How Culture Amp Became a Billion-Dollar Startup Without Sales Quotas
Every year, Ramon Elzinga fields a handful of calls from early stage startup leaders hoping to pick his brain. They want to know how he did the impossible in sales: build a team without individual quotas.
But to Elzinga, nothing could be more straightforward.
When he joined Culture Amp eight years ago as its global VP of sales, he and the company’s co-founders questioned the age-old belief that money is the main thing that motivates salespeople. They bet that sales reps were a lot like other employees — driven by career growth and learning.
“[Other companies] just haven’t quite worked it out. I’m a little surprised, to be honest.”
The leadership team put reps into groups of five to seven employees, gave them a team quota to hit and managed them like you would any other employee. Along the way, business thrived to the point that the company is now a $1.02 billion unicorn.
There was no lightning-strike moment of inspiration, no grand experiment. In fact, the idea seemed so obvious to him that he’s baffled that quotas remain so prevalent.
“[Other companies] just haven't quite worked it out,” Elzinga said. “I'm a little surprised to be honest.”
A few leaders give it a try, Elzinga says. But for the most part, individual quotas and commission have remained entrenched in sales. An informal HubSpot poll in 2017 reported that just seven percent of responding sales reps, managers and leaders were in favor of eliminating quotas.
But are quotas really what’s best for sales and the company’s bottom line? Or is it a sign of a profession that is reluctant to change? It depends on who you ask.
This story is part of an ongoing series about sales quotas.
The Dawn of Sales and Quotas
Before Channing Ferrer became HubSpot’s VP of sales ops and strategy, he started his career on a sales team without quotas. It was the only time in his life as an individual contributor that he didn’t have to chase a number, and it left a lasting impression on him.
His employer, Capital IQ, was an early stage startup still figuring out its product. Ferrer worked as a sales engineer, but every rep was responsible for selling to help reach the company’s monthly revenue target. With no quota or commission to chase, team members were free to have a more influential role in shaping the product.
“Sales reps always need to have some sort of target.”
Ferrer recalled sending regular feedback to the product team about what the customers liked and what they didn’t like about its product. He and the other reps would also sit in on weekly product design meetings to share what they learned from their prospects. This allowed the product to evolve at a faster clip, which in turn enabled the reps to close more deals and grow the business.
It was an exchange that he doesn’t think would’ve been possible with quotas.
“It meant we weren’t in the field [selling] 10 to 20 percent of the time,” Ferrer said. “I didn’t realize this at the time, but [...] if I were counting on quota, I probably wouldn’t have given that up. I would’ve been out there selling, knowing what number I needed to get to.”
Today, Ferrer thinks early stage, product-driven startups could benefit from going without a quota. But he doesn’t think eliminating quotas is right for every company. After all, there’s a reason quotas have been a part of sales since the days people were trading in livestock and textiles: They create a simple goal that delineates between prosperity and struggle, he said.
But quotas are also a powerful individual motivator. In roles like engineering, or even sales ops, individual impact is hard to measure, Ferrer said. Sales reps, on the other hand, have a clear measure of success.
“Sales reps always need to have some sort of target. Quotas are extremely helpful to say, ‘Here’s something to go after and define success,’” Ferrer said. “It’s a very clear way to drive success, and thus you get the whole business aligned around a metric.”
Of course, there are limitations to the quota-commission dichotomy. Reps who want to transition into management roles often have to take time away from selling to mentor their colleagues — or take on additional responsibilities on their own time, Ferrer said. Chasing quota can lead to burnout if the rep doesn’t have a clear internal motivation, and it minimizes activities that don’t lead to a sale.
Ferrer acknowledged that managers could create compensation plans that put more emphasis on mentorship or other personal goals beyond quota, but there’s one concern that keeps him coming back to quotas — simplicity.
“If we started saying as a sales rep you could go down this path, this path or this path, and your compensation looked different here or there [...] it adds a ton of complexity into an organization,” Ferrer said. “It would solve for a lot, it’s just that simplicity is often the overriding factor.”
Building a Sales Team Without Quotas
Elzinga doesn’t thing building a sales team without quota needs to be that complicated.
Before he hired a single rep, he and Culture Amp’s founders got together and asked themselves: Is a salesperson motivated differently than an engineer, a marketer or an employee in any other role? As plenty of studies and reports have proven, money is not a long-term driver of performance. So, they opted against structuring it around individual commission.
“We didn’t want some misaligned culture where one person was put atop the podium and everybody else was grizzled in the corner.”
Instead, Elzinga took his motivation from team sports, in which everyone is unified around a single goal. He put sales reps into teams of five to seven colleagues all selling to the same market (like SMB or enterprise), and gave them a team-based quota to work toward.
“It’s about working together as a team, where they’d all work together and celebrate together,” Elzinga said. “We didn’t want some misaligned culture where one person was put atop the podium and everybody else was grizzled in the corner.”
Under this structure, each rep is generally responsible for bringing in an equal share of business, but the most important thing is that the team reaches its goal. This creates a dynamic where sales reps are more willing to work together, Elzinga said. They may step in to help a colleague close a sale, take the time to train one another on the best pitch strategy and help out if someone is on vacation.
If the team falls short, Elzinga said it’s like any other team within the company. The sales manager will review each person’s performance and how they’re growing in their job. From there, they’ll either work with the struggling employees to improve, help them find new roles or let them go.
Even without quotas, however, it’s still important to ensure that teams share the burden of selling equally. During Ferrer’s time at Capital IQ, he said some low-performing employees coasted, putting pressure on the high performers to do all of the work. Since the best reps couldn’t max out their commission, they became less incentivized to overshoot their target. Meanwhile, the low performers stuck around.
“We ended up blending earnings for people, so we didn’t have too many people killing it on the high end and we didn’t have too many people losing out on the low end,” Ferrer said. “That was the downside.”
While Elzinga acknowledges that there could be a person who coasts as others overperform, accountability hasn’t been an issue at Culture Amp. He doesn’t consider the risk any greater in sales than in any other part of the business, and the remedy is no different.
“We weren’t 100 percent sure whether there was truth to what everyone else was doing — we had to see [removing quotas] work. And what we’ve seen for 10 years is that nothing has really changed,” Elzinga said. “We’ve got very motivated people.
So, What Does It Look Like in Action?
Elzinga’s secret to making this all work comes down to hiring.
He prioritized people who were more passionate about Culture Amp’s vision and product than about commission. These candidates tended to care more about team success, and they stayed motivated over the long haul.
“Hiring is critical,” Elzinga said. “Get that right, and the rest flows from there.”
And when reps are freed from the pressure of individual quotas, they’re more likely to make the customer’s needs and those of the team’s a priority.
Elzinga recalled a time when the company closed a deal with a big company based in Canada. A sales rep in New York started the deal with the head of HR. When the HR leader flew to her company’s offices in San Francisco, another Culture Amp salesperson stepped in to meet her in person and continue the deal. The head of HR then flew to Adelaide, Australia, not far from where Elzinga lives, so he met her for coffee. A month later, Culture Amp closed the deal.
A deal like that wouldn’t work if everyone were focused on their own quotas, Elzinga said.
“People aren’t worried about getting paid — they’re worried about the team’s revenue over time.”
The team quota encourages reps to work together to close accounts. If someone goes out for vacation, another rep will step in to take their place. If a person isn’t well-versed in a customer’s industry, they may pass the customer over to another rep who is better suited to address their issues.
And without the time-based pressure attached to commissions, reps aren’t as likely to try and squeeze a deal in even if it isn’t the right timing for the customer, Elzinga said.
“People aren’t worried about getting paid — they’re worried about the team’s revenue over time,” Elzinga said. “You start to realize over time that if you keep doing things correctly for your customers, you grow faster anyway.”
Ferrer doesn’t see the pressure individual quotas apply on a rep as a complete negative. Sometimes, it can provide the necessary intensity a rep needs to get a deal done. The more reps allow the customer to push it off, the likelier it is that another rep will swoop in and steal the deal, Ferrer said.
Meanwhile, you can incentivize customer retention to ensure reps take care to create a positive buyer experience.
“Pulling back on quota wouldn’t be a flatline,” Ferrer said. “We would continue to sell, but maybe at a slightly slower rate than we’re selling today. But at the same time, we feel comfortable that we’ve found the right balance in intensity and quality of customer engagement.”
That said, Elzinga doesn’t think the team-based quota has slowed Culture Amp’s growth in any way. The team structure gives it more flexibility to meet the needs of each customer and create a better buyer experience, which leads to more deals.
Elzinga has also found that reps are more willing to share their tips and strategies with each other, allowing each member of the team to develop over time. Ultimately, the structure feeds into two things that lead to happier, more motivated employees — learning opportunities and career development.
What Kind of Team Should Get Rid of Sales Quotas?
To Ferrer, there are two kinds of sales teams that can benefit from this strategy, the first of which is sales teams within early stage startups. In a company’s early days, there usually isn’t enough data available to accurately forecast a reasonable quota, Ferrer said. Instead of tying commission to an arbitrary target, he suggests motivating reps with equity. The more they help the business grow, the larger the stake they’ll have in the company.
The other circumstance is with an entry-level team. This is a strategy that HubSpot deploys with its inbound success team. Composed of entry-level employees, the inbound success coaches are responsible for consulting the company’s free users and moving them into the pipeline to become buyers.
“Without the pressure of quotas, the coaches are able to focus more on supporting the customer through the product journey, rather than selling before the buyer is ready.”
Their job is to answer questions, help the customer learn more about the product and eventually make it sticky enough that they want to purchase it. They’re measured on three metrics — customer satisfaction, time to respond to a customer’s request and pipeline created.
Without the pressure of quotas, the coaches are able to focus more on supporting the customer through the product journey rather than selling before the buyer is ready, Ferrer said.
But what really makes the dynamic work is that it’s structured around career growth. As the coaches lead customers through the pipeline, they get exposure to what it’s like to be a sales rep, a product team member and customer success manager. They then get promoted to the field of their choosing, based in part on the quality of their metrics.
Ferrer estimates that 50 percent of coaches have become sales reps, while the other 50 percent have gone into roles like customer success, implementation and product.
Ultimately, if you have an entry-level team, Ferrer suggests structuring the incentives and targets around career growth instead of quotas. Unlike more experienced sales reps who are confident in their career paths and what drives them, entry-level reps will value the career opportunities more than the potential of a big payday.
Why Don’t More Companies Do This?
When Elzinga reflects on the role of quotas in sales, he understands why it made sense in the early days of the profession. If a person is selling brooms door-to-door, the opportunity to earn commission on those deals is all that drives them.
But modern sales is much more complicated than that. The buying process is longer, there are more stakeholders involved and there are more opportunities for career growth. Meanwhile, buyers don’t want to be sold to, they want to be consulted.
“You’re just treating [sales reps] like everyone else in the world.”
Individual quotas stand in the way, encouraging reps to put their interests first over the company and customer, Elzinga said.
In Elzinga’s opinion, individual quotas are a problem. The only reason more sales teams aren’t eradicating it is the inertia of inheritance.
“It sounds complicated, but to be honest, it’s much more simple,” Elzinga said. “You’re just treating [sales reps] like everyone else in the world.”
So what advice does he end up giving the startup leaders who call him?
“Don’t start with quotas,” Elzinga said. “Once you’ve done [quotas], it is difficult to reverse.”