WEBVTT NOTE This file was generated by Descript 00:00:07.430 --> 00:00:08.690 Hi, I'm Julia Kirby. 00:00:08.740 --> 00:00:12.879 Our guest today is Mark Roberge from HubSpot, where he's chief revenue 00:00:12.910 --> 00:00:16.349 officer and was part of the team that founded the company eight years ago. 00:00:16.710 --> 00:00:21.269 His new book is called The Sales Acceleration Formula, and based 00:00:21.269 --> 00:00:23.600 on that, he wrote an article for Harvard Business Review. 00:00:23.770 --> 00:00:27.079 It's called The Right Way to Use Compensation. 00:00:27.429 --> 00:00:28.579 Mark, thanks for being here. 00:00:28.799 --> 00:00:29.400 Thanks, Julia. 00:00:30.240 --> 00:00:34.120 Before we get into the ideas of the article and the book itself, I have to 00:00:34.120 --> 00:00:35.730 ask you about your personal journey. 00:00:35.730 --> 00:00:37.070 You met your business partners. 00:00:37.480 --> 00:00:42.190 When you were all getting your MBAs, uh, but your background was in engineering. 00:00:42.269 --> 00:00:44.410 You found yourself in charge of sales. 00:00:44.420 --> 00:00:45.970 How big a shock was that? 00:00:46.560 --> 00:00:48.080 Pretty shocking, not intentional. 00:00:48.190 --> 00:00:52.370 Um, I, I, I guess I was making a transition more toward entrepreneurship 00:00:52.400 --> 00:00:55.699 and figured, maybe I should go into marketing or maybe I should go into sales. 00:00:55.699 --> 00:00:57.699 I think marketing is more the journey for an MBA. 00:00:58.240 --> 00:00:59.850 Uh, but it worked out great. 00:00:59.910 --> 00:01:03.839 Um, I, as an engineer, I've always looked at, uh, the world through a lens 00:01:03.839 --> 00:01:05.800 of data and science and technology. 00:01:06.120 --> 00:01:09.490 And obviously use that lens in scaling the HubSpot sales team. 00:01:09.820 --> 00:01:14.629 It just so happened that the way that technology businesses and sales teams have 00:01:14.630 --> 00:01:17.140 evolved, that lens is very advantageous. 00:01:17.640 --> 00:01:22.479 In the um, article you say that the sales plan of a company is 00:01:22.500 --> 00:01:27.610 kind of its, its most powerful weapon for making strategy happen. 00:01:27.610 --> 00:01:29.350 Can you explain why you think that's the case? 00:01:30.015 --> 00:01:30.515 Yeah, sure. 00:01:30.525 --> 00:01:33.595 First off, I do believe the sales compensation plan is an 00:01:33.645 --> 00:01:36.185 underutilized tool by even the CEO. 00:01:36.585 --> 00:01:40.395 Uh, all executives are trying to push change through the organization. 00:01:40.665 --> 00:01:44.364 And as I look back in the last eight years at HubSpot, the major changes 00:01:44.374 --> 00:01:48.325 that we made, a lot of them were driven through the sales compensation plan. 00:01:48.854 --> 00:01:51.405 So for the three phases we went through that I think a lot of 00:01:51.405 --> 00:01:56.135 startups do, first, obviously, we had to acquire customers quickly. 00:01:56.655 --> 00:01:59.015 Uh, second, we had to make them successful. 00:01:59.779 --> 00:02:04.330 And once we accomplished those two things, we had to focus on sustainability, 00:02:04.460 --> 00:02:07.729 sustainable growth, and really building a, a, a profitable business. 00:02:08.070 --> 00:02:11.730 And there was a different compensation plan needed for each one of those phases. 00:02:12.110 --> 00:02:16.439 So in that very first phase, just customer acquisition, you had a pretty 00:02:16.440 --> 00:02:19.034 straightforward, um, commission process. 00:02:19.325 --> 00:02:23.635 Approach where you just were asking people to get out there and hunt. 00:02:24.015 --> 00:02:28.705 Yeah, really the, the weight of the plan was based on customer acquisition and 00:02:28.705 --> 00:02:32.644 just, there was accelerators and, and you know, that was really the focus. 00:02:32.715 --> 00:02:37.064 And we went from a few hundred thousand in revenue to a few million in revenue 00:02:37.305 --> 00:02:40.235 and a hundred customers to a thousand customers in just eight years. 00:02:40.640 --> 00:02:42.460 And that really propelled us through that growth. 00:02:42.779 --> 00:02:44.320 Why did you have to change that? 00:02:44.739 --> 00:02:48.359 Well, at that stage, now that we've got customers on board, like any startup, 00:02:48.380 --> 00:02:52.810 it's time to reflect and see, are customers succeeding with our product? 00:02:52.820 --> 00:02:54.459 What gaps are there in the product? 00:02:54.489 --> 00:02:57.729 What gaps are there in the way we're selling to them or servicing them? 00:02:58.130 --> 00:03:02.230 And our customer attention was not acceptable to a sustainable business, 00:03:02.250 --> 00:03:04.030 as most startups find at that stage. 00:03:04.440 --> 00:03:05.670 And we did a lot of analysis. 00:03:05.670 --> 00:03:10.584 We looked at the account managers that were servicing The customers post 00:03:10.584 --> 00:03:14.135 sale, maybe there was something some of them are doing better than others. 00:03:14.555 --> 00:03:18.835 As it turns out, the churn rate by account manager was very similar. 00:03:19.405 --> 00:03:23.224 And so then we next looked at the salespeople, and 00:03:23.224 --> 00:03:24.465 that's where the answer was. 00:03:24.834 --> 00:03:29.325 The churn rate for our best salesperson was one tenth that of our worst. 00:03:29.770 --> 00:03:33.430 When you looked at it from churn, so we were, we concluded that this entire 00:03:33.430 --> 00:03:38.120 customer success issue is driven by the expectations that are certain salespeople 00:03:38.120 --> 00:03:41.920 are setting presale and the types of customers they're doing business with. 00:03:42.459 --> 00:03:46.450 So we could immediately start educating the team about that, start illustrating 00:03:46.450 --> 00:03:49.649 these numbers to the team, and base the compensation plan on that metric. 00:03:50.249 --> 00:03:54.309 So you changed the actual structure of the compensation so that they would 00:03:54.309 --> 00:03:56.700 care more about customer retention. 00:03:56.829 --> 00:03:57.179 Right. 00:03:57.219 --> 00:04:00.339 Those who brought on successful customers made a lot more money, and 00:04:00.339 --> 00:04:03.999 those who brought on less successful customers, even though the new customer 00:04:03.999 --> 00:04:06.519 acquisition may have been higher, if they weren't successful, they would 00:04:06.519 --> 00:04:07.859 make less money and be penalized. 00:04:08.140 --> 00:04:12.010 And within Six months, our customer turn dropped by like 70%. 00:04:12.380 --> 00:04:16.800 So now you had a good kind of product market fit and you had a lot of 00:04:16.820 --> 00:04:21.490 customers and you moved into a third phase where really you were just very 00:04:21.490 --> 00:04:23.360 focused on scaling the business up. 00:04:23.600 --> 00:04:23.789 Yeah. 00:04:23.789 --> 00:04:26.069 Now we have to focus on the economics of the business. 00:04:26.120 --> 00:04:29.600 Customer acquisition costs, payback period, profit margin. 00:04:30.020 --> 00:04:34.690 And at the time, um, SAS was pushing much more toward, uh, longer term 00:04:34.690 --> 00:04:36.590 payments really helps with cashflow. 00:04:36.659 --> 00:04:38.619 Also keeps customer attention in check. 00:04:39.030 --> 00:04:41.840 And we felt that at this stage of the business, HubSpot had 00:04:41.840 --> 00:04:43.489 been around a long enough time. 00:04:43.709 --> 00:04:46.719 The concept of inbound marketing, which we pitched, was getting 00:04:46.719 --> 00:04:47.740 more traction in the market. 00:04:47.740 --> 00:04:50.639 People were more comfortable with, with it, and we were in a position to be 00:04:50.640 --> 00:04:52.420 able to ask for longer term payments. 00:04:52.769 --> 00:04:57.000 So we were able to revolve the, uh, compensation plan around that metric. 00:04:57.660 --> 00:05:00.749 I want to ask about, um, sales contests. 00:05:00.760 --> 00:05:03.580 You, uh, you seem to have kind of a philosophy of them. 00:05:03.580 --> 00:05:05.249 You certainly believe in using them. 00:05:05.529 --> 00:05:06.799 What are some of the keys there? 00:05:07.205 --> 00:05:10.825 Yeah, also, in addition to the compensation plan, the contests are great 00:05:10.835 --> 00:05:12.565 at motivating the behaviors you want. 00:05:12.935 --> 00:05:15.954 The difference here is the behaviors you're shifting on here 00:05:15.954 --> 00:05:17.194 are a little more short term. 00:05:17.414 --> 00:05:20.834 For example, perhaps we're worried about the pipeline in the summertime. 00:05:21.195 --> 00:05:25.175 Well, we can run a contest in May and June to drive activity significantly. 00:05:25.394 --> 00:05:27.715 That's not something you do in a comp plan, but certainly 00:05:27.715 --> 00:05:29.045 something you can do in a contest. 00:05:29.425 --> 00:05:32.885 What I found in the contest, I really like the contest to be team based. 00:05:33.225 --> 00:05:35.265 And I also like the prize to be team based. 00:05:35.724 --> 00:05:39.655 As opposed to one winner who makes a bunch of money and everybody accuses them of 00:05:39.655 --> 00:05:44.425 cheating, instead you've got three or four people on the same team competing against 00:05:44.515 --> 00:05:46.715 ten other teams of three or four people. 00:05:47.044 --> 00:05:50.924 And what you find is you really start to accelerate the teamwork on the 00:05:50.924 --> 00:05:54.155 floor of those who are succeeding, of helping those who are struggling, 00:05:54.194 --> 00:05:55.715 maybe after hours with some coaching. 00:05:56.280 --> 00:06:00.499 And of course, the prize was never a lump of some of money for them, but 00:06:00.499 --> 00:06:04.359 instead, uh, you know, a ski trip or a golf outing or a nice dinner or a 00:06:04.359 --> 00:06:07.999 crew, uh, a, a, you know, a dinner cruise or something along those lines. 00:06:08.039 --> 00:06:12.399 So it reinforced the team aspect that they went off and won together and 00:06:12.400 --> 00:06:13.849 they went off and celebrated together. 00:06:14.420 --> 00:06:18.619 It makes sense that, um, by doing it that way, not only do you get the sales, 00:06:18.619 --> 00:06:22.680 but you also get lots of benefits for the culture and employee engagement. 00:06:23.075 --> 00:06:23.765 Absolutely. 00:06:23.765 --> 00:06:24.055 It was. 00:06:24.065 --> 00:06:24.615 It's funny. 00:06:24.615 --> 00:06:26.535 We did that for the first three years of the business. 00:06:26.535 --> 00:06:29.955 And then, you know, I want to switch it up and tried an individual 00:06:29.955 --> 00:06:31.685 contest with a big money winner. 00:06:31.685 --> 00:06:35.405 And that was the first month where we actually had, you know, claims of 00:06:35.405 --> 00:06:37.184 cheating and backstabbing on the floor. 00:06:37.184 --> 00:06:41.604 So at that point, I realized, wow, this leniency toward more of team base. 00:06:41.645 --> 00:06:44.975 It was Really important are driving that the team foundation that our 00:06:44.975 --> 00:06:46.235 culture had on the sales floor. 00:06:46.835 --> 00:06:49.265 So I come away from this conversation convinced that 00:06:49.265 --> 00:06:51.195 there's a lot in this formula. 00:06:51.195 --> 00:06:53.215 That's the sales acceleration formula. 00:06:53.515 --> 00:06:56.055 Mark, thank you so much for sharing your insights. 00:06:56.355 --> 00:06:56.965 Thanks, Julia.