Never Too Early: Paying Your First Sales Leader with Brian Murphy, Former CRO of Sigma Computing

In this episode of Never Too Early, host Lauren Ipsen, Talent Partner at Decibel, dives into crucial sales compensation strategies for early-stage founders. Lauren's guest, Brian Murphy, former CRO of Sigma Computing and Sales Leader at Okta, shares his perspectives on how to hire and pay your early sales team as well as properly structure and incentivize each stakeholder in your organization to get deals done.

00:00 Introduction to 'Never Too Early' Series

00:20 Meet Brian Murphy: Seasoned Sales Vet

03:48 Question 1: When do I know if I’m ready to hire a full time salesperson? Brian and Lauren talk about when it makes sense to bring a salesperson into the mix and how to set reasonable goals for that individual when it can often be a moving target.

06:46 Question 2: With deals where everyone contributed, who gets commission? Lauren and Brian tackle how in the early days, everyone should be pretty involved and hands on in getting a deal done. 

09:25 Question 3: When is the right time to move from founder-led selling to non-founder led selling? Brian talks about how there is a difference between being founder-led and founder-involved and how one is more scalable than the other.

12:07 Question 4: What kind of Sales Leader do I hire first? An AE? An SDR? A Head of Sales? Brian talks about what your first sales hires should look like and the type of support structure they will need to be set up for success.

16:51 Question 5: How do you address compensation disparities and the amount of transparency across a sales organization?. Lauren’s final question to Brian is around common discrepancies that occur between your first sales hires’ compensation and your “phase two” sales hires that come into an organization to take a business to the next level. Lauren asks Brian his process in addressing those compensation disparities and the amount of transparency that he believes should be involved.

20:25 Wrapping Up with Insights and Advice

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Transcript

LAUREN IPSEN: Welcome to Never Too Early, a YouTube series focused on unconventional talent insights for founders. I’m Lauren Ipsen, Talent Partner at Decibel. In each episode, we’ll cover the top five commonly asked questions that we get from founders building their organizations for the very first time. It’s never too early to learn from the best.

With that being said, I’m super excited to introduce my first guest today, Brian Murphy. Brian was most recently the CRO of Sigma Computing. Prior to Sigma, he worked at Identity and access management provider Okta for six years, through massive growth, in various sales leadership roles, ultimately culminating to running all of enterprise sales for the Americas. And before that, he led sales at Alpine Data Labs, which was later acquired into TIBCO; and as sales director at Adept before it was acquired into Teradata.

So with all of that being said, Brian Murphy is one of the most qualified to answer the top five questions that we get from founders compensating their sales leaders for the very first time. Brian, welcome to the show.

BRIAN MURPHY: Thank you. Thrilled to be here.

LAUREN IPSEN: I really appreciate you making the time. All right. So today, we’re going to talk a lot about compensation, specifically on the sales side of things. So I just gave a short overview of your incredibly impressive background. But on a personal front, can you tell us a little bit about yourself? Something that would be good for listeners to know about who you are?

BRIAN MURPHY: Yeah. Happy to. So I grew up in the Boston area. Still live here. Not unlike many people from the area, live here, born here, die here. Probably will move when the Patriots move, or the Red Sox, or the Bruins move, so that’s not happening. Grew up in an Irish Catholic house. I was the youngest of four. I had nine—my father was one of nine.

LAUREN IPSEN: Wow.

BRIAN MURPHY: Six of the nine, including my father, were in technology sales, so I’m full of stupid jokes. I’m able to do that because I have four kids. A lot of dad jokes. But one of them is, growing up in that environment, Thanksgiving was like a QVR or forecast meeting, but it was really uncomfortable, so. I’ve always been in and around tech sales and wanted to be in tech sales before I really knew what tech sales was, so.

LAUREN IPSEN: Awesome.

BRIAN MURPHY: A little bit of a family business for me. Outside of work, I’m pretty boring. I’m a terrible golfer. So I try to do that occasionally.

LAUREN IPSEN: I’m really bad too.

BRIAN MURPHY: Yeah. Yeah. Not well, but it’s still fun. Like working out, like traveling, and obviously, with four kids, two dogs -

LAUREN IPSEN: So you’ve got more excuses than I do, though, on the golf course, because, I mean, you can’t play for six months out of the year.

BRIAN MURPHY: No. It’s perfect. I have a built-in excuse. So when I’m terrible, I can use that excuse all the time.

LAUREN IPSEN: Yeah. So what’s mine?BRIAN MURPHY: Yeah. Well, you actually—you played in college, didn’t you?

LAUREN IPSEN: Yeah. I used to be good at one point. And so, people expect that that’ll be the case when we go out and play. But golf is not like riding a bike, you know? It’s not something that you just remain good at when you don’t play.

BRIAN MURPHY: There’s a direct correlation associated with my career in sales. You’d think that sales people play golf all the time. But there’s a correlation associated with my career in sales and my index. And as my career has involved, my index has doubled. So I used to be a six in high school, and actually, I think I’m up now to, like, a 13 or a 14, so yeah.

LAUREN IPSEN: Honestly, better for tournament play, though, you know?BRIAN MURPHY: Yeah. Yeah.LAUREN IPSEN: You get some pops. So all good stuff.BRIAN MURPHY: Exactly. Exactly. Yeah.

LAUREN IPSEN: Okay. Okay, cool. So let’s dive into sales, and specifically, let’s dive into compensation.

BRIAN MURPHY: Sure.

LAUREN IPSEN: I thought that you would be a great person to help me work through some of this. So every founder asks me, “I think I’m ready for a salesperson. But when do I really know if I’m ready?” And how do we set goals for someone when there’s really no predictability? So especially in the early days, how do I determine quota, ramp, OTE, when it’s all kind of a moving target, in a sense? So let’s start there.

BRIAN MURPHY: Yeah. Absolutely. I think the first thing—you said it really well, Lauren—is that it is a moving target. And you have to understand there’s going to be some fluid aspects of this, right, based on the situation. So to answer the first question, when do you need a salesperson, founders should always be, I think, in the early stages, be involved in the sales process. But when you have some hypothesis associated with what your product-market fit, value proposition, and what your ICP is—and I’ll use that word “hypothesis” very specifically—you have an idea, but you don’t have that figured out. And that is such an important thing to be able to scale out an organization. When you have that direction, you need to have someone to go figure that out. It is absolutely instrumental to the company. You’re never going to be able to grow a business if you don’t know what those things are, where the focus is, the product-market fit, and the ideal customer fit, or ideal customer profile. So at that given point in time, you should have that.

As far as setting targets for individuals, I think it’s always important, but it is crucial in the early days of the organization that you set targets that that individual and the team is going to be able to hit. And that’s in the early days, and that’s continuously through. There’s nothing that’s more challenging when you have—you’re saying you’ve got the sales person in and they’re not making their quota, and then we’re going to hire more. It’s going to be really hard to recruit individuals based on that.

But I would also kind of err on the side of things that are outside of—in the early stages, outside of typical, as you would expect, revenue targets. And that could be customer meetings or feedback or numbers, some kind of leading indicators that lead to those things. Knowing, to my earlier point, that’s fluid. You don’t have everything figured out. And it’s really about kind of understanding, learning, failing fast, and adapting on those things. So again, to reiterate, when you—I think you should really focus on hiring a salesperson is when you have the hypothesis, but it’s not fully baked, right? Where that ICP and product market fit is. And align the goals very much on formalizing and solidifying those things so you can build some repeatability and predictability, because you don’t have that today.

LAUREN IPSEN: Yeah. Awesome. Cool. I think that was comprehensive and will be super helpful to our founders. You touched on this a little bit, and I’m going to ask you to take it one step further. But you mentioned how in the early days, kind of everyone’s somewhat involved and hands-on in getting a deal done. And so, with deals where everyone contributes, who gets commission? And what does an effective structure look like, in your mind, between sales, marketing, and other key cross-functional leaders, to ensure that everyone’s properly incentivized?

BRIAN MURPHY: Yeah. I’m a huge believer in taking what the overall goal of the company is and aligning that to the individuals within the company. But I think about it kind of a matrix, and there’s two elements. There’s, one, accountability; and secondly, influence. So who is most accountable for the outcome associated with that goal? But do they have influence associated with that as well? So for example, in AE, if you’re looking at revenue and how much you’re going to compensate that person, right, what percentage you’re going to pay that individual on the deal, they have high influence, because no matter what, they’re quarterback. They’re the individual that’s orchestrating all of theresources, the alignment, so on and so forth.

LAUREN IPSEN: Sure.BRIAN MURPHY: They have—and they’re also—that’s their goal.LAUREN IPSEN: Right.

BRIAN MURPHY: That’s 100% the objective of that individual. The other side of it, take somebody who is in SDR, that is responsible for really the top of the funnel in getting those meetings. They have some influence associated with that revenue. But it’s not completely control over that. And accountability-wise, their job isn’t fully to close it, but it’s to contribute associated with that. So they could get an opportunity, great opportunity, and the AU, the SEC could mess up on the proof of concept or something along those lines. So you have to think about a compensation model that kind of aligns

with what their overall accountability and influence within that. And it would be a percentage of that total deal, right? It would be a smaller percentage because it’s a sales rep. So I would think about it more in that context, as far as the individuals.

LAUREN IPSEN: Yeah.

BRIAN MURPHY: But I really would say it’s the individuals that are on the front lines in go-to- market, right?

LAUREN IPSEN: Yeah.

BRIAN MURPHY: So I wouldn’t necessarily say somebody on the product, the engineering side of that. I wouldn’t say that fully aligns to it. But anyone touching the customer and part of that end-to-end sales process should get a percentage of that. Obviously, varying degrees based on what the individual does. But closely aligning with what the overall target goal is to people who are involved in that process.

LAUREN IPSEN: Yeah. It makes sense. I think this is also somewhat involved. But oftentimes, in the early days, a founder should be very involved in the sales conversations, especially for big deals. And across the board, they should be the one that can really sell their story the best.

BRIAN MURPHY: Yeah.

LAUREN IPSEN: And so, in your opinion, at what point and how does a founder transition out of the sales calls? And when is the right time to move from kind of a founder-led sell, if you will, to more of a non-founder-led sale, or someone that comes in and runs that process in its entirety?

BRIAN MURPHY: Yeah. There’s two different parts, I think, about that, actually. So when you talk about a founder-involved or founder-led, I think those are two slightly different things. I have a huge, huge amount of respect and appreciation for founders, what they go through, what they do. And I think that they very well should be involved in sales throughout later stage of the company as well. They should always have that element. I think most of them do. The ones that I’ve engaged with are incredibly passionate individuals and good in, really, a multitude of areas. They’re incredibly multifaceted in that way.

But what I would say is that the line of delineation where it’s led, right? So “involvement” and “led” are different things. And I’ll draw the analogy—I always talk about heroic sales versus methodical and process-based sales. So when you want to start transitioning to “We need to be able to scale the organization,” and you can have these amazing individuals, which founders are, be involved in that process, and they are the difference-maker associated with getting that deal or not, when you really have that kind of ICP, you have that methodology, you know what the product-market fit is, you have those things dialed in, and you have a sales process that is a playbook that you know is going to berepeatable, that’s when you really start having to not have the founder lead those things. You need to get an individual who’s a sales running sales, to start building that, refining that, and making that repeatable, so there’s not a reliance on that person all the time, right? Now, they still will be involved, like I said. But it shouldn’t be the heroic-based sale. It should be the methodical process-based sale.

So when you start building those things, when you have a repeatable process, when you know what the ICP is, when you know what the product-market fit is, that’s when you start to have to build more and remove the founder from the leading part of that sale. Ideally, as soon as possible, as soon as you find those things.

LAUREN IPSEN: Okay. So how do we think—so I guess this is another question that comes up all the time when I’m talking to our early-stage founders, usually at the seed or pre-seed stage. But they just kind of found product-market fit. They feel really good about their ICP. How do we know whether or not to bring in a founding AE, or an SDR, or a head of sales, whatever that might entail? Should that individual have support? Should they have a sales engineer? Should it just be them, and should they be able to run it all by themselves? And then I guess with that in mind, how do we then handle sales ops, post-sales, without support, if that’s the route that we decide to take?

BRIAN MURPHY: Yeah. Yeah.LAUREN IPSEN: And I know that’s a lot of questions in one. But if you can try and break that down.

BRIAN MURPHY: There is—I’ll try to break it down the best I can. And what I’d say at the beginning when you asked about compensation of a sales rep, when a lot of things aren’t predictable, it is fluid. And I think these situations are fluid as well. So I’ll break it down in a couple different ways. You asked about individuals, when to bring in head of sales, sales, AE, SE, ops, so on and so forth. And I think it’s kind of a maturity curve of how much time the individual is focused on a particular task. And when that task becomes more important, that you have to hire somebody to support it.

So an example of that, let’s just say by way of example, you hire an AE that is doing their own pipe gen, their own outbound, their sales operations, right? They’re doing it all. And when you start to realize that they don’t—they spend so much time on the deals because they’re closing deals and moving deals. There’s only so many hours in the day, right?

LAUREN IPSEN: Right.

BRIAN MURPHY: It’s like, what hours are you throwing out? And they’re not getting to that part of it because they don’t have the time to focus on that. That’s when you’re like, okay, we’re missing opportunity, and you have to hire those additional roles, right? That’s the way I kind of look at it, is when the individual is being consumed by something that is overly important and neglecting another part of the business that is going to especially feed to that, right? So if you’re not generating pipe, you’re not going to have much opportunity. So it is, again, kind of a non-answer, but it’s very fluid, based on what you see and what’s needed. But that’s how I think about structuring an org and building an org where you need those particular rules to focus, right?

And then kind of the second part of it is hiring a head of sales versus an AE. I don’t believe in hiring a head of sales until you have something that you feel, I would say, more than 50% confident that you have your kind of ICP done. And the head of sales, that’s part of their responsibility. A huge part of it is making sure that they’re constantly developing, identifying what that is, and building kind of systems to be able to get the technographic information to focus on the ICP and processes to go into pipe gen and create that opportunity. But if you’re starting from kind of flat, it’s going to be tough. You need some kind of signaling for that individual, otherwise you’re going to hire a head of sales that ends up being kind of a sales rep.

LAUREN IPSEN: Right.

BRIAN MURPHY: And it’s an overpaid role—

LAUREN IPSEN: Totally.

BRIAN MURPHY: —for that individual.

LAUREN IPSEN: Yeah. Yeah, you don’t want to be paying head of sales compensation and have someone just operating as an IC.

BRIAN MURPHY: No. No.

LAUREN IPSEN: So, it’s thinking about at what point it makes sense to have someone in there that can really be a leader. And maybe it is that all you need is just a really senior AE that can just kind of run all of it from end to end, get deals done. And then over time, some of those folks want some leadership and guidance. And so those are very—two very different things.

BRIAN MURPHY: I would say it’s the shift between “We have more to learn than we know,” versus “We still have a ton to learn, but we know enough,” right? “We know enough.”

LAUREN IPSEN: Probably that’s a great way to put it. Yeah.BRIAN MURPHY: That’s the way I would kind of frame it, right?LAUREN IPSEN: Cool.BRIAN MURPHY: Yeah.LAUREN IPSEN: Cool.BRIAN MURPHY: Hopefully that answered the question.

LAUREN IPSEN: It absolutely did. Cool. Okay. So at every level, there are different expectations around what sales compensation should look like. We just mentioned this. But we bring in a new head of sales from a tier one company who wants to bring on A+ people. And this happens all the time, where there’s this massive delta between the founding sales team and the ones that have been grinding through the ICP and trying to figure out what the buyer looks like, and all of these different components. But they’re getting paid a fraction of what, then, these new AEs are getting paid that came from this tier one group.

And so, I guess this is something that comes up often. How much transparency is involved? What is the right process to ensure that you’re doing right by the individuals that were early in building the foundation of the company, and then those that maybe are more of the shiny objects that came with that second phase from a new leader?

BRIAN MURPHY: Yeah. So, I guess, two parts to this. One, I’ll answer the question about transparency. Me personally, I don’t know if I have the right answer for this one, candidly, because I have one or two flaws. Joking. More than that. So one of them is I kind of say, a terrible analogy, but it’s like playing blackjack. You play by the book the entire time, you win some; you lose some. But if you play the odds, you’re going to win more than you lose, maybe. But you’re going to statistically be better off on that. The reason I use that terrible analogy is, transparency, there are kind of times where you can’t be fully transparent about things.

LAUREN IPSEN: Yeah.

BRIAN MURPHY: But overall, I believe in being transparent as much as you possibly can without it being something that is breaking your fiduciary responsibility to the company or in another area. So being pretty transparent about kind of bringing in new individuals and have different skill sets in different focus areas in different stages of the company, I think you should be transparent about that. I think you should say that. And there’s nothing wrong with that, by the way. The individuals in the profile that you hire in the early days, they are what I’d say typically more artists. I always use the analogy of artists and scientists, someone recently taught me. 44 years, it took me, to figure this out. But they talked about jazz and piano players. And I’m like, “I don’t understand that.”

LAUREN IPSEN: Yeah.

BRIAN MURPHY: Apparently jazz is improvised. Didn’t know that, so learned something new.

LAUREN IPSEN: Huh. Me neither. Okay.

BRIAN MURPHY: All right, great. I’m not the only one. I looked at him like, “I have no idea what you’re talking about.”

LAUREN IPSEN: You’re teaching our listeners so much. Yeah.

BRIAN MURPHY: Yeah. Yeah. So there are individuals that are artists, and they can do things that are absolutely amazing, and they’re dynamic and the first sellers. Not that they’re not all high intelligence. But they just—they can do things in a certain way, and get deals done, and get access, and build champions. But ask them how they do it, and they can’t explain it. They can’t do it. They’re just incredibly talented in that way. It’s the same way an artist can paint something, and I’d say, “How do you do that?” So it just doesn’t compute. You have it or you don’t.

LAUREN IPSEN: Yeah.

BRIAN MURPHY: And then there are scientists, who are basically saying—not that they don’t have the art gene. But what I’d say is they generally know what the signals are and what the formulas are associated with success. And, candidly, they’re going to have different quotas, and they have likely different stakes of equity in kind of ownership of the company as well.

LAUREN IPSEN: Yeah. True.

BRIAN MURPHY: So as far as communicating what different compensation is, no, I don’t think that’s really appropriate, and I don’t know if that’s entirely legal, to be honest. But being very transparent about the company, about, look, we’re bringing individuals in that are different people. This is what we believe is the right thing for the company. Here’s why. Here’s what the growth and the stage of the company is. And, candidly, some people can adapt, and they will turn into a scientist versus an artist, or move a little bit more in that direction. And some people will say, “I’m going to go to another place where my art skills are incredibly valued, and I’m really good in that area.” And there’s nothing wrong with that, right? And there’s different people that can go through different ranges. So I think being transparent about it.

LAUREN IPSEN: Okay. Amazing. I want to thank you again for joining me.

BRIAN MURPHY: Of course.

LAUREN IPSEN: Thank you so much for the wisdom, the insights. I think this is something that comes up all the time, and this is going to be really helpful for founders as they’re thinking about structuring compensation, but also just more generally how to think about building a strong and productive sales organization in the early days. So thank you so much for your time.

BRIAN MURPHY: Of course. Yeah.LAUREN IPSEN: I really do appreciate it. Yeah.BRIAN MURPHY: If anyone wants any more dad jokes, they can find me on LinkedIn.

LAUREN IPSEN: All right. We’ll leave it at that. Okay. And thank you all for tuning in to Never Too Early. More to come soon. Thanks.