On January 5, the day after billionaire Marc Benioff fired 8,000 people, he was 15 minutes late for a company-wide town-hall meeting at Salesforce, the business software giant he founded 24 years ago. Then he made a joke: “Did I miss something?”
His attempt at humour went down badly. Many of the company’s near 80,000 workers had tuned in, anxious about their positions. Given the global nature of Salesforce — it employs more than 2,500 people in Britain — the lay-offs were expected to be staggered to comply with employment laws around the world. “We knew more were coming, so we were all there to find out if we would still have jobs,” said one person on the call. “It was so inappropriate. Employees were very, very upset.”
The bungled call threw into sharp relief an unavoidable reality: Benioff had lost touch. Which was a problem because the company is Benioff, in the same way Meta is Mark Zuckerberg. For most of its life, the $148 billion (£121 billion) Salesforce has only known success. Annual sales of its customer management software have tripled since 2017 to $26 billion; headcount has surged two-thirds since 2019; its British operation, which is based in a tower in the City and has included high-profile executives such as former BT boss Gavin Patterson, has grown rapidly.
Yet all of a sudden, the San Francisco giant seems to have run into the sand, beset by falling profits, an executive exodus and an activist investor baying for change. Its shares have halved since November 2021, closing on Friday at $148.18. And Benioff, author of one of the great business success stories of this century, is facing uncomfortable questions.
Can the eccentric 58-year-old, who has cultivated a cultish culture and rubs shoulders with presidents and rock stars, right the ship? In the past two months, the company has lost three chief executives. Stewart Butterfield, the head of messaging app Slack, which Benioff bought two years ago, said in December he was leaving. So did Mark Nelson, chief executive of another firm, Tableau, that Salesforce scooped up. And most surprisingly, Benioff’s co-chief executive, Bret Taylor, abruptly resigned in November after just 14 months.
Taylor, ex-Twitter chairman, offered few details other than saying he wanted to get back to his “entrepreneurial roots”.
Keeping executives, though, is not a new challenge for Benioff. Taylor’s predecessor, Keith Block, lasted 18 months. Patterson, the chief strategy officer who has cycled through four roles since joining in 2019, will step down at the end of this month. Dame Jayne-Anne Gadhia, the former Virgin Money chief who Benioff hired to run Britain and Ireland, quit in 2020, just six months after being hired.
A source close to the situation said Benioff suffers from “founder’s syndrome — it’s his business and he won’t let anyone else run it”. An employee speaking on condition of anonymity said he “rarely listens” to advice. “He needs to start listening ... he comes off as tone-deaf.”
Benioff was, by his own telling, an awkward child who taught himself how to code and had few friends. He emerged as a star executive in the 1990s at tech giant Oracle, where billionaire founder Larry Ellison paid him lavishly and tipped him for great things. Yet Benioff struck out on his own. His idea was to offer customer relationship software over the internet, rather than via expensive databases that required acres of servers. Years before “the cloud”, it was a radical idea.
He also built the company in his own image. Benioff, who owns a vast estate in Hawaii, insists that Salesforce is an “ohana”, the Hawaiian word for family. Meetings at his compound begin with a blessing in the sea from a prayer leader.
Dreamforce, Salesforce’s annual convention in San Francisco, is an expression of Benioff’s ID. Mixed with sessions celebrating staff who hit sales goals are troupes of Buddhist monks, who Benioff flies in each year, to school executives on meditation. Barack Obama gave the keynote one year, and the company has put on so many Metallica concerts that drummer Lars Ulrich jokes how Metallica has become Salesforce’s “house band.”
Benioff also tirelessly trumpets business — and Salesforce, in particular — as a force for good. Before founding the company, he travelled to India to consult Amma (Mother) Mata Amritanandamayi, “the hugging saint”, on his start-up idea. She inspired him, according to one of his books, to enshrine the 1:1:1 rule, in which Salesforce pledges to give 1 per cent of sales, 1 per cent of employees’ time and 1 per cent of its products to good causes.
Investors didn’t much mind Benioff’s eccentricities or his free-spending ways when times were good. And they were good: the shares have gone up 50-fold since Benioff listed the company in 2004. Salesforce became the largest employer in San Francisco, and Benioff’s wealth surged to more than $6 billion, some of which he used to purchase Time magazine.
Yet coming out of Covid, Salesforce has been hit with a severe case of indigestion. Benioff admitted to overhiring in the pandemic, which has squeezed the bottom line. In the three months to October, sales surged 14 per cent to $7.8 billion, but profits more than halved to $210m.
The disappointing results buttressed the arguments of Starboard Capital; the activist firm unveiled that it had bought a stake in Salesforce in October and called on the company to boost profits dramatically. Taylor announced his exit weeks later.
Feeling the pressure, Benioff, just days before Christmas, sent a company-wide message complaining that remote workers were not as productive as others. His gripes led to workers going all-out to prove their worth. “Everyone was trying to save themselves,” said one employee. The lay-offs came days later.
A few factors have converged at once. Benioff splashed out $50 billion on acquisitions between 2018 and 2020, capped by the takeover of Slack for $27.7 billion — an eye-watering price tag equal to about 33 times annual sales for the fast-growing but loss-making messaging company.
The world, however, has changed. As the economy has slowed, so too has the money that businesses are spending on software. Salesforce’s share price fall, meanwhile, has dented morale among workers whose compensation is heavily weighted towards shares. What’s more, Benioff must squeeze more out of an unwieldy mix of products accrued via deals and Salesforce’s organic product development. An executive said: “This is a company that knows how to grow, but not how to grow efficiently. Cost discipline is not in its DNA, and that starts with Marc.”
Salesforce’s crisis is not existential: it is forecast to hit $30 billion in sales this year, and is sitting on $6 billion in cash. That said, Benioff’s corporate ohana is grappling with something that most families really try to avoid: dysfunction.
