Jerry Hughes: Director of Commercial Excellence at American Securities on the GTM Operating Partner role and the Persistent Pursuit of Growth

Our job, the function of the resources group, is to be a resource to the CEO, and to help accelerate those changes.

It's not just about responding to what's already in the CEO's mind. We have an important role in looking around the corner, trying to see what's happening in an industry, bringing ideas to them, and often we'll do that and help for about four to six years. Toward the end of that period, there will be new things on the CEO's agenda that he or she was not thinking of when we got involved with the company, so we play an important role there as well.

Linnea: You mentioned several types of initiatives that you will get with, but tell us when you get involved during the phases of the deal cycle.

Jerry: Typically, we get involved in due diligence. Most often, as soon as we sign an LLI, the investment and deal teams will determine which functions are most important given the potential investment and situation, and they'll pull us in.

Over half of the situations they're pulling me and my team into focus on commercial aspects and pricing, in particular. This has changed over time, and when we add a function within the resources group, the investment team needs to start to get familiar with, "What is it that they bring to the table? How will they operate within a diligence environment?"

Over the years, we've gotten to the point where we get involved pretty early, and that's super helpful because:

1) We're going to help make the decision-making process around making investments much stronger.

2) We're going to be able to understand exactly how we can help accelerate the CEO and management team's plan from the get-go, as well as whether there are additional opportunities that we should be taking into consideration.

The way American Securities works, like many if not most private equity firms, is that they have a formal process for coming up with a value creation plan. We do our version of that within the first three to four months of an investment, formalize the projects, and help the management team achieve specific things that come out of that value creation plan. So, if it's commercial, there will be an element for which I'm responsible.

Linnea: Most of the companies you support tend to be larger, more established businesses. How do you approach commercial excellence within that context?

Jerry: I recently spoke on a panel at a conference, and one of my panel colleagues is in an environment with much earlier stage businesses and it's more of a clean sheet approach. It's so different if you have an established business because you've got to be super pragmatic and there's much more risk, since you have something that's working to a certain degree today. They're generating revenues, customers, and profits, and you can't mess that up. At the same time, it's so tempting to try to do too much.

Early in my consulting career, we would do these assessments, have a methodology, and all these things we'd look at. We'd score them against best practices, what's “world class,” pricing or key account management, and coaching. You'd do the old stoplight thing, and you'd come back with a report card full of reds, yellows, and oranges, but we would try to soften it. We'd say, "Well, you're going to get this scorecard, and it's just going to say that there's a whole bunch you need to look at – don't worry about it.” Well, no one's going to not worry when they see a bunch of red on their scorecard. We ended up realizing that it’s counterproductive, and just to put it in the frame of reference, let's say you score companies on a 1-5 scale – a lot of our companies are a 2. It's C+ or B-, and that doesn’t sound good.

It sounds demoralizing, but the fact is there are three things that matter:

1) Taking share
2) Getting better than you used to be
3) Being better than your competition

That's the approach that we try to take and think about in diligence because you think about gaining or losing share, to whom or from whom and why. Those are important questions that will lead you to what and how urgently you need to do things in the commercial function.

When we take that focus, then you can relax a little bit and ask, "What's the short list of things that we could do if we have a gap against a key competitor? Let's focus on that for sure." Then think about best-in-class as we work through, "Where's the biggest opportunity for us to make a change that's going to make a difference over the medium to long term?"

Linnea: I think that's a lens through which great operating partners work, focusing on what is most critical.

As you mentioned, frequently you're rolling up your sleeves and partnering with 'messy' companies. You are iterating and driving improvements – you're not trying to change everything. As you know all too well, there is a very limited window within which you are allowed and enabled to make that change.

Taking all that, what does a day in the life look like for you?

Jerry: That’s a hard answer because it varies so considerably. Mondays look similar because most private equity firms operate on a weekly cadence, and Mondays have a set of meetings and firm-wide things. A lot depends on where I spend my time: diligence, projects, and then everything else.

Mostly, it's dependent upon deal flow and how many substantial projects I have going on within the portfolio at any given time. There could be a mix of diligence, being with clients, and working on consulting-esque projects. If we need to restructure our commercial organization, we'll do something that would look like hiring a third-party consultant. A lot of what I do though, too, is coaching, and again, this looking around the corner piece. There are a lot of companies and a lot of commercial leaders in the portfolio with whom I'll have a monthly check-in.

One of the things that we also try to do is bring ideas to our portfolio. We run a series of quarterly, portfolio-wide commercial leaders calls, where we try to bring the best ideas to the table, especially things that, given the market, we think that they should be focusing on at any given point in time. Over the past few years, things like pricing, for obvious reasons, have been really important, so we have spent a lot of time on that topic.

Linnea: You mentioned speaking to and connecting with that group of commercial leaders. Many of our clients, the first thing that they do at the point of the deal, is look at the executive leadership team.

As an operating partner focused on commercial excellence, what do you look for in your top sales and commercial leaders?

Jerry: There are two ways to think about that:

1) If we’re bringing a new one [sales or commercial leader] in.
2) If we’re evaluating someone who’s already in the seat.

To get the caveats off the table, every company has a different set of challenges, and you have to be sensitive to what it is that they're trying to do. I have some who are trying to move towards new product innovation, so that's going to have a different set of demands. Others are looking to change their channel and go-to market structure; others are looking to quickly scale the business. You also have to understand the exact scope of the role – chief revenue officer, commercial officer, sales officer.

There will be some variations, but generally, I want to see someone who's very market connected, someone who spends a lot of time with customers, and a lot of time in the market. Importantly, there's a flip side: what if you had someone who was more of a down-and-in person than an up-and-out person? You need that too; someone who understands the importance of building a team that is going to be able to address that gap and attend to the internal needs of the organization, so someone who's got familiarity with using a commercial ops or sales ops type of function.

The other thing that I look to is track record of being able to overcome challenges, so someone hyper-focused on the numbers, taking share, growing sales, building revenue and EBITDA, and can talk about their experience in those terms because that's how they think about it.

I want to see someone who's very market connected, someone who spends a lot of time with customers, and a lot of time in the market.

The other thing that I look to is track record of being able to overcome challenges, so someone hyper-focused on the numbers.

The thing about sales is you've got customers, and you've got markets. You have a lot of uncontrollables that you have to deal with and need someone who is accustomed to finding a way to hit the numbers and speak to those experiences. The other element needed is someone who focuses on and understands the importance of building the team, identifying the right players, can bring people in, coach them up, as well as make the hard decisions to make changes where those are necessary.

That's how I think about bringing a new person in. Of course, if you've got someone who's already in the seat, they may not check all of those boxes. Even when you're trying to recruit someone, you're never going to be able to check all of the boxes. That comes down to judgment – maybe you can imagine someone better, but instead can you help coach them up and think specifically about how you can fill those gaps?

Linnea: Exactly - assessing who you've got, their capabilities, their gaps, and can we live with those gaps. If we can, what scaffolding do we need to put in place to help bridge some of those?

And if you do go outside for talent, making sure that you have complete clarity on what you need, the right fit, and ensuring you find a person that is brilliant at what they do in terms of getting the right team in place, solving the right problems, and again, focusing on the outcomes that truly matters in terms of the growth numbers you need to hit.

Jerry: That's exactly right. Linnea, you hit on something very important, which is someone who's willing to take help, and has both the self-awareness and humility to realize they don't check all the boxes. If you know you're bringing someone on board who's open to coaching, and we have a lot of companies and a lot of executives, they get excited about the idea of a resources group, and about being able to partner up with someone who's an expert in their function to get better. If you start to hear that, then you know you're going to be in a good place.

If you know you’re bringing someone on board who’s open to coaching, then you know you’re going to be in a good place.

Linnea: If you're dealing with a private equity environment and somebody that's never worked with a sponsor before, the ability to want to learn and be more data-driven becomes all that more important.

Another topic that I know you're personally passionate about and interested in – and I know that much of our audience is trying to think about AI today as well – where do you see the big value unlock with AI and how can it specifically help drive growth for portfolio companies today?

Jerry: We, as a firm, have been spending a ton of time and energy on this for at least a year. Our managing partner identified this as something that we need to get in front of, and that is going to be very transformative.

We have formalized some efforts where all of the leaders of our functional teams thought about their functions, and have asked questions like, “Where's the value going to be in finance? Where's the value going to be in operations? Where's the value going to be in commercial?”

For some time, I was seeing a lot of things that were really nifty, but not necessarily needle moving. You could go back not quite a year now, and there would be all kinds of reports published in Gartner and McKinsey, and they would identify sales and marketing as one of the leading areas where there’s going to be early success in adopting AI. They’d cite things like creating email copy, capturing call notes and things like that, which sure, there's some value there, but that doesn't feel big.

Within the last four or five months, I’ve started to see some really interesting things on the coaching and training front. Imagine an AI coach for a negotiation where you feed in the situational information and you're going to have to go negotiate price. You can role play and get feedback on how you're positioning things, etc.

If you're going to go do an introductory pitch, we started to see some capabilities coming out of some of the sales training firms. There's a firm called Imparta who's on the leading edge of this type of stuff and it's really exciting. Yesterday, I saw something where Salesforce came out with a sales AI Copilot coach. So, it's going to happen quickly.

Essentially, if you're going to identify the numbers that capturing call notes was addressing or whatnot, it's freeing up time, and making things more efficient for a sales rep. That's going to be helpful, but the numbers that these coaching capabilities address are manager and sales numbers.

Getting good sales managers and getting them leverage and increasing their span of control, that's a huge value unlock because the ability to scale a sales team is highly dependent upon this iron law of an 8 to 10 span of control and you have to find those managers. It takes a lot of time.

If you can increase the span of control, the success rate of onboarding new reps, increasing their overall skill levels and shorten the onboarding time, you can do the math on that and that's a massive value opportunity. That's where we're getting really excited.

Getting good sales managers and increasing their span of control, that's a huge value unlock because the ability to scale a sales team is highly dependent upon this iron law of an 8 to 10 span of control. That's where we're getting really excited.

Linnea: You brought up something else that's so important, which is the math. How do you think about the economics of the commercial organization as a machine?

Jerry: In some ways, it’s simple. You can do the Excel formula – and I'm going to speak in terms of a traditional sales organization – but every salesperson should be able to generate X in revenue and Y in margin. That person costs a certain amount, and then there's going to be overhead associated with that person, which is everything else: sales management, technology, travel and whatnot.

You can do this ROI math, which is I have a sales rep, they sell $5M which leads to $1.5M of margin and they cost $X. Therefore, it's a good investment and I'm going to add more salespeople.

You can add them, but only so many of them are going to be successful. It's going to take a certain period of time, which means you’re going to have to think about pacing. Remarkably, a lot of sales leaders, commercial leaders, and organizations don't think in terms of the math every day. It's one of the things that I've come to really highlight in our diligence.

Remarkably, a lot of sales leaders, commercial leaders and organizations don't think in terms of the math every day. It's one of the things that I've come to really highlight in our diligence.

You must ask the questions:

What does a typical sales rep generate?
What percentage of your sales team hits that target?
How long does it take them”
What's the cost?
What's the overhead?

There are some leaders who get it. You ask them those questions and they say, "Yes, of course, I think about this all the time." They generate the $5M and the $1.5M and they cost X.

There are others who act as though they’ve been asked that question for the first time. It's so telling, and that's a bit of a red flag frankly. If we end up in an okay place, what we try to do is drive toward having solid answers to those inputs to the equation and then focus on things like variance, because you can always run an average, but is it all over the map?

In which case, you don't have a machine, and you don't have a system. You have a bunch of sales and portfolio reps, and there's numbers for each of those, but it's not something that's replicable. If it's not replicable, then it's hard to invest in it. But if you can get it within a range and you know what you're going to get, it can create an environment where you have a lot of confidence to invest in scaling that function in the organization. That's what we try to get to.

Linnea: That's such a good point. If you run into scenarios where you have more variance, more inconsistency, where do you start to get the system in place?

Jerry: Usually, focus first on the sales rep and very specifically, what they should be able to produce. If they have variance, it means you've got a portfolio that you need to look within.

Do you have anyone who is doing things the right way and can you start to build your success model for a rep around that? We've had some companies where we've done exactly that, and it's an environment where we had to make a bunch of changes. The first milestone is achieved when the initial sales rep hits our targets using the system that will form the foundation of our sales function.

The first milestone is achieved when the initial sales rep hits our targets using the system that will form the foundation of our sales function.

One is good, but it's still just one. Once you get to two or three where they're doing things in the way we want them to do it, producing the results we need to produce, then you start to have something. When you get there, you can focus on the costs around it, and if you optimize those, you're going to get more numbers out of your salespeople. Then, how do you scale the sales organization around that model?

Linnea: That's great advice because no matter which business you are, no matter what sales team you have, any sales leader can start there.

Jerry: Absolutely.

Linnea: Look at the top producer, and nature versus nurture. What is inherent or what is the system around that person?

Jerry: Importantly, it's not always the top person. Sometimes the top person is just an aberration. It's like some Superman, who for whatever reason, is wildly successful. No one is ever going to be able to do it that way. Well, okay, who's next? Is that something that we can build off?

Linnea: Totally. Let's get off the work topic now. Are there any fun avenues where you pursue personal growth outside of work?

Jerry: I try to be really involved in my community. Something that has consumed a lot of time over the last 15+ years is serving in my village government, on the board as an elected official, serving on various committees and being involved in local politics. Politics is such a bad word these days, but one of the things that is gratifying to me is how it has been non-partisan. Politics shouldn't be bad; it is about understanding things, trying to compromise, and getting things done.

At the hyperlocal level, often it's just not at all partisan, and you're working with your neighbors to figure things out and get things done that you can see and touch, and really make a difference. I continue to spend time there and get a lot of satisfaction out of that.

Linnea: That's awesome. Are there any habits that help you show up as your best self every day?

Jerry: Early in my career, I did what probably a lot of people did, which is focus on time management and try to get efficient and organized around things, which I still do spend time on.

Over time, I've realized energy is just as important as time. So, a lot of my focus is on the basics: get sleep, take time off, get outside. This morning, I was able to walk to get over here with you, Linnea, and be in the sun.

It’s important to focus on the people that you're working with, helping, and having gratitude – not just for your success, but for the ability to be in a position to help other people.

Over time, I’ve realized energy is just as important as time.

Linnea: I find very similar things for myself. It is about doing the basics consistently. It’s the sleep, food, who you surround yourself with, sunshine in the morning, and like we were joking before, a little bit of a US Open match this week doesn't hurt either.

Jerry: Exactly.

Linnea: Are there any leaders that are inspiring you lately?

Jerry: I get inspiration from a lot of things. You ask “leader,” and you'd think “business leader,” but that's not what immediately comes to mind.

In some of the things we've talked about, you've picked up on how I view coaching as an important part of my role. I have a very close special friend who is a world-class triathlete and has become a coach. Her name is Sarah Fix, and she lives in our community.

I’ve known her for 20 years and have had an opportunity to watch her transition from doing the Kona World Ironman around 20 times to becoming a coach. In those first years, it was a bit of a challenge for her because she's coming at it as she knows how to do these things, she can get on the podium, and it comes easily to her. She struggled a bit to connect and be effective with people who aren't starting from the same place.

Over time, she embraced the fact that she needs to meet people where they are, and then something else that I saw turned on was one of the best words to describe her: she's a cheerleader. She's a cheerleader for everyone that she works with and that has made her so effective because people know that it's not about her, it's about them.

She’s a cheerleader for everyone that she works with and that has made her so effective because people know that it’s not about her, it’s about them.

She's there for them and they'll do anything for her. It's just such a beautiful relationship between coach and athlete. Every time I witness that or hear about that, it does inspire me to be there, meet the people I'm working with where they are, and truly be there for them.

Linnea:That's a great shift you described from initially being frustrated working with people and being like, "Can't you just do it this way? Here's what great looks like."

To, instead, becoming a magnet for change by working to understand, motivate, and inspire the people around you. I love that.

Now, any books, podcasts, quotes that you also draw inspiration from?

Jerry: When it truly comes to inspiration and books, most of what I care about is timeless. I'm a liberal arts guy, so The Bible, the Greeks, Shakespeare, Dostoevsky, Jung. Human nature doesn't change.

Forever and across geography, we struggle with the same things: purpose, messing up, recovery, legacy, and how to work with other people. So, that's where my inspiration comes from now. Is that the only place I spend time? No.

The technical information I need for my job is increasing rapidly. Five years ago, in the realm of sales effectiveness, there really wasn't anything new. Now, there's so much that's new, and so I keep tabs on the news in the technology and AI fronts.

Within American Securities, we have a Slack channel where a bunch of people were focused on this and share information all the time. It's a great practice that I would recommend to anyone because there's no one or two sources, the information comes from all over the place. There are a bunch of sales and AI podcasts, and it's hard to find good. I think about podcasts, not as news, but as sense-making. It's people who could take the time to make sense out of, "What does this mean for you?"

I don't think there's a whole lot out there on the sales and AI front. It gets covered, but very episodically. There is an opportunity for someone out there to start to pull this all together and make sense of it in this arena.

Defining Brilliance with Jerry Hughes

Linnea: We are getting close to the finish line here, and in each episode, we like to wrap up by defining brilliance in a few ways. I'm going to hit you with a quick lightning round if you could please fill in the blanks.

Jerry:

	Purpose is...	a focus on serving others, giving more to your community than you take back. It's dynamic; it’s the next set of things you need to do to become the best version of yourself.
	Leadership is...	finding a set of shared objectives for a team, finding the way in which you can work together to make something meaningful happen, and then inspiring and keeping that team organized.
	Success is...	the peace that comes from living an integrated and principled life. There are a whole bunch of other things that will come, whether it's resources or recognition, which matter a little bit, I guess. But at the end of the day, if you're at peace with what you are doing, then that's the ultimate success.
	Brilliant leaders are...	observant, which has a bit of an “other” orientation built into it. They are focused and action oriented.
	Brilliant commercial leaders are...	going to be market and customer connected. That's how they're observant. They have to be great at coaching, be economically grounded, and think in terms of the numbers.
	I perform at my best when...	I'm with a great team working against a shared objective, and we're successful together.

Linnea: Jerry, thank you so much for joining us today in New York City and having this wonderful conversation. There's so much good stuff here that any commercial leader, operating partner, or resource group can take away to help scale up any company that they're partnering with.

Jerry: Super. Thank you, Linnea. I really enjoyed the conversation.

Linnea: Thank you to Jerry Hughes of American Securities for joining us on today's episode. I hope all of you walk away inspired with new ideas on how to grow your business and grow as a person.

That's it for this episode of the Brilliant People Podcast.

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Until next time, stay brilliant at work.