The article below is part of Alexander Group’s continuing series on top 2019 revenue leadership priorities.
Misalignment between commercial (sales, marketing and service) talent and incentive compensation can compromise even the most thoughtful XaaS growth strategies.
Across the tech industry, companies struggle with finding the right talent and retaining the required talent to drive profitable revenue growth. The demands of the XaaS market and customer base often render traditional compensation programs ineffective. How then can Pure Play XaaS companies and Hybrids transitioning traditional models to XaaS effectively align their talent and compensation programs to compete in an increasingly crowded marketplace? This article will examine strategies that market leaders use to cultivate the right commercial talent; a later article will more fully address the required adjustments to compensation programs.
Finding the right sales, marketing and service talent to guide customers through the ILAER (Identify, Land, Adopt, Expand, Renew) journey is the most critical element of success in building sustainable XaaS revenue. Companies, especially hybrids, must confront the difficult reality that XaaS requires different skill sets, experiences and capabilities from talent than traditional tech models. Effective XaaS performance mandates robust use of social and digital media; faster sales cycle times; absorption of more numerous, smaller ACV deals; an increased number of active opportunities; much deeper customer engagement post sale; and maniacal focus on renewals and expansion. Hybrid companies inevitably realize, often later than they would like, that many team members successful in the perpetual, on-premise world are ill-equipped to adapt to the XaaS model.
Tech turnover is currently running at double the normal industry rate (~20% vs. ~10%), and a disproportionate amount of that turnover is voluntary. Some of this turnover is attributable to low macroeconomic unemployment, particularly in the U.S.; however, there is no question that there is fierce competition for talent in the industry and companies are poaching top talent from one another. As coverage models change, many roles are in increasingly high demand: customer success reps, digital lead development reps, account executive, hunters and account managers.
Leading tech companies are addressing talent issues in many different ways, including:
- Ensuring Roles Are Well-Defined: Revisit existing job descriptions to ensure they are contemporary and define current and future requirements. Document expectations and requirements for new roles.
- Building Detailed Competency Models: Define an aspirational set of skills and capabilities required to perform a particular commercial job that individuals can demonstrate through observable behaviors and actions. Create a continuum of growth and development within each role to provide avenues for individuals to advance their careers. Conduct self and manager assessments once or twice per year to determine areas of strength and personal development objectives. Map particular skills directly to training modules so that individuals can address gaps in their development. Use competency models as a guide to identify suitable candidates for commercial jobs.
- Providing Clarity Around Career Path: In a recent industry study, the most consistently cited reason millennials leave their jobs is lack of clarity around opportunities for advancement. It is important to note that this group, an increasingly important element of the modern tech commercial landscape, typically does not want immediate or undeserved advancement; instead, they want clarity around the process to progress from individual contributor to management to executive. Leading companies provide this visibility via competency matrices like those mentioned in #2 above and through mentoring programs with established company managers and executives.
- Assessing Incumbent Talent Dispassionately: This can be difficult. Many companies fall into the trap of redesigning commercial organizations with current talent in mind rather than taking an aspirational approach. Leading companies design go-to-customer models irrespective of current headcount and capabilities and objectively assess existing talent to determine potential gaps. Some individuals can transition to the XaaS environment, while some will struggle to adapt. Organizations with a thoughtful, objective approach can more effectively manage risk to create desirable turnover and fill the resulting gaps more quickly.
- Avoiding Rounding Up the Usual Suspects: It is very common in this high turnover environment to encounter commercial resources that have bounced across multiple companies within the industry. This can be an indication that an individual was successful in the traditional tech paradigm and is struggling to adapt to the XaaS model. A best practice that top tech companies often cite is looking outside the industry to find new talent. There are many industry verticals that have significantly more history than tech operating recurring revenue models such as telecom, business services, information services, healthcare and distribution, to name a few. Often, potential hires from these industries will consider less senior roles at lower pay levels to break into the tech industry without direct experience.
- Investing in Mechanisms (Other Than Compensation) to Attract and Retain: For commercial talent (particularly sales), incentive compensation will always be a big part of the equation. (We will address sales compensation strategies in a future blog.) Irrespective of compensation, AGI’s research suggests that leading companies utilize multiple tools to make commercial positions more attractive to both incumbents and potential team members. Leading companies invest in non-compensation levers that make employment more attractive, such as enablement (including leads), recognition programs, training and professional development and specialist/technical support.
Finding and retaining top talent will continue to separate winners from losers in the XaaS market. Leading companies recognize that even in a digitally obsessed world, commercial success still inexorably depends on driving better customer experiences with people who can provide customers and prospects with the information and expertise they expect from a valued vendor and trusted partner.
For more information about how you can improve your ability to attract and retain top tech talent, please contact Alexander Group for a briefing.
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