This is the second episode of an experiment I did on a new episode format that was shorter, 20 to 30 minutes, and focus entirely on ideas and challenges operating small companies. The first episode in this experiment was last week’s episode with Jason Hill on adding food to the office and some of the interesting benefits there. On this operating-focused episode, I talk with Palmer Higgins of Mainly Grass and Chenmark on why he’s getting rid of sales roles and doesn’t operate on a commission structure. We talk about the positive and negative unintended consequences of becoming a more versatile team, the training and adjustment period of shifting roles, and some of Palmer’s thinking on paired metrics and why commissions are a poor metric and incentive to use in their business. If you want to learn more about Palmer and his work, you can listen to our earlier episode, episode 43, on his move to CEO at Mainly Grass. For now, enjoy our episode on sales roles and incentives.
Thanks, Palmer, for coming on the podcast again. It’s good to see you. I’m excited to hear a little bit about your sales roles and some of the org chart refresh you’ve been doing. So would you walk us through a little bit of what you were doing beforehand before you made any changes?
I sort of inherited a structure that came before me. In the lawn care space, it was pretty common to have … You had salespeople, and sometimes that was split between outside salespeople and inside salespeople. Then you had customer service, representatives or agents or whatever it was referred to, and that’s pretty standard in a lot of residential service type companies. So whether it’s pest control or lawn care or irrigation, that structure holds pretty consistent. When I started at Mainly Grass, I talked to everyone, I mentioned that on my last podcast, talk to everyone, and one thing that became very apparent to me is we had these very small siloed teams in an organization that wasn’t really that big. In season we have maybe 80-ish people, and the customer service team was five people, and the inside sales team was three people, and the outside sales team was two people.
It just seemed odd that we had these very, very small groups tackling very defined roles, which themselves were very seasonal. So the demands of inside sales versus outside sales versus customer service didn’t necessarily always overlap, but everyone was eager to know how they were going to be able to grow in the organization, which makes total sense. The problem was with all these discrete silos and no one doing any other tasks, they were very one dimensional in what they learned and the skill set that they honed at Mainly Grass. So it became pretty clear to me that for both the employee and the company, a better solution was to bring down these silos, shrink the number of discrete teams you had and broaden the scope of the roles to provide people more dynamism and what they were doing, to expose them to other aspects of the company, and to give them more opportunities to display a breadth of skillset and strengths and give them better runway to grow in their careers.
So what I ended up doing is I tore all those silos down. So inside sales, outside sales and customer service went away, and the only distinction was whether or not you were field oriented or you were office oriented. So if you’re field oriented, you got restructured into sort of the ops teams, you had technicians and then managers. Then on the office side, we rebranded that role to be called an account manager and the role was very simple to describe internally. It’s we’re office-based and we communicate with customers in a number of different modalities and across a number of different use cases. Your job is to handle those customer issues, questions, complaints, without having to pass the call or the email or the live chat off to anyone else.
So then it became we still have the sort of operations versus account management divide of people who are in the field versus not, but that’s the only distinction there is. Now there’s a much bigger account management team and there’s much bigger operations team and people’s roles have really expanded to encompass a lot of other types of tasks and other types of initiatives.
Can you go into a little more depth on what these inside and outside sales folks did? What did their day-to-day looked like prior to making changes?
So outside salespeople, we’ll say sales in general, customer will contact us in some way, shape or form, say they’re interested in learning more about Mainly Grass services and they generally want a quote. So our focus is how do we get them an accurate quote as quickly as possible? There’s generally a lot of time sensitivity on the sales side. We’re highly seasonal inside of a seasonal business. So the crux of our sales season is, call it, mid March, really ramping up in April through maybe mid June. That’s the majority of our sales season and really inside that window, the April to mid May is the peak and it’s active. So customers are calling in or emailing in asking for a quote. With software now and technology, we can often measure properties and get quotes online with a computer and some measuring software.
So our first goal, our first objective is to try and do it that way. It’s much faster, but oftentimes we can’t get a good picture, we can’t necessarily verify the location of the home, or the customer might say, “Hey, I really want to meet you on site to do sort of an onsite walk through of my property.” We say great. In that case, that’s where an outside salesperson would go in to meet the customer or to measure the property on site when we can’t do it in house. So the inside outside designation is just purely, do we need boots on the ground, whether it is to meet the customer or measure the property, or can we handle it internally?
So in the process of moving those roles into a more open job description, how did you go about describing that to employees? Was there any retraining necessary or how did that instruction period go?
I’ll say not everyone agreed with it. Not that surprising. The inside salespeople were going to have to take on roles that we’re customer service oriented and that maybe not be something that initially some of them were interested in doing, and customer service people were going to have to take on a sales function, which might be scary or something they didn’t feel like they were capable of doing so. The way I tried to pitch it is you guys all want to progress in your career, but as an inside sales person in a small company, that’s a very, very small track. So beyond that, the company and managers and your boss, we need to see you in other avenues to see where your strengths are. There’s just not enough, especially year round, of an inside sales job to get looks across different types of workflow.
So there was definitely some pushback. I don’t know if I’d say retraining. I’d say there’s a lot of cross training, the benefit of basically mashing teams together as, within the team, you had subject matter experts. So it was really just pairing people up and saying, “All right, what used to be inside sales people need to teach some of that inside sales skillset to what used to be customer service people, and what used to be customer service people need to teach what use to be inside salespeople how to do customer service related tasks.” That is still to some degree ongoing. People are still getting used to the breadth of the different roles that they’re now asked to fill. For sure, every single one of my account managers has a aspect of the account manager job that they hate.
So in my review since then, there hasn’t been a time where someone hasn’t advocated to try and re-specialize and let’s play to our strengths and this person’s really good at collections so just have collections be done by this person, and this person’s really good at sales, just have sales be done by this person. This person’s really good at just measuring lawns, have that person just measure lawns. I basically fight that at every turn to say, like, “I understand the idea of specialization and trade. It’s like a classic economic theory. I get it.” Unfortunately, what you lose is breadth and what we need is breath. We also need flexibility because if you centralize something with one or two people, what you get is you get a single point of failure. So if your person who’s amazing at collections quits or leaves or wants to take a vacation or gets sick or whatever, now you have no collections of people and you have no one who has any idea what’s going on.
Whereas if you can spread all the different tasks across a number of people, you can still have sort of your go-to quasi team lead on collections. But when all 12 people are doing collections, now all of a sudden, one, the people aren’t as good at it or holding that skillset, and two, you don’t have single points of failure when people want to take vacations or people get sick or people go to different jobs. So you have a much more resilient business and an advocate for our employee. They’re given a much bigger breadth in their roles, so they have opportunities to shine in areas where they might not have even thought they had interests or skill. That’s happened to where you sort of people into areas where they might not have felt comfortable before and they would never have self-selected into a certain role or a certain job type.
You tell them like, “Well, unfortunately that’s part of the new account management role, so you’ve got to give it a go and here’s the training and here’s the support,” and the next thing you know, they’re great at it and they love it, and that’s where growth happens. So you kind of need to push the envelope a little bit in order to see what people can do.
In our own conversations, you’ve mentioned the idea of having silent assassins, which you can identify through data, like this guy who maybe didn’t say much but it turns out he’s really, really good at this one thing. Has that been kind of an unintended consequence of this de-specialization where you can now identify more of those people?
On the account management side, we don’t have as much objective data as we do on the technician side. In the field, we’re working on trying to build it. Some of it’s more contextual on the technician side. Did they have to go back onto the property to fix something? Or did they not? Did they do that service in the budgeted time or did they not? Did they show up for work or did they not? On the account management side when you’re dealing with customers, there’s subjectivity and there’s nuance in how you evaluate their performance. So did they take a phone call? Did they not? Did they send an email? Did they not? That’s trackable and we look at that. But what was the tone of that email? Was the wording of that email appropriate? Did they pick up on some contextualized clues from the customer that they should have responded to? Did they take opportunities to educate the customer?
That stuff’s much more nuanced. I’m sure there’s AI tools that you can sort of feed in audio and text and they can tell you some of that stuff. We don’t have that Mainly Grass, so we don’t have as fully transparent and objective data on the account management side, but for sure, we’ve seen people really blossom in the account management role by being able to display talent and skill, or just gumption, fire, across the whole role, because we’re giving them this much bigger purview and we’re saying, “Look, we want you to do more. We are empowering you and expecting you to do more. That phone call rings, that email comes in, we’re going to invest in you so you can handle whatever is coming at you.”
So in that sense, we think of them much more and that’s why I named them account managers. I really wanted the word manager in that title. I think when there was more of an expectation of customer service representatives, they were sort of like message takers. The real work was being done in the field, but our account management team, they’re the front of the line, just the same as our technicians are. Customers are asking for their input and advice, they’re calling them about their soil test, or they’re calling them about some issues in their lawn. The more educated and experienced those account managers are, the better that they can deliver customer service and quality to our customer base. That’s what our customers want.
I can’t remember if I talked about this in the podcast or not, on air or not, but our entire account management team went through the same turf management program this winter as our technicians did. A lot of them are actually ex technicians and a lot of them are licensed in the same state applicator’s licenses that our technicians are, and that’s not by accident. That’s been very purposeful to say, “I want you every bit as technically knowledgeable and agronomically knowledgeable as our field staff, because you are an extension of that service delivery.”
Yeah. That makes a lot of sense. You’ve alluded to a number of them, but I’m curious on some more unintended consequences you’ve seen from this, both on the positive and negative side.
Obviously the negative side of the people that want to just do the one thing that they were good at and they did before. So there’s tons of phrases or quotes about how growth doesn’t occur in your safe zone. It only occurs when you’re on the margins of your comfort and competency. So there’s a little bit of friction and tension about stretching people and say, “If you were only doing outside sales leads before now that was more of a field job. That job has been turned more into a operations management role, which comes with a whole host of expectations of leadership and training and development of staff, which is very different than being highly communicative with customers.” There’s a learning curve associated that and there’s a degree of nervousness around being able to take on those added functions. Overall though, it’s been tremendously positive, not least of which is it’s limited the number of siloed interactions you need to transfer information.
We haven’t really covered all this. When you have outside sales, you have inside sales, you have customer service, you have technicians and ops management, one piece of information has to pass between different groups during the handoff process. Every time that happens, it’s an opportunity for a ball to be dropped. It’s an opportunity for something not to get communicated or to get communicated the wrong way or for context to be lost. So by the time it flows through all those different teams, they have this terrible game of telephone, and what suffers is service delivery, what suffers is customer service and customer satisfaction. Now, we still have this office field divide, but that’s the only divide. So we can focus our attention on how do we make sure that when we hand off information from the field to the office, or vice versa, that all of that information gets downloaded correctly, so from the customer standpoint, they feel as if they had a conversation with their technician when in fact they had a conversation with their account manager or vice versa?
I like that. Does this change the way that you hire for this role now that you are perhaps looking for people who are able to function in a lot of different types of roles?
We’ll see. It’s new enough that I don’t think we’ve had enough time or turnover to really see. The benefit of the new account management role and its emphasis on sort of radically increasing the level of, especially, the technical knowledge, so turf management type knowledge, is when we have an opening in that position, we opened it up internally to our technicians first and thus far we haven’t actually had to hire really anyone externally. When we have, we’ve been hiring people with industry experience externally who really want that added responsibility, want that added breadth in their role. It can be an excellent fit. In fact, they come in and they’re stoked to get all this knowledge. Maybe they’ve worked in the industry for years and they’ve never had the type of education or training that we’re giving them because they weren’t technicians.
Well, I think that’s a wasted opportunity, frankly. So I’m delighted to get those people onto the team and invest in them, just like we’d invest in anyone else and give them the education and empower them to be managers and to be problem solvers. But then the flip side is you got to hold them accountable to that.
You’ve talked about sales commissions and with these prior roles being sales roles, did you have some sort of commission structure? How has that changed?
Mainly Grass has never had commissions. It’s been a little bit of a badge of honor that we’ve never done commissions. I heard a lot of the salespeople say all the time to customers, “Well, we don’t make commissions, so we’re here to do the right thing, and I wouldn’t tell you something just to make a sale so I could earn a commission.” I guess I shouldn’t say do the right thing. Not everyone that gets paid a sales commission is not doing the right thing, but I agree with the premise of not doing sales commissions pretty wholeheartedly. I know I’m in the minority. I have heated discussions with particularly my team on the Chenmark level, other companies within the Chenmark network disagree vehemently with my stance on no sales commissions. If I were to boil it down, I said to you my disdain for sales commissions, is really that you’re taking a role and you’re turning it into one metric, and one metric that I’d say is not indicative of exactly what you want.
I’m a huge believer in paired metrics because whatever you measure will improve, and certainly when you attach incentives to it, it will definitely improve. My concern and my challenge to those who love sales commissions is how do you ensure that you get that metric moving in the right direction without any of the unintended consequences? So the sales commission is very simple. You get a percentage of the sales. Well, okay. What happens if they cancel right after they sign on? Do you have a mechanism to not pay out that sale, that commission? Okay. But do you sell it at a lower price to just sell it? In which case the sales guy doesn’t really care, but you care as a business owner. Are you setting the wrong expectation of the customer? So maybe say, “don’t worry, my salespeople can’t change price. The price is locked in.”
Okay. Well, are they setting poor expectations so you’re bound to have bad customer satisfaction whenever you deliver on your product or service? The list can go on, but the general point is it’s a non-parametric when you’re just doing a straight sales commission and I’m always wary of isolated metrics because you’re going to get unintended consequences when you focus on just one thing.
Have you found anyone who’s taken a sales commission role and paired it with something else that’s a little bit more effective or is that something that you’ve thought about, modeled out or maybe even tried and you just haven’t found a way to make it work?
So this is where you get at least the best type of disagreement, where it’s like, “Okay, totally hear you. One metric, one variable is not the right way, but no problem. You want paired metrics? I’ll give you a two variable incentive compensation structure. One’s revenue and it’s gross profit, or it’s revenue or it’s something else.” I still push back on that and I say like, “I don’t believe it’s possible to boil down someone’s role in a company to a formula.” There’s just some stuff is subjective. So you take a salesperson and say, “Great. Well, I can really monitor very closely not only their sales activity, but their effective gross profit margin on the stuff that they’re quoting or estimating or their net profit margin. I even burdened it with some overhead. So that gives me the paired metric of revenue growth but with profitable revenue growth.”
You say, “Okay, great. Well, what happens if that sales person is a complete asshole? Where does that factor in in the formula?” It’s either going to be a huge cultural fit, they’re a cultural cancer, everyone hates them. Where’s that in the formula? That’s obviously an extreme example, but the broader point is there’s more to a person than financial metrics. I love data. I love metrics. We use them all the time, but I’m also cognizant that not everything can be discreetly measured 100% accurately without, again, unintended consequences. So even data can lie. You can lie with data just as easy as you can lie with anecdote. So as much as I love data, I’m fully aware of the trap that you can get into if you over rely on data. So that’s why I don’t really want to overlay on a formula and say, “Great, here’s your comp, it’s this formula, you put in these variables and the why is your comp. Have at it.”
If someone has that magic formula, love to read it, love to see it, love to see how I could use it at Mainly Grass. Just no one’s been able to show me what that magic formula looks like where it capsulates everything that you care about in an employee with no unintended consequences.
This might be too deep of a point to get into with our shorter podcast format, but I’m curious if you have other perhaps non-monetary ways of incentivizing increasing sales in your company or serving customers well? Or is that just a matter of training and you just have the right people who do that naturally, regardless of whatever incentives, perhaps, you give them?
So you’re saying basically how do I incentivize sales if I don’t pay a commission?
I’d say if the only way to get your team motivated to do sales is to incentivize them, you probably have the wrong team. We track sales activity, we track closing percentages, we track lead volumes, we track renewals and we’re very open with the team about that. When some of those numbers are trending the wrong direction, we just have a conversation. Like, “We need to get better at this. We need to get better because it impacts everyone.” We do have a bonus structure. It’s just not 100% formulaic. So it’s very easy to say like, “Look, if this goes the wrong way, there’s going to be less in the bonus pool for everyone. I don’t know how that’s going to impact you personally nine months from now, but it’s not going to be good. It can’t be better if these numbers are going the wrong way.”
So generally I’ve found that sort of quasi open book management have a degree in being open and honest with the team, and if you have the right people, then people want to do a good job. People want to be successful, not just for themselves, but for their teammates, their coworkers. So I think if you can foster that sort of shared understanding, shared purpose, shared mission, you don’t need to have sales commissions in order to incentivize people to go out and sell. People know full well if they want to do better in their careers, the company needs needs more customers to be able to grow to provide those opportunities, and that’s what people want to do. So I’ve never found that to be a huge limiting factor.
Can you describe your bonus pool system just a little bit?
It’s simple, but it’s not. Bad way to say it on a podcast, I guess. We do it on free cashflow. Free cashflow is what matters to Chenmark. free cashflow is our core metric. When I say free cashflow, it’s like a fully burdened free cashflow. So it’s cashflow from operations, less cash cap backs, less any mandatory debt repayments. So there’s no fudging, “Oh, well this was maintenance cap backs, that’s growth cap backs and so that doesn’t count in cashflow.” No. It is a fully burden free cashflow number. How much excess free cash do you have after reinvesting in your business in whatever way, shape or form you needed to do? We have some paired metrics because anyone who’s finance oriented is listening to this and saying, “Well, the obvious way to juke that is to just absolutely jack leverage up to the nth degree, and then you can be rolling in free cash in the short term and bearing yourself in the long term.”
So we have leverage covenants that are paired metrics to couch that, but free cashflow is king. Cash is king and for us free cash flow generation for the purpose of reinvesting, either in our current operating companies or in new acquisitions is paramount for Chenmark’s flywheel. So our bonus is structured around the same thing. We take a split of free cashflow and we share that with the company. So from that perspective, that’s why I say it’s easy. It’s like whatever free cashflow is, we take a split of that and that becomes the bonus pool. It’s hard because in order to really understand free cashflow, you have to have a concept of all three financial statements, not just the P&L. So probably the most difficult one for people to understand is working capital and all of its flavors or nuances.
I think people can generally understand collect money faster, try and extend terms on vendors to whatever length you can that’s reasonable, I think people get that concept, but when you’re dealing with Mainly Grass has a decent portion of customers who prepay and understanding how that increases free cashflow in the short term. But then when you actually are doing the work with associated pre-payments, you have a negative working capital hit once you convert those prepaids to earned revenue. That concept is not easy for someone to understand if they don’t have a really good financial backing. So that’s why I say it’s easy because it’s just free cashflow, just whatever cash we earn, we split that cash with the company. It’s hard because it’s not just revenue minus expenses.
Gotcha. Is there anything that I haven’t asked you about with sales roles or commissions that you’re dying to talk about in our last few minutes here?
That’s the best question. Have we talked about that question before? I learned that also from the same boss that I talked about in our last podcast, is the last question he asked every management team that he ever interviewed was, “What haven’t I asked you that I should have asked you?” I always thought that was just genius. So simple, but genius. I now use it all the time. A lot of times when I use it, people that I say it to like, “Oh my God, that’s an amazing question. I’m going to start using that.” So almost everyone at Chenmark now uses that question. What haven’t I asked you that I should have? On the topic of combining roles and my disdain for commissions, I think we covered the gist of it. I’m sure I’m going to get … Well, I’m not on Twitter so I guess I won’t, but I’m sure you’re going to get people saying like, “That Palmer is an idiot. You got to incentivize sales.”
I’ll say like, “There’s a possibility that in a different company with a different service or product they were offering, I might have a different tune or maybe I wouldn’t be as vehement about it. I’m still pretty confident. Or at least I’m still pretty opinionated that I don’t think that there is one formula that can encapsulate someone’s performance and value add to a company without also bringing in unintended consequences or without overlooking key aspects of an employee’s value add to a company. But would love to know if someone has that. I’m sure if they had that, they would never share it. But if for some reason they did want to share it, I’d be eager to see it.
Excellent. Yeah. You’re eager to see if someone does have a model like that, and I’ll certainly let you know if someone sends one my way, but thank you so much for your time today. This has been awesome.