Salesforce caves to activist pressure with harsh sales and engineering policies

As activist investors pressure Salesforce, the company is exploring cost-cutting options. Today, Insider reported that the company is implementing stricter engineering performance measurements, with some salespeople being pressured to quit or adopt harsh performance policies.

Performance reviews based on engineers’ code output, a flawed way to measure engineering productivity, encourage quantity over quality. Salespeople must choose between a one-month performance improvement plan or an exit package.

“Our performance management process drives accountability and rewards excellence,” Salesforce said when asked. The company declined to comment on this policy’s timing or details.

Company is mandating a return to the office, but a Salesforce spokesperson says managers can decide. “Our hybrid approach empowers leaders to decide which jobs should be in the office or remote for their teams.”

Since 2020, the company has promoted the “all digital, work-from-anywhere workplace” they call the Digital HQ. The CRM leader bought Slack for almost $28 billion in 2020 because of it.

At the end of last year, CEO and chair Marc Benioff implied that home-based workers were less productive.

Activist investors like Elliott Management, Starboard Value, ValueAct, and Inclusive Capital have been circling the company, likely pressuring Benioff to boost productivity and cut costs. These firms are a big reason Salesforce announced that it was cutting 10% of its workforce in January, a process that has been poorly handled with layoff notices coming in dribs and drabs, leaving workers anxious and uncertain.

Constellation Research founder and principal analyst Ray Wang blames Boston Consulting Group, which the activists hired to handle cuts and implement new performance review policies. Wang told that BCG made significant recommendations on measuring salespeople and developers to boost productivity.

Wang says your perspective determines whether this approach is good. “If I were an investor, I would advocate for this approach, but if I were the owner-founder, I would want something less harsh and more nuanced,” he said.

Wang calls activists “vulture firms” for their approach. He agrees that Salesforce overpaid for bad acquisitions, but he thinks these firms don’t know how to run Salesforce and are doing more harm than good.

Wang said the vulture firms didn’t understand how much R&D and marketing Salesforce needed to stay top of mind with executives.

They’re useless. “They come in to just make money on the arbitrage and leave the firms more damaged than before they were taken over,” he said.