Salesforce insiders say the company set up its own salesforce for failure ahead of layoffs by using a quota system that penalized top performers with unrealistic goals and difficult accounts.
Salesforce, known for its cloud-based customer relationship management tool that helps companies manage their sales processes, laid off an undisclosed number of employees this week, with some news reports saying that hundreds of people were impacted.
Four current and former employees who spoke to Insider say the cuts appeared mostly to affect salespeople, all the way up to the regional vice president level. The latest round of layoffs followed about 90 job cuts last month, according to one of the people, including recruiting roles. The employees requested anonymity because they were not authorized by the company to speak about their experiences. Their identities are known to Insider.
"Our sales performance process drives accountability," a Salesforce spokesperson said in a statement provided to Insider. "Unfortunately, that can lead to some leaving the business, and we support them through their transition."
In August, Salesforce trimmed its full-year revenue guidance to roughly $30 billion in annual sales, rather than roughly $31 billion it had predicted in May, a 17% year-over-year increase rather than the previously forecasted 20%. While that level of adjustment in 2022's economy doesn't sound like it should call for panic, Salesforce has a long history of upgrading its guidance, rather than trimming it. Its stock price tumbled in August and still hasn't recovered, despite the company authorizing $10 billion for its first-ever stock buyback program, a tactic companies use to stabilize stock price.
In addition to the layoffs, Gavin Patterson, Salesforce's chief revenue officer until recently, resigned from the company in an announcement on November 10, days after the layoffs became public. One person who spoke to Insider said the "writing was on the wall" for Patterson's exit when he was switched to a role called chief strategy officer in September. Patterson told Insider his resignation was unrelated to the layoffs, and that he left because didn't want to live in San Francisco because his family lives in London.
"We are grateful for Gavin's many contributions and wish him the very best," a company spokesperson told Insider.
Salespeople describe a stretch-goal quota system
Insiders say the system Salesforce used to evaluate individual sales performance often gave even top salespeople unrealistic goals. At times, they said, the system made it more difficult for top performers by tasking them with bringing in new business from hard-to-win customers. They also pointed out that the layoffs happened before the close of Salesforce's fourth quarter, traditionally the busiest quarter for deal activity.
While the system for setting sales quotas varied slightly between the employees who spoke to Insider, one former employee who left the company earlier in 2022 said Salesforce tracked salespeople's activities, from calls and emails to sales opportunities, via its sales tool. It then increased the next year's quotas based on the actual sales the person brought in, rather than their previous goal, this person said.
So, if a salesperson performed especially well in 2021, exceeding their quota, that high performance became the baseline for 2022's quota, and the new quota would also include a percentage increase reflecting whatever growth Salesforce expected.
For example, if a sales representative had hit 200% of their goal last year, the new quota was to do that again, plus 20% to 30% more, per a standard growth rate applied to all quotas, this person explained. The salesperson is also likely to get new accounts as a result of their performance, which might take them more than a year to break into.
"They'll 'reward' that good sales rep with a bigger quota and smaller number of more difficult accounts," the person said. As a result, the following year, such a sales representative might appear to be performing worse than another representative by just getting 80% of their quota, the person said.
Expected to beat 2021, a tall order
Sales quotas were particularly high in 2022, the former employee said, because of the company's success amid the pandemic, which forced a shift to remote work where companies used more cloud-based technology. Salesforce reported fiscal year sales of $26.49 billion, up 25% over the year prior.
That boom in sales also led the company to drastically increase its headcount, adding nearly 17,000 employees in 2021m, it reported. When sales momentum slowed this year, Salesforce reacted first with a hiring slowdown, as Insider reported, and now with layoffs.
When times are tough, the message becomes, "Go sell and go sell hard," the person said. "Typical sales team behavior. When people get desperate, sales teams start doing unnatural things to close deals."
Two of the people said they left Salesforce recently on their own due to what they said was intense pressure to meet unrealistic goals.
One former sales employee said that in early 2022, their manager began meeting with every person on their team for daily one-on-ones, and holding team meetings once, sometimes twice a week to monitor progress. It was an about-face from the year before, when the former employee said everyone had more autonomy and met with their manager for individual check-ins only once a week.
Another person, a former account executive who left Salesforce in recent months, told Insider they were removed from existing accounts and placed on new accounts after exceeding 2021 goals, losing out on deals they'd worked all year to close. While the person's quota for 2022 remained unchanged from the prior year, they were expected to achieve it with fewer than half as many accounts as they previously had, and to build those relationships from scratch.
"After coming off a strong year it's confusing to have that happen," the person said.
"It makes it difficult to work if you think everything good you do is going to be ripped away from you," they said. "That was a big reason why I left. It just felt like I could not get anything done and I was not being supported the way that I needed to be supported."
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