SaaStr - What to Expect from a New CRO with Kathy Lord, CRO at Zensai
The conversation highlights the importance of defining the role and expectations of a CRO in startups and scale-ups. In smaller startups, a CRO might handle demand generation, but as companies grow, this responsibility should shift to specialists to maintain focus. The first 90 days are crucial for a CRO to align with the CEO and other executives, understanding the company's market, pipeline, and internal processes. This period should involve setting clear, realistic goals and ensuring cross-functional alignment to drive commercial success. The discussion also touches on the challenges of transitioning from a VP of Sales to a CRO, emphasizing the need for pattern recognition and experience in scaling businesses. Practical insights include the necessity of a multi-quarter action plan and the importance of empowering new leaders while maintaining CEO involvement in sales processes.
Key Points:
- CROs should not own demand generation in larger companies; it's a specialized role.
- Alignment on goals between CROs and CEOs is crucial in the first 90 days.
- A clear, realistic 90-day plan is essential for new executives to avoid misalignment.
- Empower new leaders but ensure they have the freedom to make decisions and learn from mistakes.
- CEOs should remain involved in sales to maintain market connection and support key deals.
Details:
1. 📊 The Role of Demand Generation in Startups
- Startups with revenue under $20 million should assign demand generation to a specialized expert or a highly skilled individual contributor, rather than the Chief Revenue Officer (CRO), to ensure focused expertise and efficiency.
- Demand generation requires quantitative and detailed knowledge, which most CROs and sales leaders lack, potentially diluting their focus if they oversee this function.
- Having a dedicated demand generation leader allows sales leaders to concentrate on deal closures and customer success, maintaining organizational focus and efficiency.
- The strategic separation of demand generation from CRO duties supports a clearer delineation of roles, thus enhancing the overall effectiveness of the startup's revenue operations.
2. 🎯 Setting Expectations for CROs in the First 90 Days
- Kathy, an experienced sales leader, joined a mid-stage scale-up with 225 employees after a successful tenure in larger companies, including a billion-dollar acquisition with Sage.
- The transition from large corporations to a smaller scale-up provides insights into setting realistic expectations and aligning goals between the CRO and CEO.
- Misalignment in expectations is a common issue in hiring senior executives, often due to lack of thorough reference checks and reliance on virtual interviews.
- Kathy faced challenges in adapting her strategies from a large corporate environment to the scale-up's dynamic needs, highlighting the importance of flexibility and open communication.
- Successful onboarding requires clear communication of company culture and operational differences to prevent expectation misalignment.
- Scale-ups should conduct comprehensive reference checks and consider in-person interactions to better assess candidate fit.
3. 📝 Aligning Executive Goals and Creating Realistic 90-Day Plans
- Misalignment between executives and CEOs often leads to frustration and failure, as seen in many cases where executives flame out after 2 to 50 weeks.
- Executives frequently attempt to apply successful past strategies in new environments, but these rarely work effectively without proper alignment.
- Aligning executive goals with the CEO's vision is crucial for driving sales and revenue targets, preventing unmet expectations and emotional fallout.
- Understanding the discrepancy between what a CEO desires and what a CRO or VP of Sales can deliver is essential for realistic planning.
- CEOs and founders prioritize sales and revenue, underscoring the need for alignment in these areas.
4. 🔍 Understanding Sales and Revenue at Different Growth Stages
4.1. Sales Leadership Differentiation by Growth Stage
4.2. Aligning Sales Leadership with Organizational Needs
4.3. Initial Actions for CROs in New Roles
5. 📈 Analyzing Pipeline, Metrics, and the Four Swim Lanes
- Establish a robust baseline for metrics to guide strategic growth initiatives effectively.
- Analyze the four swim lanes: people, processes, systems, and cash flow efficiency, ensuring each is optimized for organizational scalability.
- Prioritize achieving cash flow positivity and efficiency in scaling early in the organization’s life cycle to maintain financial health.
- Implement a consistent and scalable sales operating model that aligns with the organization's size and strategic objectives.
- Develop a detailed multi-quarter action plan with cross-functional alignment to ensure all departments work cohesively towards scaling goals.
- The VP of Sales should focus on maintaining current revenue cadence while executing deals effectively to drive growth.
- Enhance revenue generation by increasing pipeline creation and improving deal win rates.
- Align organizational structure with the overall market strategy and operating model to ensure strategic coherence.
- Adopt a data-driven approach to measure and optimize the sales funnel on both regional and global levels, using metrics for informed decision-making.
6. 🔄 Developing a Scalable Revenue Model and Action Plan
- Implement consistent baseline performance across regions to ensure alignment in execution, which is crucial for scaling effectively.
- Develop a structured three-quarter action plan after the initial 30 days to guide transformation and achieve strategic goals over time.
- Ensure clarity in organizational roles and expectations, especially when hiring a sales leader to target specific revenue milestones (e.g., $10 million, $15 million), which requires tailored leadership skills.
- Identify leaders with pattern recognition for anticipated growth stages to prevent common pitfalls and facilitate smooth scaling.
- Establish cross-functional alignment in goals and objectives with new revenue leaders to ensure organizational cohesion and unified direction.
- Align product development and marketing strategies with revenue goals to drive scale effectively, ensuring that all parts of the organization work towards common targets.
- Empower revenue leaders by removing sacred processes or systems that hinder transformation and avoid CEO bottlenecking in decision-making, which enables quicker, more agile responses to market changes.
7. 🤝 Empowering Revenue Leaders: Clarity, Alignment, and Trust
7.1. Fail Fast and Learn Fast
7.2. Strategic Revenue Planning
7.3. Hiring Strategy for Revenue Leaders
7.4. Demand Generation Ownership
7.5. Transitioning Sales Leadership
8. 🗣️ CEO's Role in the Sales Process and Empowerment
- CEOs should allocate 10% to 20% of their time engaging with customers and partners to maintain market and customer insights.
- A great sales leader should not free up the CEO's time entirely; instead, the CEO's role in sales evolves to focus on strategic initiatives, demos, and key deals.
- Hiring a mediocre sales leader might give the CEO all their time back, which is a negative indicator, as great revenue leaders require CEO involvement in major deals.
- Clear guidelines should be established for when and how the CEO should participate in sales meetings, whether to present vision, conduct demos, or engage in strategic discussions.
- Maintaining CEO involvement in sales is crucial for staying connected with the market and customers, supporting the organization in reaching milestones such as $100 million or $1 billion in ARR.