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Insights and Guidance

Forecast Hiring Needs

As a business leader, you naturally plan for the future based on revenue, market, and macroeconomic trends. Whether you’re the tip of the spear or a supportive function we must work in earnest to collaborate and have our plans mutually aligned. Successful growth is only achieved when all moving parts scale alongside one another or risk breaking cross-functional dynamics. At the end of the day, I follow Canoe Theory: we are all in the same canoe rowing the same direction (source). In the following four scenarios, I show how sales engineering capacity planning directly impacts sales productivity (and revenue) and how hiring forecasts can make or break a business.

First, let me introduce a basic hiring plan sheet. The driving factor in this model is to double annual recurring revenue (ARR) within two years delineated from personnel growth. New hires and attritions are reflected in the following quarter due to the 3mo ramp time (for ease of demonstration). Quotas increase yearly and quarterly revenue forecasts are simply a multiplication of Ramped AEs x QTRQuota. For simplicity’s sake, I’m not including quota during the ramp period.

In the following scenarios, we’ll discuss four SE hiring scenarios against a standard sales hiring plan starting with eight full-ramped AEs,~10% annual churn, and team growth towards the end of the FY. The desired SE:AE ratio will be 75%, or, three SEs supporting four AEs, allowing for an 8% variance flexibility (between 81% and 69%). Anything outside of this ratio will be highlighted in yellow and anything less than 75% of the ideal 3:4 ratio, roughly 56%, will be highlighted in red. Don’t worry so much over the numbers; yellow=caution, red=bad… easy. SE ramp time will be six months, as it takes longer to understand the technology and run through a technical proof of concept. This changes when we count fully ramped SEs from the hiring quarter to two quarters out. You’ll see how this impacts sales productivity soon.

Scenario One — Reactive Hiring

All too common is a hiring practice that onboards AEs first and then bolster the supportive functions after. The basic math followed is that if we need to hit X revenue next year and a salesperson can be ramped in Y months then we need to hire Z salespeople today. What’s forgotten is that the numbers plugged into that equation are the result of a well-oiled and productive machine prior to future hiring rounds and that, without preemptive investment in the supportive roles, AE ramp time and productivity figures degrade. Think about it this way: A new AE can ramp in 6mo because they had a compliment of ramped SEs supporting early discovery and POC scoping. But if they hire another five AEs they’ll get just 1/5 the guidance and enablement; now the ramp time increases to 9mo, a full quarter of deferred revenue! Then the thought is: “Let’s hire two SEs alongside those five AEs to keep the ratios aligned and keep ramp time low.” While I believe that partnering new AEs and SEs builds a more constructive onboarding experience and develops comradery, ramping SEs still can’t provide the quality support as would an SE hired six months back.

Ramp time plays a critical role in sales productivity when hiring alongside support personnel. As time-to-productivity (TTP) increases, this impact widens. Above, we forecast quarters that will be stressful, where sales may struggle to meet quota and SEs feel overworked.

In this scenario, the SE leader hired alongside the growing sales team. When a member attrited in Q1–21, the hiring manager hired a backfill within the quarter. When sales increased their team, the hiring manager dutifully hired more. It sounds good on paper but this direct alignment creates stressful quarters due to the delta in time-to-productivity between AE and SE. First, it impacts new hires because they feel they’re not getting proper senior-level support from SEs and delays their ramp time. Second, it impacts tenured SEs because they’ll be stressed to provide support across more people, at least until the new SEs ramp. In the meantime, the existing SEs are on the hook for supporting nearly 50% more of the quota for the same OTE (note: in this example, SEs have a shared quota model). If AEs can’t hit their stride early on, they may also be at risk for attrition.


Scenario Two — Deferred Hiring

The situation is even worse when the hiring plan is delayed or when funds ‘need to be freed’ for support organizations. In early startups, we find ourselves following a Sales Learning Curve: first, in an initiation period where individuals figure out what works and build initial GTM playbooks; then into a period of transition, further refining the playbook and preparing for scale; finally execution for growth and profitability (source). To avoid sliding backward and forcing our AEs to, again, figure out what works and what doesn’t on their own… without SE support, leaders must remain diligent on the maturity of their business. New hires will quickly consume enablement material and slide decks but need active coaching to operationalize their learning. While this may initially fall on the leader to work directly with each new hire on the minutia, it only works on smaller teams- roughly 5–8 direct reports- and does not scale. It is on SE leaders, in fact, leaders of all supporting departments, to continually measure and represent the value of their organization against driving business factors to ensure the field is adequately and appropriately supported.

A deferment in hiring, or any policy that underfunds necessary support structures must be thoroughly assessed against future impact, not simply the current budget. Deferments combined with ramp times affect multiple quarters and can now impact employee morale. AEs blame deal slip/shrink on lack of support and SEs become at-risk for burnout.

This situation simply moves the hire date of SEs to the quarter following the AE hire. As a result, the impact extends across multiple quarters and tenured SEs and AEs feel the strain on their collective systems while ramping teammates are frustrated they can’t seem to get their deals off the ground. As the strain continues, anticipate attrition risk from both new and ramped teammates.


Scenario Three — Delayed Hiring

“What’s the most important quality of a leader?” someone once asked. Without missing a beat they interrupted — “Recruiting!” I thoroughly believe that if you attract and retain the best people that revenue will follow and the following exemplifies the scenario that befalls leaders who cannot recruit: a death spiral. It is critical that all leaders build and maintain their candidate funnel and continually enhance the means by which they source talent.

Delayed hiring produces situations where shortsightedness creates long-term challenges. Carrying double their traditional quota for an extended period, seasoned SEs will begin to attrit and revenue numbers for the year may not be salvageable. Sales attrition may follow. Do not delay hiring!

When we — in a supporting role — are no longer able to support the pace of sales, the impact will immediate and prolonged. In the example above, the Q1-F21 churn wasn’t backfilled which created minor stress throughout the year. Then, the rapid expansion of sales without an equal investment in the SE org led to EoY attrition of senior SE staff and exasperated the problem. The increasing stress and lack of an immediate plan for reinforcements lead to revenue loss, further attrition, and a death spiral that, unabated, will impact the company’s ability to source talent as word spreads about the “revolving door.” A heavy investment in recruitment and hiring practices, scaling down the business to a manageable size and then working back to the desired number, or replacing leadership who can bring in new teams will be necessary to stem the hemorrhaging of amazing people.


Ideal Scenario: Forecast Your Hiring

This scenario is the result of clearly articulating and measuring the impact of inappropriate or deferred hiring such that the hiring policies of all supportive organizations are aligned to support an influx of new AEs. SEs are hiring a full quarter ahead of the sales schedule to get them foundational onboarding and provide technical partnership for incoming AEs to rapidly ramp. Imagine the quality improvement in your new hires’ new business meetings when a ‘new’ SE is able to offer support in PG campaigns, discovery calls, and positional conversations! Imagine the quality of feedback your AEs will provide when they’re learning the ropes and feel they have a trusted partner who’s available when they need them! And finally, with the ramping SEs having at least fundamental experience with the technology 3mo in, they can focus more diligently on the personal and operational partnership for their new teammates.

Here is where the mature leader stands apart from his peers becoming a true business leader even in a supportive function: an active and full candidate funnel to backfill surprise churn, alignment with future sales growth and the ability to hire ahead of the curve, ensuring productive teams, and providing a stable quality of service throughout. How can you improve this even more? Improve and accelerate ramp times for your SEs… get them firing on all cylinders 10% sooner, or 15%, or 50%! Accelerate the technical enablement for incoming AEs so they feel more confident handling initial PG and discovery — this scales your SEs’ involvement in early qualification and helps them contribute to making a wider impact. Further consider structuring your organization to support on-demand demo systems and self-guided trials; let your ramped SEs focus on high-impact sales cycles. As your organization grows, consider stratefying to further reduce ramp time on the core product lines and build a career path for principal and staff SMEs. And above all, maintain the culture to attract and retain top talent.

One final thought, and a pitfall many hiring managers fall into, don’t wait for HR or finance to release headcount. Fight for it. Show them or your president or whoever makes headcount decisions these calculations and how ramp times, quota numbers, and productivity ratios will be impacted if you simply ‘fall in line.’ You’re a business leader, you lead your business, so lead your business.