The Science of Scaling · 11 Jul 2024
The Secret to Toast's Coaching Culture w/ Jonathan Vassil (CRO, Toast)
These are notes on the conversation, checked against its transcript. The episode itself has the full discussion.
In brief
Jonathan Vassil, CRO of Toast, describes joining the restaurant software company around $20M ARR and rebuilding its sales organisation around a coaching culture. He covers how Toast found its distribution problem, how it redesigned manager comp, performance management, promotion gates and hiring around work ethic and a pitch-based scorecard. Host Mark Roberge adds commentary, including a benchmark for quota attainment, a coaching-time allocation he cites from research, and a disagreement about firing rules.
For founders
- Tie part of district manager pay to team attainment, as Toast did when it required 75% or more of a manager's team to hit monthly quota before that part of pay was earned.
- Hire for work ethic first, because Toast's data after about eight months showed it was the factor most correlated with top performers, with coachability and intellect mattering only alongside it.
- Build a pitch-based interview test with a binary hurdle, such as at least 10 features or benefits in a five-minute pitch, then have candidates pitch three times to measure coachability.
- Put a binary, quantitative performance rubric in writing and share it with every rep on day one, so underperformance follows a fixed sequence of warnings.
- Place early sales reps where existing customers are nearby, since Jonathan said proximity to another Toast customer was the top factor in who would buy early on.
For revenue leaders
- Track the share of reps hitting quota each month and treat 60 to 80 percent as the healthy range, since Mark Roberge said below 60 percent signals culture risk and above 80 percent suggests soft quotas.
- Allocate coaching time by performer tier, with Mark Roberge citing research for roughly 20 percent to top performers, 20 percent to bottom performers and 60 percent to the middle.
- Run a monthly review where each director answers three questions per rep: what the manager is coaching, how they are coaching it, and how success will be measured.
- Require managers to show pipeline reviews, coaching feedback and coaching plans before they can apply for promotion, so promotion rewards the behaviour you want.
- Treat pipeline reviews as an accountability and funnel-validation exercise at Toast, with coaching handled in separate sessions.
What was said 24, most useful first
When Jonathan joined, about 20% of reps were carrying most of the revenue, which he judged not scalable. Listen
He said productivity was growing and the company was hitting its goal, but roughly 20% of reps produced about 80% of revenue. He interviewed every district manager, director and top rep, and concluded the system rewarded performance but not coaching. His stated route to moving more reps to quota was hiring well and building a coaching culture aligned with career progression, incentives and rewards.
“it was being carried by 20% of the reps, which is not scalable.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Toast changed district manager pay so part of it depends on whether 75% or more of the team hits monthly quota. Listen
Before the change, manager comp was tied to ARR brought in. From January 2018, Toast moved a portion of manager OTE into a team attainment component, which pays only if 75% or more of the team hits monthly quota. The host offered a made-up illustration in which a base rate is paid regardless and a higher rate applies once the threshold is met. Jonathan said that was roughly right but the mechanics differ.
“as a DM every month, 75% or more of your team has to hit their monthly quota or you don't get this money.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Healthy quota attainment is between 60% and 80% of reps, and the figure is a signal about the quota or the hiring. Listen
Mark Roberge said that below 60% of reps hitting quota, the culture will go south and people will start quitting. Above 80%, he said quotas are too soft, or the hiring is weak and quotas should rise. He suggested asking whether quotas are too high and can be lowered, or whether performance needs to be driven harder.
“I like it to be between 60 and 80%.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Mark Roberge cites research that coaching time should be split 20% to top performers, 20% to bottom performers and 60% to middle performers. Listen
Mark Roberge presented this as rigorous research consistent with Jonathan's view that bottom performers should not be ignored. He said sales managers tend to overcoach bottom performers. His reasoning was that two hours with an A player moves them to the next level, and two hours with a B player can activate untapped potential.
“It's if you have 100% coaching time, 20% of your top performers, 20% of your bottom performers, 60% of your middle performers.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Toast's position is that every rep deserves coaching, including the weakest performers. Listen
Jonathan said the common advice to ignore poor performers and spend time with top performers is the opposite of how Toast operates. He presented coaching as a right for every rep in a coaching culture. Mark Roberge added that managers in general tend to overcoach their bottom performers, so the allocation matters as much as the principle.
“We believe the exact opposite. Everyone deserves the right to be coach”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Toast's performance rubric runs from a verbal warning for one missed month to an option to terminate after three in a row. Listen
Once a rep is ramped, a miss in one month is a verbal warning, two consecutive misses bring a written warning, and three consecutive misses give the company the option to terminate. Jonathan said termination is an option rather than automatic because some circumstances need adjusting for fairness. In his commentary, Mark Roberge added that the PIP should be as binary, quantitative and non-subjective as possible and shared with everyone on day one.
“if you miss quota three months in a row, we have the option to terminate.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Mark Roberge describes a monthly review where each director answers three questions for every rep. Listen
In a worked example framed around Jonathan, Mark Roberge described a CRO holding a 90-minute monthly one-on-one with each director, who has four managers and about 40 reps under them. For each rep, the director must state what the manager is coaching, how they are coaching it, and how the company will measure whether the coaching worked. In his example, a rep's demo-to-close rate of 19% was targeted at 25% that month and 30% the next.
“Number one, what is your manager coaching that rep on this month? Number two, how are they coaching them on that? Number three, how are we gonna measure if the coach did a good job and the rep improved?”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Toast found that work ethic was the hiring trait most correlated with top performers, and coachability and intellect only mattered alongside it. Listen
Toast scored interviews on work ethic, coachability and the ability to connect the dots. After about eight months of data, and scoring its existing 60 reps, Jonathan said work ethic was the clear driver. He said coachability and intellect did not matter unless the person was a hard worker. Toast then built its hiring process around work ethic, which it breaks into five or six components, including ambition, detail and bias.
“And it was work ethic, clear. Coachability and intellect didn't actually matter unless you were a hard worker.”
Listen to the episode Hiring & team building Link to this Report a problem
Toast tests candidates with a five-minute product pitch scored against a binary hurdle, and has them pitch three times. Listen
Jonathan said that candidates who research the product will cover 10 to 15 features or benefits in a five-minute pitch, which he takes as evidence of work ethic. Using a hurdle such as at least 10 features or benefits as an example, he said this makes the judgement binary for the manager. Candidates pitch three times and must improve each time, which he treats as evidence of coachability.
“let's say the hurdle is you gotta have at least 10 features or benefits that you touch on during that five minute pitch.”
Listen to the episode Hiring & team building Link to this Report a problem
Mark Roberge outlines building an interview scorecard from the traits of your top reps, with written definitions and examples of high, medium and low scores. Listen
Mark Roberge said to identify the top 10 reps, find what they share, and use that as the hypotheses for an interview scorecard. For each attribute, write three sentences defining it, plus a paragraph showing what a high, medium and low score sounds like. Every six months after a hire, check whether the hire performed and whether the scorecard predicted it, then iterate.
“And every six months after we make a hire, we assess. Do they do well or not? And did the scorecard catch it?”
Listen to the episode Hiring & team building Link to this Report a problem
Toast went deep in areas where existing customers were nearby, and proximity to another Toast customer was the top early predictor of who would buy. Listen
Jonathan said Toast chose to go deep in a market rather than wide. Multivariate regression showed proximity to another Toast customer as the number one factor early on. Reps and BDRs are trained to mention a nearby Toast customer by name in prospect conversations, which the conversation noted gets the rep a half hour with the prospect.
“The number one factor early on and who would buy toast was their proximity to another toast customer.”
Listen to the episode Pipeline & demand generation Link to this Report a problem
Toast refused to promote managers who had not been coaching, and used a missed application to show the rule was real. Listen
To apply for a regional VP role, a district manager must show pipeline reviews, coaching feedback and the coaching plans they built. Jonathan described a top-performing manager whose most recent ride-along recap was from November, when training rolled out, and who was therefore turned down. He said the company rewards the behaviour it wants modelled across the team.
“You got to show me your pipeline reviews. You got to show me your coaching feedback. You got to show me the coaching plans that you built. If you don't have them, don't apply.”
Listen to the episode Hiring & team building Link to this Report a problem
An investor at General Catalyst asked him one question every time: what percent of reps hit quota last month. Listen
Mark Roberge said that when he was CRO of HubSpot, the investor only asked about the share of reps who hit quota, not total revenue. Mark Roberge said it took him a year to understand why. A total that comes from one rep with $2.5 million and others doing badly is different from one where 80% of the team hit quota.
“Hey Mark, what percent of the reps hit quota last month? That's all I care about.”
Listen to the episode Metrics & finance Link to this Report a problem
Mark Roberge is wary of an option-to-terminate rule because it can introduce subjectivity and politics. Listen
Mark Roberge said he agreed with the transparent, written performance culture and called it best practice. He still said the option to terminate can create subjectivity and politics, citing examples of favouritism and of firing for non-work reasons. His concern is about the discretion in the rule rather than the rule's transparency.
“For me, it's like that can create subjectivity in politics.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Toast ties promotion to objective performance, and each level raises base, commission rate, OTE and quota. Listen
Toast runs six or seven AE levels in its SMB business, not counting enterprise, mid-market, hotels and retail. Reps move up when they hit objective hurdles within a set timeframe, and each step raises base, commission rate, OTE and quota. Asked whether reps end up earning less per dollar of ARR, Jonathan gave two answers. The pay step-up is more drastic than the quota increase, and reps are already performing at the higher level before they are promoted.
“Every time you jump up a level, which you earn objectively through performance, you get a base, your base goes up.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Toast's pipeline review is an accountability and funnel-validation exercise, with coaching handled in separate sessions. Listen
Jonathan said the leadership team argued for hours over whether the pipeline review should be an accountability exercise or a coaching tool. They settled on accountability and funnel validation, and placed coaching elsewhere. Leadership also designed a process for how managers give feedback to a rep after a demo or ride-along.
“the pipeline review is about accountability and about validating the funnel”
Listen to the episode Sales process & deals Link to this Report a problem
Jonathan asked district managers for the top two or three things they were coaching each rep on during ride-alongs. Listen
During his first year he flew across the country doing ride-alongs with managers. For each rep, he asked what the top two or three coaching topics were, and judged the managers by their answers. He said the comp change later made managers take coaching far more seriously.
“what are the top two to three things you're coaching them on?”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Toast shifted from requiring software or food-tech experience to hiring for DNA, with an OTE constraint of about $100K. Listen
Jonathan said Toast's constraint was OTE, which was around $100K, and that it moved away from requiring software sales or food-tech experience. Instead, it hired for DNA, which he described in terms of work ethic, coachability and the ability to connect the dots. He said this was done early on and is still in use.
“We moved from, hey, you gotta have software sales experience or food tech experience too, to more of a DNA hire.”
Listen to the episode Hiring & team building Link to this Report a problem
Research finds that weighting years of experience selling to the same buyer and product type predicts poor performance. Listen
Mark Roberge said it is intuitive to hire for prior experience, and that most CEOs and inexperienced sales hiring leaders do so. He said it does not hurt to have experience but that focusing only on it leads to bottom-half performers in the industry. He argued that DNA, meaning traits such as work ethic, is a bigger driver of success.
“those people that put the most weight on years of experience selling to my buyer and my product type, fails.”
Listen to the episode Hiring & team building Link to this Report a problem
Toast's SaaS-plus-payments model drove ARR per restaurant location roughly twice that of competitors, which supported a field sales model. Listen
He said Toast pioneered integrating payments with its SaaS model, and that this gave it twice as much ARR per rooftop as competitors. He said that meant the company could spend twice as much, so the unit economics could support a large field sales organisation. He also said the restaurant market's size and the founding team were the other reasons he took the job.
“Just allowed us to generate twice as much ARR per rooftop than our competitors, which means what means you can, you can spend twice as much.”
Listen to the episode Strategy & market Link to this Report a problem
Toast mapped the five critical activities of its best district managers in a two-day leadership session, so they could be scaled. Listen
Jonathan said Toast's top leaders spent two days identifying what its best managers do that could be scaled. The list included hiring well, holding weekly team calls, building coaching plans, giving clear feedback after ride-alongs, and running pipeline reviews. He said the group argued for hours over the purpose of the pipeline review.
“what are the top five activities that our best managers do that we can scale?”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Jonathan cited the district manager comp change as a forcing function that got managers coaching and hiring better. Listen
He said big forcing functions are as important as anything you can do. After the team attainment component was added, managers began coaching and became more careful about hiring, because having half their team below quota was no longer acceptable and would hold them back from promotion.
“the big forcing functions are as important as anything you can do.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem
Jonathan gave his district managers The Score Takes Care of Itself, which frames the work as focusing on daily inputs rather than outcomes. Listen
He had district managers read the book at his first meeting with them, when Toast had about 60 reps. The idea is that doing the right things every day, regardless of outcome, leads to the outcome. He said Toast still does this today.
“And if you just do the right things every day, independent of the outcome, the outcome will always follow.”
Listen to the episode Leadership & culture Link to this Report a problem
Toast rebuilt its district manager comp plan to reward distribution performance, not just the deals managers closed. Listen
Jonathan said the original comp plan rewarded district managers who could close deals and did not reward distribution across the team. Toast told its managers that it wanted business people who could sell, not only top performers. He said this was the start of the movement toward a coaching culture.
“The comp plan did not reward distribution performance. It rewarded DMs who could close deals.”
Listen to the episode Sales team, hiring & comp Link to this Report a problem