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Protocol | Enterprise

'Haters will be haters': How Salesforce, despite some big setbacks, had a banner 2020

Amid the chaos of major layoffs and top executive departures, Salesforce announced a key acquisition and managed to report blockbuster earnings.

'Haters will be haters': How Salesforce, despite some big setbacks, had a banner 2020

Marc Benioff is the CEO of Salesforce.

Photo: Kimberly White/Getty Images

On Aug. 27, Salesforce announced it would lay off around 1,000 employees.

The news came as a shock to many. At the beginning of the pandemic, CEO Marc Benioff committed to making no "significant" layoffs for 90 days. (The 1,000 job losses occurred 155 days after that pledge was made.) But any blowback to the announcement appears to have been brushed aside by some of the company's top leaders.

"If it is any indicator … I have gotten, easy, 10x more emails and texts than all the employee posts combined, from non executive employees, telling us how smart of a move this was, and well orchestrated," Chief People Officer Brent Hyder wrote in an email obtained by Protocol to other executives, including Chief Communications Officer Brad Burns.

Ending the correspondence, he added: "The haters will be haters."

Salesforce called it a "difficult communications day for the company" and said Hyder was "trying to be a good leader and lift the spirits of some people who had to do a really hard job."

Still, Hyder's mantra could be the theme for Salesforce's 2020, a year that may mark an important turning point for the 21-year-old company. The $200 billion enterprise software giant announced its most significant acquisition to date, saw key turnover in its executive ranks that is helping to usher in the next-generation of leaders, reported blockbuster earnings amid a global pandemic and is now poised to compete more aggressively against key rivals.

"It was a year of change, significant change," RBC Capital Markets analyst Alex Zukin said. "They exit this year with an opportunity for rebirth."

Gains and losses

Back in August, when announcing the layoffs, the company also said revenue increased 29% year-over-year to $5.15 billion — one of the best quarters in its history. Then in the days following, Benioff said the company would hire as many as 12,000 workers in the coming year. But additional reductions are also possible, with Salesforce now aiming to "rebalance" up to 10% of its workforce every year, according to Benioff.

The company declined to make Benioff available for an interview and Hyder did not respond to request for comment.

"We're reallocating resources to position the company for continued growth," Salesforce said in a statement. "This includes plans to hire up to 12,000 by the end of 2021, redirecting some employees to fuel our strategic areas, and rebalancing some positions that no longer map to our business priorities. We worked to support those affected to find the next step in their careers, whether within our company or a new opportunity."

Jump to December, and Salesforce dominated the news cycle with its $27.7 billion purchase of Slack, the company's biggest deal to date. It puts the company on track to expand beyond its core customer relationship management software offering, a strategy that executives laid out for Wall Street analysts during the annual investor day in December.

Despite signaling a new direction for the firm, the deal made some investors nervous about future organic growth: Salesforce's stock dropped nearly 11% in the days following the news of the acquisition and has shown little recovery since then. And as Salesforce embarks on the next chapter of its corporate history, its rivals are also charging harder.

Microsoft recently partnered with startup C3.ai and Adobe to begin selling artificial intelligence-backed customer relationship management software. While Salesforce remains the dominant leader in the CRM industry, Microsoft is seeing explosive growth in its Dynamics 365 business. C3.ai CEO Tom Siebel, who invented the initial CRM product in 1995 at Siebel Systems, said Salesforce has lagged in bolstering its own AI-based offering, called Einstein. For its part, Salesforce says Einstein is running over 80 billion predictions each day. UBS analysts have also warned that smaller competitors such as Twilio could take market share from the software giant.

Still, other industry experts say Salesforce at least has no need to sweat Microsoft in the short term.

"There's overlap, they will bump into each other, but at the end of the day I don't see them as direct competitors," Edward Jones analyst Logan Purk told Protocol. "Microsoft does a lot of things fairly well, but it's not that they do everything great. And I think Salesforce does CRM great."

Executive overhauls

Underneath its flashy Slack deal, there were signs that Salesforce was taking steps to reposition its leadership.

There were several executive turnovers at the company this year. The most significant was the departure of co-CEO Keith Block in February, which created a major power vacuum within the company that is now being filled by the rising influence of chief operating officer Bret Taylor and chief revenue officer Gavin Patterson, according to industry analysts. Their growing authority was evident in the leadership role both played in the Slack acquisition. Slack CEO Stewart Butterfield is also poised to play a key leadership role as the company strives to integrate the platform into its own CRM system.

In December, the company overhauled its Asia-Pacific leadership team, with APAC CEO Ulrik Nehammer, chief customer officer Stan Sugarman, chief operating officer Dan Bognar and EVP Lee Hawksley all departing. That's a major shakeup in a key growth market for the company.

And there were other important departures: Chief data officer Hernan Asorey left for Microsoft, product head John Ball departed for ServiceNow, chief scientist Richard Socher left to form a new startup and Lisa Edwards, the former EVP of strategic business operations, left in October for software company Diligent Corporation. The latter was the latest in a string of defections from high-profile female leaders, including former HR chief Ana Recio and global marketing head Julie Liegl. It did elevate other women to leadership roles, including a promotion for Amy Weaver to chief financial officer.

There also appears to be some bubbling tensions with current and former employees. Salesforce's former head of government relations, Niki Christoff, recently took to Twitter to lambast Benioff for not allowing her to join the board of directors of another company — a policy she argued was discriminatory against women. Christoff declined to elaborate on her tweets.

Despite its reputation as an outstanding workplace, current and former employees also criticized the slow pace of change when it came to diversity and inclusion efforts. In November 2019, for example, one worker took to an internal chat group to highlight how "incredibly emotionally and mentally exhausting" it had been to "fight for equality and equity related answers and change at Salesforce," according to a screenshot of the message board viewed by Protocol.

For its part, Salesforce announced several major equality-related initiatives in 2020, including plans to double the number of Black leaders by 2023. A diversity scorecard released in December, however, still showed little progress in improving the number of minority employees.

It's unlikely any of those developments will put a dent in Salesforce's growth — the company raised its earnings outlook for the fiscal year in December — or change the general public perception of the company. But they do bring about uncomfortable questions for the company, particularly given Benioff's willingness to speak out on hot-button political issues like U.S. immigration policy an LGTBQ+ rights.

But by taking control of one of the most popular applications in use today, Slack, Benioff is all but assuring that Salesforce will — whether you like it or not — remain in many of our lives for years to come.

Or, to put another way, the haters will still be haters.

Power

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Image: Omar Marques/Getty Images

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Issie Lapowsky
Issie Lapowsky (@issielapowsky) is a senior reporter at Protocol, covering the intersection of technology, politics, and national affairs. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University’s Center for Publishing on how tech giants have affected publishing. Email Issie.
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