For those few educated in classical economics, Gresham’s Law is a real find. It essentially states that when crappy money comes into a system, the good money (gold), is hoarded and goes out of circulation. The lesson is that when junk enters any system, excellence departs.
Well, in enterprise sales, it is no different and we see it every day.
In any diffusion curve, there are those in the lower left quadrant who are the real champions—they find new deals, they get the new accounts who support the company going forward. They are the “franchise reps” who make others rich. And the rest of the sales force hates them. They prospect, they have the native intelligence to find connections others do not see. They are the 1%.
Then there is the right side of the diffusion curve—and in the enterprise space, it is about 90% of the population. They are the order takers who wait for the phone to ring and whenever possible, find ways to have accounts a top rep closed moved to them.
These are the mediocre reps—they are the ones who believe prospecting is watching Salesforce all day looking for someone—usually in another rep’s territory, who might have a need for the product. In 95% of the cases, it is an existing customer—almost never a new one. And they jump on it because they are not sales pros, they are body snatchers. And every organization has them—those who make a living eating the dead, not finding the new accounts which help a company grow.
Whether this is right or not, whether it is allowed by sales management or not is secondary. The real issue is that these mediocre reps instantiate a cancer in an organization and it slowly drives out anyone who is a “franchise rep” – that person who finds new deals, brings in new logos.
Steve Jobs called it the Bozo Explosion. “A” level people hire other “A” level players. But “B” players hire “C” players and those in turn hire “D” players. Then the “A” players depart—Gresham’s Law of Enterprise Sales.
Crappy sales management only accelerates this process. When there are sales managers who were never top reps, it is almost always an indication of bad things to come.
Over the course of 18 months, 3 or 4 top reps leave—but they may be 95% of your sales talent pool since most of your reps are mediocre—they cannot find new accounts—they cannot create new value props—and when the day is done, they work Salesforce, not make something happen.
For the raw startup, this is death. You cannot survive without that top talent—the 1%.
You are better off with fewer reps, who are part of that 1% than 20 who are part of the 95%.
When you look at how this impacts your cap chart, your equity, your dilution, you will understand that you should hunt down mediocre reps with dogs—get them out of your environment as fast as possible. If they live and die in Salesforce, they are probably your problem.
This is a different way of thinking, but if you want to keep your equity, reward your early employees, the mediocre rep is a cancer that eats all your money, equity and drives out your excellence. And they are easy to identify—-
Hard for a CEO to make this call. But some are doing it. And they are almost always ones who are on their second or third startup and they get it.
So should you.
All blog posts are from our personal experience and do not reflect opinions of any former clients, anyone with whom we may be working.
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