Salesforce paid salesmen $1m – now its firing them under pressure from Elliott Investment Management
The natural economics of software is why Salesforce has become one of the most successful software companies. Not only do the programs work well, their popularity is self-reinforcing.
There is a large pool of people in the business world who understand how Salesforce programs work, making it more likely that new companies will hire Salesforce. They, in turn, will train their staff in Salesforce, and so on.
How did Salesforce get into this position? Some people praise the way the staff treats.
They get paid a lot. Among ex-Salesforce employees in Australia, top salespeople are said to have received $500,000 to $1 million a year in salaries and bonuses.
While such numbers cannot be verified, there is no doubt that Salesforce spends heavily on staff. The company is generous with training, from how to code to how to handle conflict. New employees were flown to the San Francisco headquarters where they could discuss their career goals with more experienced employees. There was an annual sales conference called Dreamforce. Al Gore once spoke.
Back in their home markets, they had professional reviews every three months. Salespeople who failed to meet their targets were fired.
“When I was there six or seven years ago, we always talked about this being the MBA of software sales,” former Salesforce sales rep Daniel Bartels told me this week. “You’ve learned more in three to four months than in years in an MBA or working elsewhere.”
Jean-Philippe Picard, who left two years ago to start his own computer marketing company, said, “Great product, great people and great place to work.”
Salesforce has adopted a corporate culture based on a Hawaiian concept of ohana, or extended family. Under the approach, employees are expected to help each other, and their customers and suppliers. Staff are paid to do charity work. There are stories circulating that the company goes to great lengths to help employees in trouble.
A former employee said a friend who works at Salesforce was vacationing in Nepal last October when he was cut off by flooding and mudslides.
“He got stuck without water, food, medical supplies,” he said. “He was told by the Nepalese authorities: ‘You are stuck. Nobody’s coming.” He made one phone call. He was told that in 45 minutes there will be a helicopter 200 meters from where you are. Salesforce hired the last helicopter in Nepal to get him out.”
With the US and Europe potentially entering a recession, Salesforce, like most major technology companies, is under pressure to cut costs. Activist fund managers Elliott Investment Management, Inclusive Capital Partners and Starboard Value have been buying shares of Salesforce in recent months. They presumably want Salesforce to increase profit margins.
Three weeks ago, CEO Marc Benioff said he planned to cut 10 percent of its 80,000-strong workforce. The decision is a kind of admission that he misnamed the pandemic.
From the beginning of 2020 to the end of 2022, Salesforce’s workforce grew about 60 percent. Now, instead of talking ohana, the company emphasizes the need for efficiency.
“Treat them with grace and dignity, but you have to send them away if they don’t perform,” chief operating officer Brian Millham said at a conference in December, according to the Wall Street Journal.
Activist investors like Elliott usually target companies that they believe are not as profitable as they should be because their leaders are not strong enough. They want people fired and unprofitable businesses sold.
Usually they negotiate privately first. If the board or CEO doesn’t do what they want, they publicly criticize them. This can destabilize the company. Sometimes they try to win board seats.
Elliott, who has a long history of shareholder activism, has politely suggested that Salesforce needs more discipline. “We look forward to working constructively with Salesforce to realize the value befitting a company of its size,” said the investor’s managing partner.
Capitalism is ruthless, and Elliott is unlikely to value the Salesforce business family as much as Benioff, one of San Francisco’s leading philanthropists. Shares of Salesforce will be nearly halved by 2022. They’re up 16 percent this year — a sign that investors believe the company is headed in the right direction.
The pressure on Salesforce to reduce costs is an example of how the global economic slowdown can change corporate culture. Leaders like Benioff are expected to invest less in people. Companies are rewarded for thrift rather than generosity.
There may be fewer rescue missions in Nepal in the future.