• Some Salesforce employees have been offered a "Prompt Exit Package" instead of a layoff, with less severance.
• If they refuse, they will put on a PIP, sources say, a common step before termination in the industry.
• Employees say the company is ratcheting up performance expectations as activist investors invade.

Salesforce has increased performance pressure on some employees as it executes its plan to reduce its workforce by 10%, multiple current and former employees tell Insider. Workers aren't sure if performance-related terminations are part of that 10%, they say.

The company is planning to introduce new performance metrics for engineers and has already forced some salespeople to choose between a 30-day performance improvement plan (PIP) or a severance option called a "Prompt Exit Package," according to several current and former Salesforce employees. PIPs are commonly used in the tech industry as a step prior to firing someone. The PEP, on the other hand, is basically voluntarily quitting, but Salesforce offers two months of severance with it, according to an email viewed by Insider. 

"The company is pushing hard for productivity tracking and metrics on all facets," one employee told Insider. 

"Performance pressure and return to office became big themes," a former employee, who was laid off from Salesforce in February, said of their last few months with the company. 

One new metric Salesforce is planning to use to evaluate engineer productivity, the person said, is code check-ins, a controversial practice some say incentivizes quantity over quality and reduces trust between teams. A code check-in is when a developer makes a set of changes to a codebase.

The heightened focus on performance comes as the software giant works to shed 10% of its workforce, or some 7,000 people, after a two-year hiring spree. Salesforce increased its workforce from 57,000 to 73,000 in 2021, according to its annual report. 

The company notified some employees on January 4 that their jobs were being eliminated, and sent another round of notifications on February 2. Insider has reported that more than 4,000 people have likely been laid off so far, but Salesforce has not confirmed how many more employees it has actually cut, leaving its remaining workforce anxious for their jobs. 

Meanwhile, activist investors have been mobbing Salesforce, which has seen its market value shrink in half since its peak in 2021. Five such investors have revealed significant stakes since October, including Starboard Value and the feared Elliott Management, which is said to be mounting an effort to replace some board members, Reuters reports. Other activist investors include Mason Morfit's ValueAct, Jeff Ubben's Inclusive Capital, and Dan Loeb's Third Point Capital LLC, which just last week disclosed a stake. 

Activist investors typically want their targets to trim expenses and focus on more profitable businesses, rather than pursuing growth at all costs. Starboard first approached Salesforce this summer, spoke with some of its executives and pushed for cost-cutting measures. Salesforce cut a few hundred salespeople in November, a person familiar with the matter told Insider, and the company told Insider the cuts were made for "accountability," implying that performance was a consideration.

Employees worry that so much activist attention will result in more performance pressure or further layoffs which, insiders say, the company has already contemplated. Sources say there's been internal talk on whether to cut an additional 10% of staff later this year.

One Slack message sent by an employee after the first round of layoffs in January said that Salesforce has a goal to reach 25% operating margin by the 2026 fiscal year and asked execs at the time if the target was a factor in layoffs.

Meanwhile CEO Marc Benioff has also repeatedly mentioned productivity to employees when discussing the cuts. "We don't have the same level of performance and productivity that we had in 2020 before the pandemic. We do not," he said during an all-hands meeting in January after the first notices went out.

Less severance than those laid off

Workers who spoke to Insider are concerned that the company's increased focus on performance could mean more people will be targeted for a PEP, leaving them with less severance than their colleagues who were simply laid off.

Laid-off workers will be offered a minimum severance of five month's pay and possibly more based on tenure as well as other benefits like company-sponsored COBRA, Benioff wrote in a January email to employees announcing the restructuring.

But employees who have been targeted for a PEP are offered eight weeks of severance and company-sponsored healthcare benefits under COBRA. 

Employees are given two business days to elect the PEP option, according to an internal email viewed by Insider. If they don't choose the PEP, employees will then be allowed to view the 30-day PIP plan, which they then have to start within 3 days of declining the PEP offer. 

Around Thanksgiving, the company offered some sales employees who had been deemed underperforming in certain areas, such as annual contract value and pipeline generation, the option to start a 30-day PIP or accept the PEP and immediately leave the company. In some cases, the company has presented employees with PEP offers in the same week it has executed mass layoffs, employees told Insider.

Four Salesforce employees who spoke to Insider, including two who had been offered a PEP, said the option to choose between PEP or PIP feels like a way of pushing employees out of their jobs. 

"It's a shady optics play," said one person who was given a PIP or PEP offer last month. "From an outside perspective, it looks like these people quit."

They also said they felt like Salesforce had set some salespeople up to fail, saying the company expected them to hit unachievable quotas that bested their results during a pandemic-fueled boom for cloud software, even though the economy is weakening and post-pandemic demand is waning. 

"The markets we all work in are only so big," a recently laid-off Salesforce sales executive said.

It is unclear how many engineering employees have been affected by the new performance management system, or if PEP offers are being made outside of sales teams.

Changing a hard-to-fire culture

A former Salesforce executive who left the company in accurate months told Insider that a push to accelerate the company's PIP system began in the fall. A common complaint held by Salesforce managers over the last decade has been that the system made it too difficult to fire underperforming employees, even if they were regularly labeled as such despite multiple changes in managers or roles.

The new performance management system implemented in the fall was designed to address those complaints, the former executive said, noting that it was "literally impossible" to manage anyone out of the company, including legitimately 'terrible' performers. 

"This is a classic enterprise performance improvement plan, but faster," they said of the company's new system. 

The sales employees who spoke to Insider say that plan has not worked out in practice, and has left the door open for colleagues they consider to be strong performers to be pushed out of the company. 

Salesforce did not respond to a request for comment.

Are you a Salesforce employee or do you have insight to share? Contact Ashley Stewart by sending a secure message from a nonwork device via Signal (+1-425-344-8242) or via email (astewart@insider.com). Contact Ellen Thomas via email (ethomas@insider.com) or send a secure message from a nonwork device on Signal: (+1-646-847-9416).

Related articles

ENTERPRISE Salesforce just did another round of layoffs as part of its plan to cut 10% — a 'bloodbath' affecting mostly salespeople. 4,000 fewer employees are on Salesforce's internal Slack.

ENTERPRISE If Marc Benioff is forced to sell Slack to appease activist investors, it would probably be worth less than half the $28 billion he paid just 18 months ago

TECH Salesforce's Marc Benioff defends his statements that new employees — and possibly younger remote workers — are not as productive, in leaked all-hands meeting

TECH Salesforce employees fear deeper cuts now that a second activist investor has a stake. Elliott, the world's most feared hedge fund, has confirmed it wants changes.

New York CNN  — 

Software giant Salesforce (CRM), one of the 30 stocks in the venerable Dow Jones Industrial Average, had a miserable 2022. Now the company is under attack from a big hedge fund that wants to shake things up at the company that owns Slack.

Elliott Management, a firm that has taken activist stakes in Pinterest (PINS), PayPal (PYPL), Twitter (before Elon Musk acquired it) and former CNN owner AT&T (T) over the past few years, is now targeting Salesforce. Shares of Salesforce rose more than 4% on the news in early trading Monday.

A source close to the situation said that Elliott Management took a multi-billion dollar stake in Salesforce. Elliott would not divulge the size of its position in Salesforce to CNN Business, but the company did confirm its investment.

“Salesforce is one of the preeminent software companies in the world, and having followed the company for nearly two decades we have developed a deep respect for [Salesforce CEO] Marc Benioff and what he has built,” said Elliott managing partner Jesse Cohn in a statement to CNN Business.

“We look forward to working constructively with Salesforce to realize the value befitting a company of its stature,” Cohn added.

Salesforce was not immediately available for comment.

Shares of Salesforce plunged nearly 50% last year due to slowing growth and management turmoil. Co-CEO Bret Taylor stepped down, leaving Salesforce chairman and co-founder Benioff as sole CEO.

The company also recently announced plans to lay off around 10% of its staff due to the weakness in the tech sector.

Salesforce, like many other tech firms that are now cutting jobs, hired aggressively during the early stages of the Covid-19 pandemic, as the work from home boom led to a surge in demand for cloud software that made it easier for companies to manage their businesses remotely.

Benioff was even named CEO of the Year by CNN Business for 2020.

However, Salesforce spent a LOT of money over the past few years on acquisitions, scooping up workforce productivity tool Slack as well as software firms Tableau and MuleSoft for nearly $50 billion. Investors are now wondering if the deals were worth it.

Salesforce also has to contend with tough competition from the likes of Oracle (ORCL), German software giant SAP (SAP) and Microsoft (MSFT), which has a top Slack rival in Teams.

Salesforce finds itself in a rather unusual situation, with four activist investors operating inside the company at the same time: Elliott Management, Starboard Value, ValueAct and Inclusive Capital. Experts suggest that having so many activist investors in play at once at a major tech company like Salesforce is exceptional.

What do these folks want from Salesforce, which is hardly in full distress? Sure, the stock is down, but Salesforce raked in $8 billion last quarter.

But that could be precisely why the investors are so interested — because they believe whatever they think is wrong can be fixed fairly quickly, and everyone can make a lot of money without a lot of fuss.

That may or may not be the case. When you have four strong personalities involved in the same game, even if their end goal is in sync, how do you get them all collaborating to pull CEO Marc Benioff and the board of directors in line with them? And let’s not forget that Benioff has a pretty strong personality himself.

If the investors have differing opinions about what’s wrong at Salesforce, it can create an opening for Benioff to negotiate, something that activist investors don’t typically like to do. Instead, they like to dictate terms and position themselves — usually by capturing board seats — to make sure the company does what they want. Salesforce did announce three new board members last week, including ValueAct CEO and chief investment officer Mason Morfit.

But with four firms, who gets additional board seats? Who negotiates these changes? Do they work together or do they come apart? It’s an interesting exercise in teamwork. Can these investors share the responsibility without driving each other crazy?

Salesforce is looking at new ways to cut costs as activist investors continue to put pressure on the company. Today, Insider was reporting that the company is implementing much stricter performance measurements for engineering, with some salespeople being put under pressure to quit or succumb to harsh performance policies of their own. This is consistent with what sources have been telling TechCrunch.

This could include performance reviews based on the quantity of code produced for engineers, a flawed way to measure engineering productivity, which encourages quantity over quality. While salespeople are being put between a rock and a hard place, being asked to choose between signing a strict one-month performance improvement plan or taking an exit package.

When asked about this, Salesforce responded with this comment: “Our performance management process drives accountability and rewards excellence.” The company did not elaborate or answer follow-up questions regarding the timing or details of this policy.

TechCrunch has also been hearing that the company is mandating a return to the office, and according to a Salesforce spokesperson, it’s now up to the managers to decide. “Our hybrid approach empowers leaders to make decisions for their teams about which jobs need to be in the office or remote.”

That’s an interesting attitude shift for a company has been promoting the idea of the “all digital, work-from-anywhere workplace” since the pandemic hit in 2020, something they call the Digital HQ. It’s a big part of why the CRM leader spent almost $28 billion to buy Slack in 2020.

But neither is it surprising since CEO and chair Marc Benioff practically telegraphed this at the end of last year, suggesting that folks working from home weren’t as productive.

All of this is probably related to the fact that activist investors — including Elliott Management, Starboard Value, ValueAct and Inclusive Capital — have been circling the company, undoubtedly putting tons of pressure on Benioff to increase productivity and cut costs. These firms are a big part of the reason Salesforce announced that it was cutting 10% of its workforce in January, a process that has been handled badly with layoff notices coming in dribs and drabs, leaving workers anxious and uncertain.

Ray Wang, founder and principal analyst at Constellation Research, blames Boston Consulting Group, which he says was brought in at the behest of the activists to deal with the cuts and implement new performance review policies. “From what we know, BCG made some significant recommendations on how salespeople and developers should be measured to Excellerate productivity,” Wang told TechCrunch. Update: BCG denies being responsible for the performance review policies.

Wang says that whether you think this approach is a good idea or not depends on your perspective. “If I was an investor, I would advocate for this approach, but if I was the owner-founder, I would want something less harsh and more nuanced,” he said.

Wang isn’t a fan of how the activists have handled this, calling them “vulture firms.” While he does agree with their assertion that Salesforce overpaid for bad acquisitions, he believes these firms lack an understanding of how to run a company like Salesforce, and they are ultimately doing more harm than good.

“The vulture firms do not have a good understanding of the investment levels in R&D that are needed for innovation to continue, nor did they understand what level of marketing spend Salesforce needs to remain top of mind for execs,” Wang said.

“They don’t add any value. They come in to just make money on the arbitrage and they leave the firms more damaged than when they were before they were taken over,” he said.

Salesforce, San Francisco’s largest private employer, laid off thousands of employees early Thursday morning as the tech giant moves forward in its plan to cut its workforce by 10%.

The corporate software company blamed the layoff rounds, originally announced on Jan. 4, on overhiring during the pandemic. In a two-hour meeting the following day, CEO Marc Benioff complained that just half of the company’s salespeople were responsible for 96% of sales, according to a CNBC report.