The following is from an interview with Michael DeLeonardis, the CGO at Ashling Partners, an award-winning service provider in the rapidly growing intelligent automation market. Michael started his extensive career as a technology consultant, working for high growth technology services and startups such as Inforte, as well as starting his own company, Arcadia Healthcare Solutions. Michael transitioned to sales and market growth roles at smartShift Technologies, Beqom, and Intangent, before moving to his current role at Ashling Partners.
The following has been lightly edited.
How have you approached hiring in response to the economic downturn, and do you use pay ranges in that process?
We've put all net new hiring and any backfills on hold until we know how deep the economic situation becomes. One of our challenges this year was volatile income expectations. We started to see industry offers surpass those of software and consulting, which I've never seen in my 25 years in consulting services.
Based on our benchmarking, we felt like we were still offering fair compensation. We have three bands for each role, which allows us to do the most effective, appropriate, and standardized offers. When employees competing offers and asked above what we thought was reasonable, we had enough discipline in our strategy to let those employees move on. At the end of the day, we want our people to be successful. Sometimes individual success can come from going somewhere else.
We level based on experience, the needs of the organization, as well as the market. For example, an associate RPA versus an associate ML engineer are not the same from a market perspective. There is a wide amount of variation you can expect in those incomes based on the demand in the marketplace.
What common response to economic downturns do you personally disagree with?
In the early 2000’s as part of the dot com bust, companies slashed sales and marketing left and right. By doing that, they essentially guaranteed they wouldn’t be able to drive the revenue needed to grow. You can’t just arbitrarily slash the sales organization: that's the tip of the spear to drive any net new business.
“You can’t just arbitrarily slash the sales organization: that's the tip of the spear to drive any net new business.”
In what other ways has Ashling Partners responded to the economic downturn?
We’re focusing on utilization to ensure that we have the right mix of revenue and profit heading into potentially tough financial times.
Over a year ago our private equity partner, Thomas H. Lee, started signaling that we needed to prepare for financial turbulence. We got more efficient by reducing some of our internal investments on R&D and focusing on utilization. We’ve essentially shifted from growth at all costs to profitable growth which enabled us to build a more resilient organization that can scale through both up and down markets.
We're also starting to lean out operations. In a normal state, we’d hit around 60 million in revenue, but we’ll end up around 30 million in revenue this year because we've deprioritized acquisitions. Essentially, valuations got way too high relative to people's risk tolerance given the financial markets.
“We’re focusing on utilization to ensure that we have the right mix of revenue and profit heading into potentially tough financial times.”
What steps did you take to go from growth at all costs to profitable growth?
Pricing discipline was the big thing. We’ve been investing in reusable assets, bringing IP to our customers and investing more heavily in our Advisory team, which is focused on value engineering to ensure we’re consistently outcome-focused. In parallel with that, we updated our pricing calculators so they were more in line with our ideal target margins. The combination of updating our calculators and introducing discipline around deal reviews ensured we were pricing things at a profitable point.
What is your team specifically doing to increase revenue?
We rolled out a digital demand function and an ADR function to help us build a pipeline that's mutually exclusive to our partner channel as well as new logo acquisition.
We’ve also started to build in predictable sales motions in the form of industry solutions. For example, we developed a care management solution for healthcare that now we're able to go out and sell to other players out in the marketplace.
What is your team doing to conserve cash and reduce costs?
We are a lot more conservative on our discretionary spend, whether it be travel or just ‘nice to haves’. We also leaned out the org a little bit and focused on retaining top performers.
What's something that you feel the most concerned about in light of the market turn?
New logo acquisition. We've been very strong at upsell and cross sell, and we've got mechanisms to weather that sort of storm, but we've seen softness in new logo acquisition this calendar year.
Even if we're hitting our upsell and cross sell targets, but we're missing our new logos, we're missing revenue targets. And if we're missing revenue, we have target margin problems. As long as we strike the right balance between upsell, cross sell, and new logo acquisition, we'll be able to hit the numbers.
What’s an example of an optimal response to a market downturn? What about a suboptimal response?
Reacting and planning for market downturns is all about market share. If you're a small company, you're a minuscule fraction of an overall market. In that case, it's less the downturn itself that impacts you, and more the process of natural selection.
Essentially, customers are going to have a lot more options at their disposal during an economic downturn. If you focus on discipline and fundamentals (Customer Experience and Customer Outcomes) to ensure that you're delivering quality to your customers, you will survive these sorts of downturns.
Smaller companies that weather this kind of market have strong fundamentals, quality product, quality people, and quality execution. A company of our size doesn't have to make fundamental changes to our business model. We just have to make sure that we are executing well and maintain a certain degree of growth.
“If you focus on discipline and fundamentals (Customer Experience and Customer Outcomes) to ensure that you're delivering quality to your customers, you will survive these sorts of downturns.”
How should larger companies approach an economic downturn?
I'll give you an example. One of our partners is starting to make a lot of those decisions right now. Historically, they have an aggressive growth strategy with their sales and marketing cost at around 75% of revenue. With the downturn, they evaluated where they could thin out the sales and marketing organization while still being effective, leading to a 20% headcount reduction. The main takeaway here is that the shift from growth at all costs to profitable growth is a worthwhile move regardless of whether you’re at $30M or $1B in revenue.
They're also shifting roles and responsibilities by refocusing their sales org on new logos. Then their customer success organization picks up consumption and expansion. It’s a divide and conquer sort of method. They're assigning people specific lanes to prepare for a future state of the economy that demands efficiency.
Zoë Rose is a Content Marketing Manager at OpenComp and has held roles at Fuel Cycle, CorePower Yoga, and TrueCar. She pens the monthly High Growth Matters Spotlights. Connect with her on LinkedIn here.