SM: Very early on in this conversation, you mentioned you are really into metrics. Talk about metrics you track, metrics you manage your company by. LD: We can start out with late-stage pipeline coverage. That is how I know our business is healthy. Late –stage pipeline coverage of each area and each sector is probably how we have been successful in all these areas.
You asked about Taleo and I think that is because you met with the CEO so you are close to that business now. They talked on their earnings call about how they made a massive investment in SMB, and they have 12 reps, but we started in 2003 and in small business alone we have 50.
We have a mid-market business that is bigger, so that tells you a little bit about the investment we have made; it is almost like 10x what they have. I don’t decide to address those things in my earnings call, but that gives you a feel for the size and the scope we have.
How we get successful metrics is by tracking every single rep. I have all of these employees who worked at Oracle and other places, and when I asked them “What is your pipeline?” and the answer would be, “Oh, it’s big.” I would then ask, “No, what is your late stage coverage ratio on your quota?” They look at me like a deer in headlights: “What?!”
I then say again, a bit slower, “Late state coverage ratio on your quota?” and usually get something like, “Well, that is a lot of math!” To which I answer, “Let’s talk again when you have done the math.”
That is how I run the company.
What was your average price per seat, per module?
Nobody does that. They will just say, “It was a big deal!” But so what? That does not matter. We need to know if we are going to make money on it so let’s break it apart.
If you work at a Blue Chip, top performing Fortune 10 global company, that is normal for you, but every single person I have working here, including the three best sales reps from Taleo and we just hired the best one from Oracle, and two guys from SAP in Europe, they come over and talk about the big deals. But what I want to know is if they were profitable or did you give the product away?
They look at me and they know I am talking about the right thing and that they are going to learn a lot because they are going to work at a very different level.
We consider ourselves some sort of mixture between the Navy Seals and McKinsey, and that is how we go to work. We actually had the head of the Navy Seals come and speak to us at our last all-hands meeting, to give you a feel for how we operate and how we think of ourselves. Across the business we track metrics like that.
We track productivity, we track things we have invented ourselves such as ramp sales equivalents which talks about how much a rep should be producing right now not just if he is a good guy or a bad guy. What does that mean? How long has he been here compared to everybody else, and then we add those numbers up for a division.
What I found in Unilever is that people would hide the data from me … I call it ‘hide the ball’ … by not hiring people for a long time and therefore we would not have the capacity, and then before the meeting they would hire somebody and put 1’s in all of the places to say that they have all this. I asked “How long have you had that guy?” and the answer would be, “Uhh, not so long.” Well that is kind of a problem because we agreed he should have been hired 6 months ago so he should have been ramped by now, and if you multiply that by 30 or 60 people that is a lot of loss of capacity.
What we have created is this internal ramp sales metric which we use for both professional services and customer success, which talks about the capacity which we expect from a particular person, from a region, from an aggregation of regions, from all of the VPs, and that is how we run the company.
If that means somebody comes to a monthly meeting to talk about what they would like to invest, we don’t sit there and say, “Well, you had a big deal last week so good for you, keep hiring.” We say, “Look, your productivity sucks, fix your productivity and you can come back and ask for more.” So it is very much like a business only their currency is productivity and I have the bank that let’s them buy some more.