Structuring the SaaS Leadership team

When a SaaS company is in the start up to high growth phases, it can be challenging to figure out the leadership structure and the level of experience required in each role to get to your first $50m in revenue.

The truth is some companies have a bit of luck on their side and get there with a more junior leadership team, while others end up investing in a more experienced leaders earlier on. How do you know what roles are needed, when they are needed and the levels of experience required to ensure the company will growth and thrive in a financially healthy manner?

There are some guidelines that can be used to evaluate the best approach to building a high performing leadership team.

The Mission of each Leadership Role

Let’s start with defining the main executive leadership roles and their mission and contribution to the SaaS company:

CEO: Chief Executive Officer:
The CEO’s mission is to manage the company and in many cases make the hard business decisions when the leadership team and/or board is not in complete agreement. This includes driving the strategy, profitability, organizational structure and communication with the board and the employees.

CRO: Chief Revenue Officer
The CRO’s mission is to streamline sales, marketing and customer experience at a SaaS company. This role was developed to align Sales, Marketing and Customer Success to develop and drive strategy and operations to execute a well architected GTM strategy that defines target market fit that will maximize the revenue generated for each SaaS solution to drive value and ROI for customers in a cost effective manner.

CMO: Chief Marketing Officer
The CMO’s mission is to manage the company’s brand, demand generation and sales enablement in support of the company’s GTM strategy in a cost effective manner that enables sales to achieve quarterly and annual revenue targets.

CFO: Chief Financial Officer
The CFO’s mission is to manage the company’s finances, developing future plans for financial viability, and determining financial strengths and weaknesses and providing the best financial plans to deliver on the GTM strategy.

CCO: Chief Customer Officer
The CCO’s mission is to manage the company’s ability to deliver on the SaaS contract for each customer with a focus on managing product consumption, realization of customer value, business impact and measurable ROI and the customer roadmap plan to operationalizing the SaaS solution across the customer’s organization. This role develops the life long partnership to support customers and drive a raving fan base.

CPO: Chief Product Officer
The CPO’s mission is to be the SaaS product visionary and manage the company’s development and release of all quality SaaS products in alignment to the company’s vision and GTM strategy. This role manages the entire product lifecycle from ideation and prioritization to execution and general release.

Evaluating the Complexities

In understanding the mission of each of these roles, it also helps to create clarity of the focus for each of these areas of the company. Whether you hire a CXO level or a VP or Director level, the mission of the organization remains the same. This is important to keep in mind if you decide to hire more junior leaders who may not understand how to build a strategic plan to drive the mission for their area. It just means you may only get a partial strategy from the junior leaders and it may not be as comprehensive as a more senior leader. A junior leader may also not have the experience and knowledge to incorporate a plan to scale cost effectively.

There are a few strategic options you can entertain at various stages based on the complexity of your Strategic GTM plan. However, we need to understand how to evaluate the complexities of the target market the SaaS Company is targeting in its GTM strategy to help define the kind of experience that will be required of your leadership team.

Target Market Complexities are defined as follows:

As you evaluate each element of the complexity model for each of your target markets, you will begin to determine what level of experience you may need across these complexities to help you derive the correct strategic and operational plan that may be required for each of the leadership roles.

For example, if the SaaS GTM strategy is focused on the Retail SMB market and the problems it solves range between simple to medium; the size of the company is small and simple; the compliance requirements are nonexistent; and the global reach is only North America; then you may be able to hire some up and coming leaders with high potential that have had significant exposure to your target market and understand the problems you solve enough to render a solid strategy to your first $20m.

An alternative example is if the SaaS GTM Strategy is focused on the Enterprise market across several more complex industries (i.e. Insurance, Healthcare, Financial Services) where the problems your solution solves are more complex, the target company size is large enterprise companies, with high compliance requirements who have a large global presence. These types of complexities in the market may require more experienced senior level leaders who have been in these industries, serving the larger more complex customers, who have dealt with the complexity of meeting compliance requirements operationally as well as within the product and understand how to scale to serve a global market.

Evaluating the requirements that is needed for your SaaS company in your leadership team goes beyond verifying they understand your market and how your solution solves some key problems in the market. It’s about understanding your strategic vision for growth and where that will take you and teasing out what other skills, experience and exposure these leaders will require to plan for how the company will get to the vision from where you are today.

You may end with a leadership that can only plan to the end of the quarter or maybe the end of the year, but is not able to create a visionary plan for how to build in the maturity, skills, scalability and experience required to build an operational team that will be able to thrive and grow while delivering consistent results.

How important is Industry knowledge in the Leadership team?

This is a common question I get asked when hiring someone on the leadership team. My answer is “It Depends”. I know that’s not a great answer, but I will explain why.

It depends on the nature of your solution and the target markets you plan to go after and serve and on the leadership role.

If you are targeting one industry, like Healthcare or Manufacturing, and your solution is fairly technical and focused on solving specific process problems, it is definitely advantageous to hire leaders that know these industries and understand the problems well. It may be required to be able to relate to customers and prospects quickly and easily. Some industries prefer to work with companies who can talk the lingo and help them to understand how your solution will revolutionize their processes. The more experienced leaders will stay apprised of changes in the industry and how the solutions to problems you solve may change over time including new compliance requirements or standards expected. In this example, I would agree that the CXO leaders should have industry experience to help drive the right strategy and operational direction to compete and lead the market.

Another example would be if you are targeting ALL industries and the problems you are solving are easy to understand and fairly common with solutions that are logical and simple. In this case, you may seek experience in the software industry for similar type solutions and markets, but it if they have been successful in growing software companies of similar size to the next level and can learn the market and problems your solution solves, then it may be sufficient experience to build a quality high performing leadership team. The industry knowledge is not necessary as your solution is marketing to all industries.

Alternatively, if the software solution is focused on a specific process or series of processes, then it may be beneficial to look for leaders with knowledge and experience in those specific process areas. For example, if the solution is focused on Supply Chain or Order to Cash type processes, then it is helpful to have experienced leaders who know these processes, the problems and challenges for various size companies, the compliance requirements, the competitive landscape and how best to build an innovative strategy and approach to rise as a leader in the market.

How financially versed should each leader be?

At the CXO level, all leaders should have a solid understanding of financials and how their organization contributes to the financial health of the company. This is required due to the fact that each CXO will be building a strategic and operational plan for their organization to deliver on the corporate strategic goals and objectives. With each strategic and tactical objective the CXO defines for their organization to deliver for the quarter and the year, their will be cost and revenue impacts. The CXOs should understand what the cost impact would be to deliver each goal and objective or how they may drive revenue targets and what is required to equip their team members to deliver on each goal and objective successfully.

For example, if you have a corporate goal to reduce the customer implementation cycle time by 20% within the first half of the year; each CXO will evaluate what changes are required within their organizations to help support the successful execution of this goal in the time frame. It may require investments in technology, training, additional headcount or different types of roles, and other cost considerations. The CXOs may need to consider the budget impact to enabled each change that is defined and required to execute on the corporate goal for their organization. There also could be several revenue targets impacted that could help offset these additional costs.

As the leadership team sets the goals and objectives at the corporate level, they also will need to determine the changes and tactics required across each department to be able to deliver on the goal or objective. Then evaluate the financial impact and make the appropriate decisions on the viability of the plan and how to financially support the plan.

Is having expertise in one area enough for a CXO to be successful?

With each leadership role, the assumption is that you will look for someone who is an expert in their particular arena, i.e. CFO is a CPA with corporate experience in running all financial departments, CRO is experienced in running both a Sales and Customer Success organization, etc.

So the question is; Is that enough for them to be successful. Generally speaking it can be enough from the startup phase to the beginning of the high growth phase. However, once a SaaS company gets above the $10m mark and really need to scale and growth in a financially healthy way, it requires an understanding of the other roles and organizations and how they contribute to the success of the company. The reason this is important is so as a leadership team, they can all come together and compromise when needed and agree on the priorities each quarter. In order to that successfully, they will have to have the knowledge of each other’s organizations’ contributions and business impact to help determine what is most important for the company to deliver results from quarter to quarter.

One of the common observations I have made with startup and high growth companies is that the leadership teams struggle to row in the same direction. They each know their areas of expertise, but don’t always have an understanding of the contributions, challenges and impacts of the other organizations to the company strategy. Each CXO only focuses on their department goals and what tactics they know they need to execute, but without the context of understanding how the entire company will execute along the customer lifecycle model, these tactics may not be the right ones at the right time. This is where I see the operational plan begin to diverge and become misaligned. When the operational plan becomes misaligned, it is very challenging for the leadership team to drive consistent results.

The goal of the leaders is to align their goals and objectives across all the functions and agree on the priorities and tactics required to deliver on the company goals and objectives. As the leadership team evaluates their weekly, monthly and quarterly performance, they can have the honest conversations on what’s working and not working and help each other to make the adjustments and decisions on the timing of when to pivot and how without fear and judgement. The truth is that most strategies and operational plans will require some adjustments from quarter to quarter based on what’s working and not working to deliver the results. It is also common that many of those adjustments will be across all the organizations in some manner. A seasoned executive will acknowledge the changes required and work cross functionally in a collaborative approach to define the change together that everyone agrees has the highest probability to move the needle in the right direction.

The CXOs should be comfortable being challenged by their team members and be willing to acknowledge areas that require improvements. The CEO can coach the team to work together on the priorities and be supportive of each other to help each other be successful. When all the leaders are rowing in the same direction, they are being supportive and helpful to each other and the CXOs are not being defensive but respectful. These are traits you want to look for in each of the CXO roles.

In summary, putting a high performing leadership team together is one of the most challenging objectives a CEO has to execute. However, with the right perspective and understanding of what the SaaS company needs to get from one growth stage to the next as well to achieve the long term plan, the CEO will be able to define what is needed for each role individually including evaluating their experience and personality to be a collaborative leader. The CEO should look for people more experienced and knowledgeable than they are. One of my mentors put it best:

As always, I welcome your thoughts and feedback. If you found this helpful, please share our newsletter with your colleagues. If you have questions or would like support in any way, please contact me at [email protected].