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war stories from the startup frontlines

building a sales organization
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the panel: build an organization

Ms Dubbé: Let's take a couple of questions that we've had for this morning.  Tell us about the worst hire you've ever made—the horror story.  Who would like to go first?  Walt?

Mr. Rogers: Actually, there's been more than one of these, but it brings to mind a question that Carolyn asked me earlier.  She said, “Have you ever sold to Federal Express?”  In one of my past jobs I managed the southeast for Four Phase Systems.  I would say that the most difficult hire is that remote person you cannot see physically everyday. They're off in a remote geography and you have to trust that they have the work ethic to get up in the morning and go to work.  You can't have doubt, because that's where it starts.  They've got to go make those calls. Anyway, I had this fellow out in Memphis and I kept questioning him in territory reviews, “Are we calling on Federal Express?”

          “Oh,yeah, I'm going to call on Federal Express.”

          I asked him, “Do you have an organizational chart?”

          He didn't have an organizational chart, so I said, “Okay, you've got to get the organizational chart.”

          This went on for a while. Finally he came into my office in Atlanta one day and said, “I've got the organizational chart.” He actually thought that was the objective.  Then the bulb comes on.  This guy had the work ethic to get up in the morning, but he just didn't understand the job.

          That's just one story.  I have others that I can relate, but let me pass it. Who wants it next?

Ms. Hyde: I'll second the motion that hiring people for remote locations is one of the most difficult things to do, as well as keeping them trained and motivated.  I'm cautioning you, relative to that, certainly your first salesperson should not ever be in a remote location, from my perspective.

          I'll tell you what I did. It's been about 12 years since I learned my lesson.  I went against my own gut on something because I let a recruiter pressure me. I don't know if we have any recruiters in the audience who are going to be upset with me, but I'll make this statement that a recruiter can take apiece of horse manure and put it in a beautiful box with a pretty red bow so that you'll think that you're getting the best gift you've ever seen.  Remember that a recruiter is a salesperson, much like when you walk into an open house and there's a real estate agent there. When you decide to make an offer on that house, remember that they work for the seller, okay? I'm probably going to be pelted with donuts by any recruiters in the audience. There certainly are some good ones, and developing a relationship with one or two that you trust who have proven that they're showing you candidates in your space that are qualified, that’s a key thing to do.

          Let me tell you about what I did.  I am zealous about reference checking, and, when I do reference checking, I don't just go with the references the person gives me, I ask for customer references, as was discussed earlier, as well as prior managers.  I ask each of those folks on the phone, “Who else could give me information or provide feedback about Bill?  Is there anyone that you can think of that had an opportunity to see his style, his skill set?” Then I will get another name and go down one or two levels and contact people who were not on that initial list.

          I was in a situation where I needed a salesperson. A recruiter presented an individual to me who made a very good first impression. All of a sudden, within24 hours of my seeing that person and before I could do my complete reference check, I started getting pressure from the recruiter that this guy was so great, he had three offers, these other three companies were desperate to get him, if I wanted a shot at this incredible superstar, I had better hurry up.  I absolutely ignored my toughest rule about reference checking and I checked only one, then went and hired the individual without going through my full process.  I got a lemon.  Within two and a half months, he was gone.  It was a costly mistake.  Buyer beware is what I'll say relative to that situation. Whether there's a recruiter involved or not, don't shortchange the reference checking.

Mr. Roger: I'll second the message about it being costly.  Whenever you have to replace somebody, we say it takes three to six months to get somebody back in there.  Think of the lost opportunities, the possible large deal that slipped through the cracks.

          The worst hire I made really sticks out because it went to one of my own weaknesses.  About a dozen years ago when I was with Best Software, we were starting to go through channels.  I had no channel experience, so I had to find somebody who did.  I found a gentleman who worked for a major competitor, who had been in the channel forever and I hired him. Then, slowly, I found out that the individual had a very bad reputation in the industry, primarily because of lack of service, not following up on calls, not servicing business partners. As a result, I took all that bad baggage into a new program.  Slowly, it got back to me as I met resellers.  They were telling me, "I've had this problem with this individual before, I'm surprised that you would hire him.” It took a long time for me to discover that, and it was very difficult for us to replace it because our first impression to a new channel was as a software company that wasn't going to provide good service.

Audience Member: About references, I've heard that there are services that will check a résumé carefully.  They'll call a school, get a transcript, verify in extreme detail whether anything on the résumé was falsified.  Are you familiar with these?  Have you used them?  Do you recommend them?

Ms. Hyde: At SER Solutions we have a company that does a kind of background check, but it might be relatively expensive for a small company to check the graduation from college, etc.  I would never entrust anyone else to talk to specific references.  I don't think another company can know enough about your business to understand everything that's important. In some cases, you may ask one question that leads you to think of how you might drill down further. If you elect to use a service to check whether they graduated from that college, I don't see a problem with that, but I would still check the actual former employers and customers myself.

Mr. Rogers: I would echo what Carolyn said. One thing that's overlooked today, and this has happened to me twice, where a candidate has said they graduated from a particular school—in one case it was Georgetown—and I had the alumni book so I just looked it up. It was easy to check, but it brought home the fact that you need to check.  By the way, there are things on the résumé that are very easy to check and you can check them very quickly and very inexpensively. The other thing that Carolyn said is a very important point, that when you're talking to a reference, find somebody else that the reference person knows, someone he or she will refer you to that the candidate doesn't know you're talking to.  I can't tell you how important that is because no one that was supplied by the candidate is going to give a bad reference.  The other thing, obviously, is to know the market. Find somebody you know and trust, who works for a company where the candidate worked before, and talk to them. A lot of times it might happen at a meeting like this one.  You might see somebody with a name badge and you say, “Hey, I'm interviewing a candidate. Would you happen to know this person?”

Ms Dubbé: There are a number of things you need to look at when hiring your first salesperson, and hiring the first one is often the most difficult issue for a company because it's a cultural introduction.  You have a company filled with engineers and principals and people for whom this is their livelihood, their baby. To bring a salesperson in is like a knife through the heart for many companies.  How do you go about hiring the first one?  What ground rules do you set? How do you interview? Do you want someone senior or junior?  They've got to be everything, chief cook and bottle washer, coach and cheerleader.  You don't have a comp plan set.  How do you do it from the beginning?  Bob, we'll start with you.

Mr. Skinner: If it's your first hire, this is dramatically important to your company and you've got to spend time with this individual.  Certainly, checking the background is the first step, but getting to know that individual and seeing if there's a cultural fit is more important than anything else.  The biggest difficulty I've seen is where somebody does not fit in.  It may sound a bit trite, but I tell people while I'm interviewing them, “This is the type of company where you make your own copies, where you change the toner yourself.  I don't need people here who will walk away when the paper tray is empty.”  This is the type of commitment you're making when you go to a small company.

          The best mix that I've found is somebody who has been around for a while, started off in a large company where they got good, classic sales training with somebody who was monitoring them well to make sure they were productive, then moved into smaller companies.  That way they've had that smaller company experience before they joined your company, so they've seen both sides. They've got a good classic foundation as well as the ability to work within a small company. I recognized that when I started out in a small company. When it was acquired by Control Data about 20 years ago, I ended up going through their formal sales training and realized how much I didn't know.  So, find somebody that's got that experience first.

Mr. Rogers: Yes, that's a very important point. When looking at a candidate from a very large company with a lot of experience, what I say is, “There's no ‘they’here.  There's no ‘they’ to do whatever has to be done.  If the conference table has to be wiped before the sales presentation, you go in and wipe off the conference table.  You can't stand on ceremony.”  When you look at someone from a large company, look for what I refer to as the ‘first bounce.’  Let them go to another small company where they figure out that they've got to change the toner, where they're no longer going into a prospect with an easily recognized name like IBM or Xerox.  When they have to go in saying, “I'm the guy from XYZ,” a sense of reality sets in  and they have to convince that prospect that they're worthy of seeing them and buying from them.  It’s a very, very important point.

Ms Dubbé: One of the things we find in portfolio companies is that a couple of things come into play when you make that first hire. First and foremost, you've never done it before.  Second, you're bringing a new species into your organization.  Let there be no mistake; this is a totally new creature.  This is someone who focuses on money, who really doesn't give a damn about the technical innovations that you have or how good the product is; they want to know if they can sell it.  Typically, the trade-off that you find is that you're bringing someone in who is perhaps more senior than you can afford, so there is a cash-versus-options trade-off with that first salesperson.

          I find that companies often are very uncomfortable talking about money with a salesperson.  You want to hire somebody who is solely focused on money. You want them focused on cash.  That is how salespeople keep score. It is a new playing field every day.  When they generate a purchase order, they generate cash. Therefore, a score goes on the board. That is the biggest cultural thing.  When you hire that salesperson, you have to recognize that. Some of the most effective companies I've been a part of rank their salespeople on a board when you come in the door every day so you know who's on top and who's on the bottom.

          You want a culture of disclosure.  You want salespeople to know they are accountable for their actions and that they are being expected to sell. They're not expected to call their Aunt Joan on the phone and they're not expected to take somebody to drinks; they're expected to sell.  You don't pay for activity, you pay for results. You have to decide what the culture of your organization is, whether it's going to be activity-driven or results-driven.  From my perspective, you don't want to pay for activity because there's no return on that.  You want to pay for results.  You want to hire that salesperson with the understanding from the get-go that this is a cash-driven environment, that revenue is what drives the ship here, and that's what you pay for.

          One of the harder things in evaluating a salesperson is to look at their network because that's how things are done in town.  Salespeople should be great networkers, right?  You dig your well before you're thirsty, and you should be able to go out and tap it.  If you are looking at a salesperson, how do you evaluate whether they have a network or whether they're just doing a song and dance? Carolyn?

Ms. Hyde: One of the questions that I ask is, “How do you organize your week?  Lay out for me a typical week and how you spend it.  Think of it within the context of working here for our company.”  I'm assuming they looked at the website.  That's another little clue, too.  If you have a website, they should have looked at it, assessed what's on it, etc. If you ever have a salesperson come in who has done no research at all, not looked at your website or requested any material about your company prior to coming in, that's problem number one.

          I ask, “How would you spend your week here? How would you spend your first couple of weeks on the job?”  I want to hear them say that they like to organize their week either late on Friday after hours or on Sunday night. Then they should begin to tell you about things that they do to build their pipeline and organizations that they belong to.  If they’re in the call center business, which is one of my business practices, I want to hear from them that they go to ATA meetings.  If you're in the health care arena and you're hiring someone who has expertise in that area, they should mention that they have some organizational relationship there, maybe even some sort of aboard relationship.  Look at the organizations they belong to and what they do in terms of spending their time. It gets back, also, to talking to some of their prior customers and individuals that are outside of the initial reference list they give you.  I always look at the organizations they belong to, and they should be networked into your community.

Mr. Rogers: Yes, one of the things I try to do with a candidate is develop a trust. Find out from that person what they're about. One of the things I always try to find out, and I do find out, is where they live and why they live there.  In addition to all the things that Carolyn talked about, are they physically in the territory you're looking for them to cover or are they physically in proximity to the community?  Bob made this point about not hiring anybody who didn't live in the area or was not from the area.

          I had an individual who lived in Mt. Airy, Maryland, and was in federal sales.  I inherited this guy, but it brings home the point.  He was talking to me about how he beats traffic. He comes in early and leaves early.  Well, when you're selling to the federal government and you're in that community, you've got to attend dinners, you've got to attend breakfasts, you've got to work the entire landscape in order to be successful, attend the association meetings and so forth.  Somebody whose preoccupation is getting home and beating the traffic is not going to be successful in sales. It's little things like that you look for.  Here’s another one.  I interviewed a candidate who lived on Kent Island, Maryland. The conversation got around to what a wonderful place it was, which led to how much he liked being out on his boat all the time.  I couldn't get out of that interview fast enough.

Mr. Skinner: I have to tell a story real quick. I had one like that.  I went out to meet a rep in California. He lived in Sacramento, and he was driving me back from the airport. We were going to make some calls in San Francisco.  I asked him where he lived and he said, "I'm right by the lake.  Usually, I can be out water skiing by 3:00 p.m.” That day he was out by about 1:00 p.m.

          What you ask about is part of setting expectations when you bring people in, and it also gives you an idea of their activity level.  You have to set the expectation with the rep that they're going to drive their own activity, that if they're going to get leads at all, that's the icing on the cake.  You may be lucky, you may have a ton of leads, but most of us don't. So, in doing that, I ask, “Where are your leads going to come from?  What activities have you done before that are successful? Can you put together a list for me of the first 10companies you would call with contacts and the next 10 companies you would call with contacts?”  I normally do this in the phone interview so that when they come in we can roll up our sleeves and go through this.

          I'm looking for people who are creative, who are picking up the business magazines for their location—Washington Business Journal here would be an example—and finding all the positions that change.  If you're selling HR software, you're looking for somebody who has just been named to anew HR position, who belongs to the appropriate associations, and so on.  You have to be creative.  You have to be an entrepreneur if you're a salesperson.  If they don't have that network, they're not going to succeed, and they can tell you very readily if they do have that network.

          Here's a good indication.  I had a great guy in Denver years ago.  I always use him as an example.  I could barely get a conversation going with this guy when I was coming back from the airport because his phone would just ring and ring and ring.  He would always apologize, but I would say, “Oh, please, keep going.” Right?  A complete difference from the person who, when you drive back for an hour or so, there's never a phone call, never a follow-up, so, when a call falls through, there's no alternative plan.  This guy kept me busy and ran me ragged from the time he picked me up from the airport to the time he dropped me off. He was connected in every way to Denver and knew what was going on there.  Look for that connection.

Ms Dubbé: That leads us to another topic, lead generation.  You have a new company. You don't have a big marketing staff, you don't have a PR staff, and you have a sales rep who's out there.  There are two types of salespeople.  There are those who generate their own leads, who see the world as a hotbed of people on which they can call; and then there is the “welfare salesperson” who stands there with his hand out saying, "I don't have any leads.  I need to be able to eat.  My territory is so arid I could cough on the dust.” We've all heard the different analogies that sales reps have.

          Carolyn, how do you find the ones that find the leads for you?

Ms. Hyde: Something that Bob said I want to mention again, and this is also a way that you can get some more information during your interview.  Have a phone conversation at length with the individual before you bring them in, for two reasons. One, because you don't want to waste your valuable time with someone who is clearly not qualified; and, two, to give them an opportunity to show you the level of research that they're willing to do, as well as to really sell you like they would sell a customer.  When you speak with them on the phone, ask how they develop their business, how they do lead generation, tell them where your website is and so forth so that they're much more prepared.  If they're not prepared when they walk in the door, you're finding out that they're not the candidate for you.

          Back again to something that Walt said earlier, that it is good to have people who have big company experience early on, but you're not the first small company that they've ever worked at. That’s because you don't want to be their training ground and you don't want to take a chance on getting what Gina so aptly called the “welfare salesperson.”  Those are some initial clues, if you will.

          Back to organizations and associations. Are these people tightly networked?  As Bob indicated, you want to see the person in action—as long as all those phone calls aren't from a nagging spouse.  I've had those kind of people working for me, as well. If you can tell by the phone call that it's business, it's very, very good.

          Ask them directly how they generate leads, how they get opportunities, how they find places to sell.  I've found that candidates are probably more candid about this than a lot of other things you might ask them.  I've had people flat out say to me, “We get leads from bingo cards that the marketing department generates.” If they can't come up with creative ideas in terms of how to get business in gear or how to develop leads, then that's not somebody for you unless you're one of the lucky few that just has leads pouring in the door.

Mr. Rogers: Yes.  I look at it from the standpoint that the company is selling a solution, and that solution creates a prospect base. Leads are found within that prospect base.  When you're talking to the candidate, you ask, “Where do you think this solution fits?”  If they've done the right things, if they've gone to your website, if they've researched the company, then they will have creative ideas—the good ones will—about where the product will be sold.  In many cases they will take the lead and say, “I need to be calling on this type of person within these organizations, and there are so many organizations like that within this territory.”  In the federal government it's a fairly easy prospect base to go after, depending upon whether you're selling directly to the agency or part of the solution that goes into the bid that a prime contractor would put in.  That prospect base is going to be where the solution is going to be sold, and the salesperson has to understand that.

Mr. Skinner: The best leads are the ones that somebody can go back to that they've sold to before; places where they've got that rapport, or at least can go back to those companies and use the former decision-makers as an entree into that company and then navigate.  I've always said that a lead is only as good as your ability to navigate within the organization to find the decision-maker.  The two go in tandem: being able to get into the company and being able to find decision-makers.

Ms Dubbé: One thing we all know is that, in many cases, salespeople are more difficult to manage than engineers. They're always going to push the envelope, at least the good ones are. They're always going to need more, want more leads, need more marketing, want more press, need more collateral, need more money, need more expenses, whatever it is.  Managing salespeople is very different than managing engineers.  You have to be cognizant that they have a certain set of needs that you're going to have to fulfill.

          First of all, do you have people who can go with them on a sales call, or do you need to hire a sales rep that's technically literate enough to position your product as well as sell it?  That has to be a formula when you make that first hire. There are many companies that are full of engineers who are qualified, but they are not salespeople.  The question you face is: Do you want the salesperson you hire to go out on a one-headed sales call, in which case they have to have some technical depth to explain the product, or are you willing to take a more polished, business-oriented salesperson and take the technical person with them?  That's a trade-off, and it's typically a company by company decision.

          Let's change gears for a minute.  We have questions from the floor.  Sir?

[continued]

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