The account executive would be then a bit of a manager, more manager than individual contributor and that’s okay. If we needed to, if we thought the scope of control was going to get too risky, we could always just break the pods apart, create a 21st, 22nd or 23rd pod and we could dip right into these territory account managers who are great. They’ve bought into the concept too and some of them are ready to run their own businesses. We can just shift to the right, stay on the pod concept, and grow if we feel any stressors in the pod itself.
You have 20 pods. Do they all roll up to you?
Ultimately, all the numbers roll up to me and so we have an Americas theater sales leader and a theater partner director. There’s only two guys managing the Americas which is about 60% of our revenue, a big chunk of it and then a system engineering manager to manage that base. I have effectively, three direct reports in the U.S., a similar model in Europe and a similar model in APAC albeit APAC’s a little more channel centric so we’ve got a couple of nuances out there. Effectively, that’s it and underneath them is the global sales force.
You aren’t kidding. That is one flat organization.
It’s flat and it’s great because I love having as little distance between me and the sellers cause ultimately the sellers represent the customers and I never wanted to feel as if we were losing touch with what’s happening in the field obviously.
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