Some tech companies appoint a salesperson to chief executive when business demands. Why do they do this? Does it work?
Technology company CEOs usually come in two flavors: IT genius founder for the growth stage and finance gal (or guy) for milking the cash cow during the maturity phase. However, some tech companies appoint a salesperson when business demands. Why do they do this? Does it work?
Something different seems to happen when a sales rep takes over as head of a tech company.
Oftentimes this leads to disasters in the making: staff demoralization, founders bailing out, deferred investment in operations and R&D, misunderstanding of the overall business, dereliction of duty by board-of-director members, and other signs of trouble. Some salespeople even recognize these issues themselves, and when they were in position to take the reins, they declined. They know their strengths and where they lack capabilities.
“From 2001 to 2008 when I was running IT Matters (now E.S. Williams & Associates) with two partners they had an opportunity to appoint me president/CEO,” says Stuart Crawford, president and CMO, Ulistic, provider of outsourced marketing solutions for managed IT service companies. “They didn’t do that and had Rob Hay, my partner and operations guy, become president. It was for the best. Rob was able to streamline operations, maintain morale and allow me to do what I was good at—sales and marketing.”
Crawford goes on to caution any organization from promoting a salesperson to CEO. Because salespeople naturally concentrate on their specialty, and a company needs a professional who can understand the entire operation from the leadership role, he says.
Understanding the Technology vs. Sales-Driven Mindsets
Before you can understand why salespeople are fundamentally unfit for the role of tech CEO, you have to know the back story that makes them unprepared to lead in this industry. While women may be from Venus and men from Mars, it seems that technologists and salespeople do not even share the same solar system. The way some industry observers see it, dyed-in-the-wool techies believe that the truth lies in the numbers while salespersons see business as a numbers game.
“The tech-driven mindset focuses on what customers are big and which trends and data are superior,” says Terry Akins, an independent marketer, who has experience with companies large and small. “It tells the truth about where the market is going and who is buying, and then you can easily find the next move with that data. Techies can see the faults of any company and what to do to correct them. The tech-driven mind will do honest marketing.”
On the other hand, the sales mind focuses on current customers and relationships and those that can be acquired. They call as many people as they can and get as much advertising in high-profile places as they can afford, according to Akins.
“The mantra behind the faulty sales-driven mind: Some will. Some won’t. So what?” Akins says.
Why Salespeople Face More Problems than ‘True’ CEOs
In in the technology sector, sales reps generally fall into categories of farmers and hunters, common knowledge tells us. Farmers concentrate on sales that come in regularly from loyal customers. But they do little to generate revenue from new accounts. Conversely, hunters are all about the big game kill. They’re on the trail day in, day out tracking prospects and reeelin’ ’em in. However, they have scant interest in present clientele, delegating their oversight to support. Besides the chosen vocation, means and methods of the two sales philosophies share little, except for their individualism. Both types of salesperson think only of their own sales—first, second and last—especially when it comes to meeting/not meeting their specific quotas, according to some tech sales observers. And that tunnel vision can put them at a disadvantage in the corner office.
“A salesperson can fail at a sale for a day—perhaps a week—and not affect the company bottom line or worry about their job,” says Julian Holtzman, CEO, Torq Labs, a motion data analysis company. “A career salesperson will eventually normalize the stress associated with those minor failures. But when tasked with leading and decision making as CEO, stress of failure amplifies by orders of magnitude. Depending on the salesperson, they will either deal with it or not. A salesperson maybe an ace in their industry, but to be an effective CEO is to be a jack-of-all-trades.”
Boosting Short Term Results at Expense of the Long Term
Of course, no CEO—whether a salesperson or otherwise—operates in a vacuum. The CEO might have final say on day-to-day company strategy, but unless a sole proprietorship or limited liability partnership, chief executives report to a board of directors. Ultimately, the board hires the CEO and approves company strategy. And a board desperate enough to hire a salesperson as CEO could take other myopic steps to make it through the short term. Such as steps that could come at the expense of the long term interests of the enterprise, according to former corporate insiders.
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“At a former company I worked for, we experienced a switch in board focus away from building quality products,” says Ian Wright, founder, British Business Energy, a business energy comparison website, “to focusing on monthly sales targets that got more and more unrealistic.”
Early on, the company had a traditional mix of specializations from development to marketing to sales, according to Wright. But as can be the case at many cloud startups, some founders began to look for a liquidity event. To maximize their cashout capability, they shortchanged the company by focusing solely on boosting immediate results, as Wright relates.
“So they delayed then canceled important product work, since coders and developers are cost centers,” Wright says. “Plus, they refused to increase salaries for anyone but salespeople, despite placing ever-increasing demands on tech and marketing teams, resulting in lower morale.”
End result: they boosted short term sales spectacularly but at the cost of losing their best and brightest. “The company would often wonder why it had such a hard time recruiting people when the reasons should have been glaringly obvious,” Wright says.
Damn the Torpedoes, Full Speed Ahead: Growth at all Costs
Even if the board and top equity holders of a cloud company or other tech concern look to guide the enterprise into a short-term mindset, the fiduciary responsibility of the CEO remains to do the right thing for the sustainability of the business over time. So when the CEO takes the top line view at the expense of everything else, all bets are off. Product misfires, staff demoralization and personnel burnout are just the tip of the iceberg, according to former tech insiders.
“I worked in numerous tech companies that have a salesperson as CEO, and the overriding theme is sole dependence on constant, unsustainable growth,” says Adam Vowles, head of digital marketing, TWDG, a digital marketing agency. “Focus on growth comes at the expense of the quality of the product, and employee abilities and happiness.”
In fact, some employees got so disillusioned they eventually quit the industry all together, according to Vowles. Completely new sectors—and their concomitant steep learning curves—seemed more appealing than the huge amount of demanding work placed upon them, according to Vowles. The parallel problem of large staff turnover that needed replacement also resulted.
“Laser focus on growth and sales also became an issue when the product—that had just come out of development—was not good enough,” Vowles says, “which results in a huge swath of complaints and more work for the overstretched workforce.”
‘Where There is no Vision, the People Perish’
A truism which comes down from Proverbs reads that “where there is no vision, the people perish” applies as much today as ever and especially to internet businesses. At one web search optimization company, a switch in leadership led to a big step down in sales: from 939 percent growth over the previous four years to only 10 to 15 percent revenue increase in the last year, according to a former company insider. This is partially attributable to lack of vision by the new CEO, who had been a salesperson, according to Christopher French, former senior account manager with the company.
The person who was CEO had much stronger business acumen, made firmer decisions and emphasized data dashboards and information gathering, according to French. The new CEO did not have this business acumen. For example, the salespeople were not expected to achieve equalized results. The most successful salespersons were favored and the under performers received no training to help them achieve their expected targets, according to French. This salesperson turned CEO didn’t know how to teach sales skills and couldn’t understand the staff struggles, French relates.
“CEOs who are strong business leaders don’t have to shine as salespersons but stay busy leading the company,” French says. “They must choose between CEO or CSO roles—they cannot be both.”
A Hybrid Approach for Hybrid Companies
Just as many companies take a hybrid approach to IT strategy, some cloud computing companies solve the salesperson-as-CEO problem while increasing sales focus in the C-suite with a dual chief-executive structure. For example, consider Embotics, a cloud automation company.
At Embotics, Michael Torto, CEO, is an experienced operator who previously took five other firms to a sale, liquidity event (e.g., IPO) or expansion of scale, according to a company representative. He’s the Embotics sales guy, drawing an inference from the company’s website.
“Throughout his career, Michael has returned significant capital to investors and shareholders,” says Margaret Menotti, Embotics spokesperson. “From generating close to $1 billion in a public offering to a company sale netting $100 million in profit on a $4 million investment.”
Meanwhile, Jay Litkey, founder and president of Embotics, is the company tech genius and strategist, according to Menotti.
“A serial entrepreneur with extensive experience launching, financing and growing software companies, Jay pioneered emerging high growth markets that include cloud computing, virtualization, systems management automation and internet video,” Menotti says. “For more than a decade, Jay has been a virtualization evangelist, focusing on strategic impacts of virtualization and automation within enterprise data centers.”
By the facts, here’s the deal on the hybrid CEO strategy of Embotics, which just finished its best year ever, according to the company:
- Record sales growth in the past 12 months (results not disclosed)
- Major customer wins in enterprise and service provider markets such as Nordstrom and Charter Communications
- vCommander, its platform for Infrastructure-as-a-Service, now called fastest time-to-value solution in cloud management, according to the 2016 Gartner Cool Vendor report
- Featured in Frost & Sullivan’s 2016 Hybrid Cloud report as a key vendor
Takeaway: it takes a lot to successfully lead a cloud or technology company as CEO, according to management experts. A co-CEO arrangement where the responsibilities split between those with the most competencies remains a possibility. Or a sales-oriented CEO could have all the necessary skills, they say.
“Leading a company requires multiple skills—in Silicon Valley, tech background is common,” says Amit Sharma, author of Sales-Decoded and CEO, Dishah Strategic Solutions, a sales and marketing consultancy. “However, that is just not good enough to build a successful corporation.”
A CEO has to deal with product development, market development, customers, competitors, employees and partners, which require strategic vision inline with market demand and growth, trust and authority to convince people and selling and negotiation skills with partners, investors, media and customers, according to Sharma.
“A salesman with these qualities can make a massive impact to organizational growth as a business leader,” Sharma says.