Savneet Singh – Urgency and Culture – EP.255

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(00:00:00) – Intro

(00:01:25) – Projecting a sense of urgency

(00:06:45) – Evaluation cadences

(00:11:26) – Building Culture at Scale

(00:15:12) – What companies do you admire with regard to their culture?

(00:17:16) – Mistakes made in organizational design

(00:21:34) – Originating ideas

(00:22:41) – Making unpopular decisions

(00:27:31) – What makes a successful M&A deal

(00:31:24) – Integrating a newly acquired company

(00:32:34) – Software consolidation approaches

(00:35:55) – Looming threats for software companies

(00:40:55) – Equity Comp as a tool for designing incentives

(00:51:26) – What’s top of mind for you?

Alex Bridgeman: Well, Savneet, it’s great to see you again. I really enjoyed our last podcast, which is why I was excited to have you on again. And I think it was only about 12 months ago and a bunch of ideas you brought up in that episode kind of like ring through my head, especially the sense of urgency that you bring as a CEO, which is a value I want to bring as a CEO as well. Can you just dive into that just a little bit more? There’s a sense of you having urgency, but kind of projecting that through your team is another challenge within that. I would love to hear kind of in the last couple years how you’ve learned how to project that urgency.

Savneet Singh: Yeah, I think it changes as you scale. But I’ll tell you a few things. The first is, if it’s organic to you, it helps a lot. And so I’ve always been an urgent, impatient person. And so I think it helps a lot if you’re that way because then your team observes that, the people you hire are like that, and it kind of compounds. The second thing I’d say is, if it’s not natural to you, and generally it’s natural to anyone that’s a CEO or a leader, you then have to make it really deliberate. So, urgency is one of our values; act with urgency. It’s literally our first value at PAR. And so, you know coming in the door as a new employee that like, oh, the urgency matters. I think we talked a little bit on our last podcast, but we’re a really values-based organization, but values to us are really different than most companies because they’re not about curiosity and fun. They’re about delivering outcomes to our customers so that we can create value for our shareholders and ourselves. And so, our values are crazy intense. They’re act with urgency, they’re deliver outcomes, speed, never settling. And so, I think codifying it and being deliberate about those values matters a lot. And the last thing I would say, it’s about being the example yourself. So when I get an email from an employer or customer that I can respond to quickly, I’m on it. I show that urgency to the team, and I think there’s an expectation. Somebody really remarked on our team recently, I went to a restaurant technology show, and obviously when the CEO shows up to a show where you’ve got a lot of your team members, it’s a fun thing but it’s also a stressful thing because everyone thinks they’re being watched, and they’re really not. But I go to this conference. I schedule eight meetings. I see the booth, meet every other employee… and the point being is that if I don’t show the urgency and intensity of like, hey, we just spent $30,000 on this conference, like we better get every dollar we can out of it, and if I just sat and said, hey, let’s have a drink, let’s chat, let’s have some fun, that would create a very different culture. And so, the comment that our teammate made is, hey, you’re the only CEO at this conference. And I’m like, I love that because it shows that our culture is different. And so, I think it’s the last part about you’ve got to live it yourself and it’ll compound across your organization. And then you celebrate examples of it to people that do live that.

Alex Bridgeman: What are some ways that you identify that in potential hires, that sense of urgency that you have and you want to bring?

Savneet Singh: So, I think there’s a couple things. The first is you learn the most still, I think, from their prior experience. So, you look for examples in the past of did they make decisions about their career in an urgent manner? When someone’s like I’ve had this job for eight years and I kind of knew I wasn’t a good fit, then I’m kind of like, well, why did you wait so long? You get a feeling from references, like I do a lot of references when we hire somebody senior, and a lot of what I try to understand is what is it like to work with them? When they get an idea, do they take the stairs or do they wait for the elevator? You get a lot of learnings from kind of talking to those that have worked with them. Because honestly, nine out of ten times, people might not be a good cultural fit, but the way you act kind of stays consistent. If you’re a fast mover, if you’re urgent, if you act like an owner not a renter, that all- you probably exhibited those traits at other places you’ve worked at. And so, I spend a lot of time trying to understand it from those. But honestly, the way we discover it at PAR is it’s part of your review at the end of the year. So you’ve got your KPIs that you’ve got to hit to get your bonus, which are then also ranked by your peers and your direct reports on how did you live each one of our five values? And the critical aspect of that was that we can see how does your team think you’re living those values. And that creates a great way of us having a two-way conversation, which is like, hey, you delivered on your KPIs, but you got a really low score on those values. Like what’s missing here? Are you living the PAR way? So that’s a little bit how we do it.

Alex Bridgeman: That also helps to put numbers around, like more objectivity around evaluations too, that scoring amongst your peers versus only coming from you or only coming from your manager. There’s a quantitative aspect to that that makes it a more like cards on the table conversation.

Savneet Singh: One of the things, the most common advice I give when I’m on a board and I’m advising another CEO or leader is you want to make conversations with your direct reports as objective as possible. So I don’t want to sit there and say, Alex, you’ve had a pretty good year, but I really wish you did this and that. You want to go back and say, hey, here’s a scorecard that we created together, and here’s how we delivered on these items. And then you go, hey, we’ve got our culture scores. We have people rank you on the culture scores. And so that could be my- I could have an impression that you are not actually with urgency. But if I then see that eight of your nine direct reports ranked you very high on urgency, as an example, or commented very agglowingly about your urgency, then like I know my anecdote is being overridden by real data. And so I try to make it very, very objective. And so that by the time I have a conversation, they’ve read their review, they know where they stand on the metrics that they were supposed to deliver for the year. And so it turns into a more, I’d argue, a fair conversation that you can then start from a point of honesty, which is saying, hey, I know I think you act with urgency, but if your team doesn’t think that way and your peers don’t think that way, let’s ignore what I think and talk about why is that coming across.

Alex Bridgeman: And what kind of cadence do you establish for those reviews and those conversations? Like, you’ve got a much bigger team than when you started, like what does that look like, and how do you organize it?

Savneet Singh: We do them twice a year. And so, we kind of collected data and the feedback twice a year. And then, one of the cool things we do as a company is that our entire leadership team, so the top eight, nine people at PAR, we get in a room, and then we look at the people ranked highest at PAR going down many levels. And we get there for three or four hours, and then every single leader has got to report the people that they ranked the highest. And there’s debate, they say, hey, like I don’t think that person is really like the next leader at PAR. Why do you think that? And so, it’s another way, we call it our calibration exercise, but it’s a way for us to get buy-in that we all think this person is someone we need to invest in, or hey, I may think this person’s the greatest thing since sliced bread, but gosh, the finance team despises them. I got to solve that for them to get to that next level.

Alex Bridgeman: Are there processes within evaluation and team scoring and whatnot that you’re trying to include or add or get better at this year? If I compared your process today to this time last year, what would be different?

Savneet Singh: So, I think that the distinction between this year and last year would be we were way more focused on the value side. So, we made- we get your values, each reviewer has to comment on how you live that value. And that was really instructive for me on 25% of cases where I think I had a misjudgment or one of our leaders had a misjudgment of somebody on the team. The best examples that you can think about is there are people that are really good at selling upward, and you feel great, but then you kind of- and then their team members sort of feel maybe intimidated to give honest feedback, but then when you’re sort of rated on reviews and you’re like one of our values is winning together, and you’re like, wow, they rank really low on that value. That’s probably the people’s- and so it’s that. As far as like the changes, I think we try to make changes every year. I would say the big change we’re making now is the number of questions we do in our reviews is coming down. We made it- it used to be like 30 questions or something, and I think what we realized is you can probably get it done in 10, maybe even less, and so we’re just cutting down the number of questions we ask. And it’s also just a great burden for our leaders to answer so many questions.

Alex Bridgeman: Is there one question that’s most important? Like if you missed this one or these two, the rest of them don’t really matter? Like how do you get from ten to three questions?

Savneet Singh: I don’t think there’s one. No, I don’t think so. I mean, I think that each question has a specific purpose. So, one of the things I try to suss out in one of the questions is, as an example, I ask this a lot in skip level meetings, how’s your relationship with your manager, Alex? Oh, it’s great, I love Johnny, he takes care of me, he’s great, he’s always got my back. And I’ll say, what does Johnny push you the most on? What is Johnny’s- and then they’ll give an answer, and that tells you a lot. Oh, yeah, we don’t have that kind of relationship, it’s more collaborative. I’m like, okay, that’s concerning because then Johnny’s not sort of creating that. Or man, he’s just like obsessed with me hitting my target. So, I’m like, well, it might be a good thing because we haven’t hit our targets here. Or it’s about process. And so it gives you an idea of how does that manager manage. And I really want to understand that because are they doing it the way that we think is right or the way that they’ve learned somewhere else? That’s like an example. Another question I always ask is, tell me your manager’s best skill. And then tell me your manager’s- it was one area that you wish you got more from your manager. And so, an example of the single biggest yellow flag to me is when you ask what the best skill is, it’s generally like I call them throwaway. They’re very fun, they’re super collaborative, very supportive. These are great things, and you want all of these things, but I would rather have somebody that’s like, man, they’re the pacemaker, they’re driving us really hard. I love my manager because they’re changing the way I think about the business. I love my manager because they push me to be my best. You’re looking for specific words, intense words because I find those to be the best managers. I often find the super collaboratively, the fun managers are not the ones that drive outcomes in the way that we need to drive outcomes in the competitive industry that we are in. So those are a few that I really always read because I just want to hear, what does Alex really think of his boss? And so what do you think his greatest strength is? And if you say, his greatest strength is he’s so supportive and gets me resources, I’m like, anybody can do that. But if their greatest strength is they really challenge me to look at my business differently, they really challenge me to hit my metrics, my goals, they really challenge me to make changes to my team when I’m uncomfortable doing that, those are the hard things that really great managers do.

Alex Bridgeman: We’re kind of bouncing around it, but you talked about having a, there’s a unique view on spreading culture at scale that you talked about. We’re kind of jumping around it, but I think it would make a lot of sense to give what’s your foundational philosophy for culture at scale, especially being a public company, which has its own interesting dimension too?

Savneet Singh: I don’t have a philosophy. So I have a few thoughts. The first is, I always hate when people are like, do you remember the culture when we were 20 people in a room or 30 people in a room, or now, at PAR because we’ve been lucky and had some success, it’s like, man, do you remember, Savneet, when we were in 2018 and we had 10 million in revenue and it was every day we were working trying to- sleeping in the office, trying to figure out how to avoid bankruptcy, and it was such an amazing- everyone knew everything. And I always think there’s just like this hubris in saying like, why is it assumed that back then it was better? And I think the reason why that happens is because it feels better when you know everybody, it’s a smaller environment, you feel more connected. And that’s totally true. But that’s not what culture is. We are here to drive value for the people that have given us the money to invest on their behalf. And so we do that by driving great outcomes for our customers. And so, if our culture is not driving great outcomes for our customers such that they’re creating value for their business, that we can create value, and then give that value back to our shareholders, there’s no point to it. And so I’ve started there, which is like, why can’t culture today be better than it was when we started this journey? So that’s kind of a thing I constantly say to everybody, like culture can only get better. It doesn’t have to get diluted over time. The second major, major, major learning I’ve had that I think people don’t quite appreciate is that, and this is something I don’t think I’ve ever seen, but I should probably write about it one day, which is I think your culture needs to map to your organizational design. And so, what I mean by that is that if you saw, you’ve sort of seen, we’ve talked about PAR values before, ownership, urgency, winning together, deliver outcomes, and never settling. These are intense values. These are looking for ambitious people. Well, when you hire ambitious people that are trying to deliver outcomes for customers and never settling, living every day as day one, if you have a functional org chart that has six or seven executives at the top, you’re talking ten years before an ambitious person gets a chance to run a P&L, gets to run a department, gets to have real agency in what they do. You’re talking about an organization where a customer wants something and you’re going up to a CRO of a $300 million software company saying, hey, can I give this to a customer? Your organizational design needs to support the culture you’re creating. And so, at PAR, part of the reason we run in business units is that it supports that culture, which is like, great, we found this great talent. You are now the general manager of our ordering product, our $1 million revenue line. You’re like ostensibly the CEO of that thing, and you drive that. And then what does that do? One, it reinforces our culture, which is like, wow, if I live those values, I get that chance before anybody else in my business school class or my college class. I got a cool opportunity to do something. Two, we get to see if they can sink or swim, so it’s a huge advantage for us to then say, wow, that person did an amazing job. Then we promote them again, and it like self- it creates the culture, the flywheel because they’re like oh my god, you live the values, you got the opportunity, the company rewarded him for living those values, and then you got rewarded again, and it sort of proves it all out. And so I think your organizational design has to match that culture that you’re trying to create. That’s not right for everyone. That’s our style, where we look for these sort of ambitious, emerging talents that are willing to take risks. And you’ve got to do that. And I think, excuse me, I had a meeting with a young employee, and she was in my office. And I said, what’s your goal? Like, what do you want to be? And she works, covers marketing enablement within one of our product lines, and she says, I want to change the world. And I’m like, crap. You know why? That’s an ambitious person that I have to make sure we can create a role so that she never wants to leave here. Because if we don’t create her feeling that she’s working her way to change the world at PAR, like she’s going to leave. And if we had just had a simple functional org chart, like by the time that she could get anywhere close to having a real large team, it would take forever. So anyways, I think that’s the other thing that I’ve learned, at scale, your organizational design has to tie into the culture you’re creating.

Alex Bridgeman: What companies have a different organizational structure, but you admire them even so? What companies do you admire that are different from PAR, but have a similar philosophy with organizing their culture and teams?

Savneet Singh: I think there are a lot actually. I mean, I think that if you think about- so lots do what we do. I think if you look at some of the success of Microsoft, it’s because they’ve got these general managers, they’ve got these great kind of mini-CEOs running these businesses and working collaboratively together. I think it’s done well. But I’ll focus on software. I think there are certain organizations that have found a DNA around building and shipping product through a centralized product group that works really, really well. So, one of our peers is Toast. I have tremendous admiration for their ability to ship product, keep it unified, and run in a more functional design versus having different units. So, I think that’s a great example of a company I look up to and I think has done a really phenomenal job of building products for the end market they serve and staying quite functional. So, I think it can really work. It just depends on the DNA of the company you’re creating. And I think part of it is what scale you’re at. I think a lot of it also matters if the founder’s still running the company. Because oftentimes they still control a lot of decisions around product and go to market. And so I think there’s a lot of different things. I think both work, but that’s an example of a company I think has done a really good job with it.

Alex Bridgeman: What mistakes around organizational design did you make early on?

Savneet Singh: Oh, I mean, we’ve done a ton. The first thing I did when I came to PAR is we became completely decentralized because I sort of felt that one P&L with a hardware services business and a small software business, when we took over PAR, we didn’t have $10 million of software revenue. But that was the focus of the business. And so I was like, who owns that? And it’s like, well, the CRO that owns also the hardware revenue and service revenue. I’m like, no, no, no, we need someone that owns that revenue line because that’s the most important thing. And that was, I think, really successful in kind of creating that. But I think some of the mistakes I made was that there were a lot of opportunities to then also consolidate business units that I kept separate too long. Because what we’ve realized is that our playbook is different. We aren’t Constellation Software where we’re trying to buy stuff at 2 times; we’re buying businesses that we’re integrating, creating customer outcomes by selling them more products, but creating differentiated customer outcomes. And that oftentimes works better in a consolidated manner. And so, one of the mistakes we made was we separated certain products that probably should have been together earlier. And the reason why that was a mistake was not that they actually- they actually work great that way, but the product innovation got stifled between the two of those things. And so in the areas where we could combine two products into one is where I was too slow to combine them. So that’s an example. Another example was we had a consolidated product team for a long time, great leader, someone I look up to and respect. And the idea was, well, we should have one product team across all of our products. And when we did that and did retrospective a year or two later, what I observed was the following. All of our products were slower to deliver new features and functions. All of our team thought we were farther away from our customer than we were a year or two ago. And all of the direct reports felt like they couldn’t go as fast as they wanted to and they all felt a little more disengaged. And I thought that was so interesting because we had a great leader, very accomplished person, and when I dug into it, it actually made a ton of sense. Well, what’s the point of a product manager that’s selling point of sale software being looped into a generalist who’s covering point of sale, loyalty, online ordering, back office, cyber. Like when your mandate is so wide, you don’t add a ton of value to each individual direct report that you have. And you don’t have to, but then those direct reports, they need to feel like they’re still driving their own ship and they’re still listening and being the voice of the customer. And so that was an example where we then pushed product and product marketing back into the BUs and then kind of created a group that does the centralized engineering, centralized products across all of them, but the core product development we kept within the BUs. And I think it just created another layer of management. So things got a lot slower. And again, think about our customers. Hey, I got a product with a point of sale. You bring in the head of product who’s not a specialist in point of sale. He knows it really well, but he knows seven products really well. It’s like, what’s the point? And so that was one of the mistakes we made too.

Alex Bridgeman: Well, I would imagine too that the, for any of the folks on that product team, their random thoughts throughout the day while they’re walking their dog or showering or something, those aren’t accumulating to a single product. It’s more of a portfolio of products that are not very organized in their head. Like when I think about the job or podcast or everything I’m working on, like if it’s focused, then all my random ideas kind of focus around that one idea versus being spread across lots of different things. And those like insightful ideas you get just doing random stuff throughout the house, those accumulate to one place versus being spread like peanut butter.

Savneet Singh: I couldn’t agree with that more. I call it the shower test. I think that when you think about something a lot and then you go take a hot shower, I guess now a cold shower, and you’ll have these ideas that sort of spark like something that you’re like- a nonlinear form of thinking. And I think what happens there is like the subconscious comes to the front of your mind because you’re being stimulated by something else, and you can then be like, oh crap, like amazing idea comes out of that. But I think that when you have five things going on at once, instead of having that nonlinear thing, what comes out of your mind is actually the next linear step, which is like, oh, I’ve got to do these five things, I forgot to do these five things. Versus I got to- oh my God, if we did this as a product, we would open up all this other stuff. And so, I think when you’ve got five things going on, you just think of the next linear thing on your task list, versus you got one thing you’re obsessing about, you can think about the non-linear outcome that gets lost by a big to-do list every day.

Alex Bridgeman: Where do most of your random ideas, your shower test ideas, where do they come from? Do you plan out walks throughout the day, or where do those originate for you?

Savneet Singh: It’s completely unstructured. I would say, so when I’m making a big decision, the people at PAR would tell you I’m the most annoying guy in the world because I’m just literally walking around the building, walking the building for hours and hours just thinking and thinking and thinking and thinking. Just a few months ago, earlier in the year as an example, it was March, we acquired a convenience store software company. And it was really contrarian. Our stock went down 9%, investors were like, what the hell are you doing? You guys are screwing up the thesis, blah, blah, blah, blah, blah. But I obsessed on this for days and days. I probably walked 100 miles just thinking about it. And so when I am consumed by something, it’s a lot of walking and thinking and there. But for me, on the day-to-day, as far as like where I get good ideas, it is almost always after intense exercise is when I find out like my anxiety with all the day-to-day stuff goes away and then the shower after that or on the drive home from the gym, I’m like, oh crap, like that’s where I find it hits for me. It’s usually after some intense exercise or some physical thing.

Alex Bridgeman: Can you dive into making big decisions, especially ones that are not necessarily popular? Like how do you go about that?

Savneet Singh: How do I go about that? I mean, I think every good leader has to be a good listener. You’ve got to take in a lot of opinions, you’ve got to hear from a lot of people. But I think what makes a good leader is a person that can then figure out this is the path I want to go on, even if it’s not the path that we were advised by. And I kind of get there by just always thinking, I always think if I owned 100% of PAR, what would I do? And I make every decision that way. And this is a great example, we just finished a company-wide town hall, and we’re talking about a lot of the good wins we had this year, the mistakes we had this year. And I said, what we need for ’25 is our contrarian bets because consensus stuff doesn’t work. And I gave the example this year, this convenience store deal we did that I mentioned. This was hotly debated internally with our board being like, hey, you’re a restaurant company, what are you doing here? And I said, when we funded it with a pipe of their shareholders, there’s a lot of like, what are you guys doing? Like, this is not what you do. And that’s really hard. It’s very hard to go to your board and say, hey, I want to do something that you guys probably don’t like. It’s very hard to go to your top shareholders who’ve been so supportive of you and saying, I’m doing something that’s kind of off thesis in your mind, but trust me. And by the way, our thesis is really simple. Convenience stores were becoming the next restaurants. They were taking share. We saw this happening, but the data wasn’t there yet, but we kind of believed it. And so I got there by just having a ton of belief that the data that I was seeing and that I could see the world going that way. And then I just kept saying, man, if this was- like if I was the only shareholder, I would do this. And so you go out there, you do it, and it’s tough because then your stock goes down 9% and you’re like, oh man, am I wrong? You start questioning yourself. But fast forward, it really proved out. Another great example was, just this is a smaller thing, but we just equitized $100 million of debt that we had just like a month ago or something like that. And when we did that, I would say every financial advisor we talked to, think of all the big bulge bracket banks, even our own internal finance team proposed something very different. They proposed, let’s refinance the debt, put it out many years, combine it with some other stuff, let’s save a bunch of interest expense. And my perspective was different, which was, we should de-lever because one of the great tools that we’ve created shareholder value on is by M&A. And by having debt on the balance sheet, you really don’t have the flexibility to do more M&A down the road. But the challenge is that when you equitize debt, like your stock usually goes down because you’re trading, you’re diluting shareholders for debt. And so, we went to the board and it was the same thing. We said, hey, like this is not what our advisors recommended, we hired two specific fancy advisors, but I really think this is the right thing to do, here’s why I did it, and the board supported it, and guess what, our stock went up. And so that was the opposite of the first one, which was like it took some time to get validated. This one, we were validated right away. But in both of those, I think it comes down to you’ve got to really do the work, and then you just have to be convicted, and over time, hopefully your judgment’s right six, seven out of ten times, and you’re okay.

Alex Bridgeman: Well, the equity deal seemed particularly interesting, and I did see that and kind of made a mental note to ask you about it, because you talk about when your stock is low, that’s a good time to buy and sell when it’s high. It’s effectively what you did. The stock was pretty close to record high. And so, your equity was at a price where it probably made a lot of sense to swap it out with debt.

Savneet Singh: Yeah, I mean, I think it came down to… which is like we financed the company through converts early on because that was sort of the only financing tool we had when we took over the company. And it was very simple, which was, by pushing out the debt longer, all you’re doing is postponing the eventual dilution. And because I think our stock is going to go up over time, I’d rather deal with that dilution now than have to do it down the road. But more importantly, I wanted the flexibility of like let’s just say we found a great acquisition. Guess what? Now we have $100 million of more debt capacity we may need, or our balance sheet looks better, we could do a large equity financing if we needed it. And so to me, it was that point on flexibility that I really wanted to get to. And I think now we have a good track record of the M&A working so that we can do that. And so, like I said, it was non-consensus. Like, the convert market’s been so hot, you can get terms that are unbelievable. But for me, it was about having that flexibility.

Alex Bridgeman: Is there a debt load you’re looking to get to or hover around that you feel comfortable operating with?

Savneet Singh: No. To me, it’s just what’s the cost of capital at the time you want to acquire something, and provided we have flexibility and we’re not sort of risking the long term. So, as an example, we have done deals where we use equity and it’s highly, highly accretive. We’ve had examples when we use debt because there was- I remember we took on a debt piece that was 1.75% or 1.875% and I’m like as close to free money as we’re going to get, so that’s a great way to finance it. So, to me, it’s what’s the cheapest cost of capital at the time you want to do a deal, provided that you still have lots of flexibility on the balance sheet to do more down the road.

Alex Bridgeman: Yes, certainly. Can you talk more about the M&A side and especially what works and what doesn’t and what you’ve found makes a successful deal or not?

Savneet Singh: There’s a lot there. What works and what doesn’t. I think when we think of M&A, for us, M&A kind of falls into two buckets. There’s M&A that I call product-led M&A. We’re buying a net new product that we don’t have today that we’re adding it to our solution. And the rubric we use is that if we had that product within PAR, does adding that product at PAR create a unique customer outcome that we couldn’t do if that product was not owned by PAR? So said differently, if we had those products under one roof, can we build something on top of or create a seamless service experience or a data experience that the customer is like, oh, wow, that felt different than if I had two different vendors for those two different products? That’s kind of lens one, which is can we create a unique customer outcome? Lens two is can we make the math work? Does the math actually work? And then lens three is the organizational and cultural plan that we build on top of that. And so that M&A is very product led for us. And I tend to find that works better for us and probably for most companies because you’re avoiding a lot of the conflicts that happen when you do the second type of M&A, which is what I call market share acquisitions. This is when you’re buying a competitor. Because when you buy a competitor, those are the ones that, listen, on paper, like as shareholders, oh, it makes so much sense. Coke and Pepsi should merge or whatever. These things do the same thing. Why do you have two different companies doing the same thing? But the problem when you do that is that, pretend it’s an enterprise software product, and you have two different products now that do the same thing under one roof. Well, it’s really, really hard to go to one group of customers and say, hey, we’re going to move you all over to this other product because they didn’t buy that product. They chose this product, and likely they chose that product over this product over here. And so that’s an incredibly challenging process and you actually are increasing churn. Because you’re like giving the chance to opt out of the deal and so you likely churn some of your customer base, piss a lot of people off because they didn’t want your product, now they…. have to move your product. And I think in an important manner, you then have to deal with the team issues, which is which product team do you keep, which salespeople do you keep. There’s so much conflict that happens in that mess. And then it’s very hard to convince that acquired company that they’re important to you or your team, but you’re like, yeah, like clearly- and so, you create this massive cultural mess alongside of it. And so, to me, those deals only make sense if you’ve got an incredibly detailed integration and product plan, and you go in knowing, hey, acquired team, we’re here to buy your customers, not your product, and that’s a tough thing. And so, I find those deals a lot, lot harder versus buying a net new product where you’re integrating into your existing tech stack, giving your sales team another product to sell in their bag, and then hopefully create this flywheel where your customer’s getting something special from you where they want to come back and buy more and more. And so that’s like high level how we look at it. Now, when does it work or not work? That’s a tough question. I think M&A works when you pay the right price, it works when you buy the right product, and then it works when you operationalize it appropriately. Paying the right price is easy, anybody can figure that out. Not anybody, but most people can kind of figure out what’s that. I think figuring out how to buy the right product is the hardest part. I think that people in software, being a value investor when you’re buying good product is the worst thing you could possibly do. You want to pay out for the high quality product because you don’t want to inherit a bunch of technical debt. You don’t want to inherit a bunch of stuff that’s not working. And then I think the execution on top is obviously the most critical part, which is cool, we have two products. Like, do they ever connect to each other? Do they ever talk to each other? How do the teams connect? What’s the organizational design? What are we going to commission these people? Which sales team? Like, those are the details of it. And so, at PAR, we have this really great framework where when we buy a company, we create a financial plan, an organizational plan, and a culture plan. And those three plans got to be kind of signed off or relatively signed off before we close the deal so that all parties know what we’re getting into and committing to before day one.

Alex Bridgeman: Who’s on the teams that create those plans? So, if you’re going to lead the integration for a newly acquired company, how does that, from your team perspective, get assembled and led?

Savneet Singh: Yeah, so early on it was me. I was a one-man M&A team. Now we’ve got a great M&A, we have a colleague that sort of manages the M&A process, so think of that as corp dev. And then it depends where the product is sliding under. So, for example, on our acquisition of Stuzo, which was a loyalty product, it went into our loyalty business called Engagement Cloud. And so that was driven by the general manager who runs that business for us. And so he is working on the organizational plan, and then together we’re working on the culture plan and the financial plan. So it sort of depends where it’s sliding into, but we centralize that. It’s just myself and the key leader that’s going to own the results of that, generally working on that together. Because it is kind of the most important thing going in that you’ve got to get right.

Alex Bridgeman: Yeah, absolutely. On the M&A front too, you started with Tera Holdings being the thesis around buying multiple software businesses and being a kind of mini Constellation. And your thinking has evolved since then. And now, of course, instead of leading a collection of software company, you’re leading one big public software company. And of course, software consolidators have become a much more popular model in the last 10 years. And I’d be curious to hear just how your thoughts have evolved or perspective has evolved as that model has become more popular.

Savneet Singh: It’s funny, in 2018 when I made the decision to step into PAR, at that time, I was actually starting to get really concerned of let’s call it like the Constellation copycat model. And that’s the pot calling the kettle black because that was me. I talked about it, I recruited for it, I built a team to do it, have funded teams to do it, it was something that I really was passionate about. And the insight back then was, I don’t get how the public markets think that you can buy a bunch of stuff at two times revenue, and then magically, when you take it public, it’s worth six times revenue. And that was a playbook everybody was running back then. And the argument was, well, the revenue base is larger and so it’s more defensible and it’s predictable, so it should have a very high multiple, and I agree with that. But a lot of it was this sort of like simplicity, which is like it just seems too easy, and if an MBA can do it, anybody can do it. And so I started to get really concerned because I thought it was getting too competitive, and so the multiples would go up. And in the end, as an investor, you’re not really buying a software company, you’re buying a capital allocator. You’re basically buying someone’s ability to allocate capital to high free cash flow assets that they can reinvest that free cash flow over and over again. So it’s not really like you’re buying a software company; you’re really buying just a free cash flow machine, and you’re trusting that person to reinvest that free cash flow on your behalf. And so I was sort of curious if the markets really appreciated that. Like should this really be trading at cash flow multiples or asset management multiples? And so, at that time, I sort of went on the PAR path because I said, you know what, I think the value will ascribe to, the multiple will go to over time the verticalized player that’s actually creating synergy and product by albeit still running a roll up. So the difference being when we buy a company, we integrate it and we create incremental value by putting it in our sales bag, creating this flywheel of land product one, do a great job on product one, land product two, from the same sales force, the same GNA base, so now your unit economics are amazing because you sold two products for the cost of one. And then because you have better unit economics now, you can now reinvest in your products, reinvest in your go-to market to create a better chance of landing the next product, the next product, the next product. And so, the idea was really simple, which was I think that was the roll up play that made sense to me, which was verticalizing and driving these real customer outcomes. Now I was totally wrong; that was in 2018 and these businesses had incredible runs for the last six years. But I do get concerned about it now because there are so many people chasing the exact same playbook that, how many of these companies can go public? How many of these companies can get scale? How many of these companies can actually prove that they are the better capital allocators than Constellation Software and all the other great, Visma and all the other great ones that are out there? Like I’m not sure. And what happens when people start saying, you know what, I don’t want to pay six times NTM, I want to pay four times, and now you’re paying three times, like your margin of safety, put with all your corporate… it gets smaller and smaller. And so I worry about it a little bit, albeit I’m passionate about it, my friends all do it. And so that’s why I kind of made this decision for myself.

Alex Bridgeman: What threats do you see ahead for software companies broadly? The Klarna Salesforce and Workday cut news, that was kind of interesting, seeing them build their own internal tools to replace those. That felt like, amongst a couple of friends, that felt like a shot across the bow for software. But I’d be curious if you see the ability to create software faster internally as a threat or kind of a mixed bag of some opportunities, some threat, depending on kind of where you sit in software?

Savneet Singh: I wouldn’t be the best person to give an opinion. I think I’m going to summarize my view, which is I think the vertical apps have the best chance of building something in this agent world that can partner with AI companies or build AI so that they can survive and thrive. I think that the reason why is that they have the data that really matters, they have the workflows that are specialized, and so they’ll have maybe more time, but more ability to actually create unique outcomes. So I think the vertical products could potentially survive longer. Now, the innovation in AI has been, for the most part, horizontal. It’s the big scalers and stuff like that. And I think it’s an incredible threat because if you listen to [?] and you’re basically saying all of these are just- all software is just databases and the workflow on top can now be done by a bunch of agents, well then you don’t really need a lot of workflow software, you need a lot of agents. And so, my thesis and belief is that if you’re the workflow product, you better build that agent and make that agent super sticky and the other agents and that you’re… over time. And so, I think it’s a massive threat, but it’s less of a threat, the Klarna threat that you mentioned, which is people are going to build it themselves. I do think that exists. I just don’t think at the enterprise level, we’re going to see nearly enough of that to be a huge threat. And I think it’s going to come back to this really simple thought. If you went back 30 years ago, most big enterprises built their own software. Big restaurant companies built their own point of sale systems. Big sales companies built their own CRM systems. You had these specialized advantages. Procter and Gamble built their own supply chain software. So did McDonald’s. These huge companies decades ago built their own software because they thought, hey, that’s our competitive advantage. We’ve got something special here, so we’re going to package it in some software that no one else has. And then guess what happened? Innovation happened, and software companies realized we can recruit better software developers than a legacy retail company or whatever it may be. And so they built better software, and it was meaningfully cheaper and more innovative. And so, I wonder if that’s the play that happens here again, which happened in software back in the day, which was, if you’re a big company, you build your own software, and then you sort of move to Salesforce or whatever. Is that the same thing that’s going to happen over again?

Alex Bridgeman: Where do you see agents playing a role at PAR? I think integrating software and hardware the way you do gives you a lot of defensibility and also a lot of options in terms of features you could develop that would make a lot of sense. Where do you see pulling in some of that technology and those agents into PAR?

Savneet Singh: It’ll be all over. So, I think simplistically, restaurants and retail companies suffer from overload of data. And so, you’re going to see so much data flowing that they don’t know what to do with it. And so, I think the very basic of giving your agents making decisions or giving you the tools to sort of say, do this, don’t do that, don’t buy tomatoes, push this promotion, cut the price of this. Like that I think is where we’ll see a lot of agentic work happening in our world. The second place is going to be on the marketing side. We have the largest loyalty program in America as it relates to restaurants and convenience stores. There’s a lot you can do. You can use AI to say, run this campaign versus that campaign or target Alex for this campaign and target Savneet for this campaign on an individual human level. Think about, I always think about, we sell lots of food. Can you use an agent to go interact with my Apple Watch or my Fitbit and my DoorDash so that the recommendations that come to me now are saying, hey, you worked out at 6:30 this morning, so you should have- this is the best meal on DoorDash to give you that protein intake, or man, you’re not sleeping really well, try this meal at this time and doing that. And so I think from the loyalty side or the engagement side of your customer, there’s so much you can do. The basic being run this campaign instead of that campaign, target this list versus that list, change the image here, it’s too pixelated here, change that image there. And so, I think you’ll see a lot on that side too.

Alex Bridgeman: Yeah, that’ll be a ton of fun. Are there any other threats beyond AI that stand out to you or agents that stand out to you?

Savneet Singh: Not really. I think that AI is certainly the 800-pound gorilla.

Alex Bridgeman: One thing I was kind of curious about from our earlier chat too was around incentives. You have a pretty clear incentive program that reminds me a little bit of EOS as well for each employee and based on KPIs and whatnot and comes with a bonus. How does equity comp come into that? Where do you use that as a tool for designing incentives?

Savneet Singh: So, once you get to a certain level of PAR, you get your salary, you get your bonus, and then you’ve got an equity compensation that comes with it. And my first year at PAR, I realized that’s not enough to retain good talent, but it’s also not enough to find those gems of people who deserve more but may not speak up, may not be the [?] and you don’t know. And so, we created something back then called the CEO Bonus Program where we collected a pool of equity, and I would ask every manager to say, who are the people that deserve equity in your company? And we’d have them force rank it. And so, we would have people literally on the shipping dock getting stock for the first time after working at PAR for 40 years. We would have- and then we obviously have our great software developers, our product people, our marketing people who did great jobs get it as well. And that was a way to sort of push equity in the hands. Now that we’re larger, we still have that CEO equity program because you want to find that. But generally, my philosophy is that as you get seen in the organization, we want the equity side of your comp to be really big. And I use a really simple adage or idea, which is, if you’re a great talent at PAR, I don’t want our managers to think about how much do I have to give Alex so he doesn’t leave. I want us to think about how much do we have to give Alex so he never thinks about leaving. And so for those people, we give one-time retention grants that are really big, that vest later, so that we say, hey, we really think you’re special. This is way more than you’d make on your yearly comp. And we’re both committing to be here for a long time.

Alex Bridgeman: How does that conversation work with your board? Has your board been helpful in giving you benchmarks and comps to other equity plans at other companies? Because there’s, of course, a dilution effect to any of it. So where do they kind of guide you or help influence that?

Savneet Singh: So, I’d say categorically we’ve been an under-equitized company. We aren’t like, if you look at those charts of companies with high percentage of stock-based competition, we’re almost at the bottom. So, we’ve been really careful about how we’ve done it. I would say it’s evolved a lot. I’ll give you- I’ve been the CEO at PAR for six years, five proxy statements, I think on all five, ISS and Glass have voted against the comp program. In my first year, it was because it was too variable in nature, which is insanity to me because I’m like so- because I didn’t want cash comp, I wanted equity comp based on performance targets. It was too variable in nature. My second one was voted no because I said, give me a bunch of options, don’t give me any other comp, and if stock goes up, I make money, if it doesn’t, it doesn’t. But that again was considered not a long-term compensation. I was like, I found that to be the most long-term compensation. And so, every year, it’s been a little bit unique because our board has been supportive in us doing stuff that was not supported by ISS and Glass Lewis because we were getting outperformance by it. So I think they’ve been relatively supportive of that. It’s taken time. I think the board that I joined that I was part of and then inherited as CEO was, it took us a long time to get to that. But now I think it’s great because I think the board sort of sees the performance but also realizes that it’s not my comp which is highly benchmarked and so on and so forth that matters, those next 20 leaders, making sure they never leave and finding ways to retain them that matter. So they’ve been very supportive. As you get bigger, it’s harder and harder to have creative comp structures because a lot of the big funds just vote whatever the proxy says, the proxy advisors say, and the proxy advisors tend to like basic simple comp.

Alex Bridgeman: I mean, there’s something to simplicity for sure. I’m curious more on equity comp, because I’ve been trying to learn from a couple other CEOs how they design it. And some will do some sort of phantom equity or option or profit unit or whatnot. A lot of them are private too, so that maybe changes things a little bit. But I’m more curious, like what other equity plans have you seen that you admire or think are interesting in their own way and kind of unique?

Savneet Singh: Yeah, there are a lot. And I think it’s hard, like I’ll give an example. There are a number of people at PAR that I think are amazing. And so we created a unique plan, which is like, man, if I got to stick in the benchmarks, I don’t know if I’m going to keep them. And so we created this crazy idea. We said, okay, we’re going to take your current annual stock comp, we’re going to five or six x it in a one-time grant, but you get it in three years. So you still get your annual, and then magically in three years, you get this huge amount of stock that’s gone up, and it’s even, that’s six, five times becomes 10 or 20 times, whatever it is, your annual comp. And so, we’ve had to navigate around it. The people that I think do a great job on comp are, I think the organizations owned by 3G Capital have done a really good job of incentivizing equity ownership and making it heavily performance-based. I really like what they’ve done. We’ve tried to emulate parts of it; it’s been hard. So, I think they’ve done a great job and I like what they do. Constellation Software has such a unique model. You’ve got to invest back in the stock all the time. So, you’re really, really vested to it. You can argue that’s not totally fair also. But I think that’s another good example. So I think there’s just a ton of models. Very few companies though, I find, do something that’s very performance-based because they go down the middle. And so, we’re trying to do, I’d say we’re trying to replicate those guys more than we are trying to find the median.

Alex Bridgeman: You mentioned the Constellation model you said wasn’t entirely fair or the buying, how does that work? What’s your thought?

Savneet Singh: Well, generally you get your comp and then you got to use that comp to buy Constellation stock. And so you’re really vetted to it. But I think that’s also an interesting idea. I think, I believe, I could be wrong here, but I believe even at the 3G companies, you get your bonus, but if you pick to have your bonus in stock, you get a discount. I like those kind of models that include great long-term ownership. So I think those work really well. But to me, if you’re just, to kind of zoom out for a second, I still think what drives the most performance is not the comp structure, but what you tie the comp structure to from an output perspective. For me, the best thing the PAR board can do is to tie my comp to total shareholder return, my LTI. And for our employees at PAR, what we do that’s super unique is that I get really, really granular. We have a hardware business as an example. I remember when we had the guy running our hardware operations. I once went to him and said, Bill, how much impact do you have on our revenues? He said, well, not really. I mean, if I move turns faster, maybe there’s a little more revenue. And I’m like, okay, so why is 50% of your target tied to revenue if you actually don’t have a ton of impact in there? And then I said, okay, how much impact do you have on our profitability? And I said, you know what, let’s focus, what are the metrics that actually drive return for us that you control? And it was inventory turns, it was SLAs on our shipping, on time performance, like these core operational features. I said all right, your bonus is tied to those things. And then a portion is tied to revenue and EBITDA because we want to keep you tied to the PAR story and be tied for everybody’s success. But can you imagine the forcing function for that guy, which is like, dude, 60% of bonus is tied to like these three things that drive performance, like I’m really on it. Or maybe a simplest and funniest example to your listeners who buy public stocks, when we took over PAR, we had zero analyst coverage. And we had a complicated story, we needed analyst coverage, and we didn’t go to conferences. And so I went to our guys, same conversation, what impact do you have on revenue? What impact do you have on EBITDA? Okay, so why are those your targets? Okay, you know what your targets are? Get us two sell-side analysts by the end of the year, get us invited to four sell-side conferences, take our shareholding up. You do that, you get your bonus, dude. And so for that guy, could you imagine, he’s like, crap, all right, I’m going to call every damn sell-side analyst, I’m going to get them to do it, I’m going to get us into a conference. Can you imagine how much harder he worked when he had to get us into four conferences? He would have begged, borrowed, and pleaded to get us in there. And so, to me, it’s not just like- it’s like what do you tie the outcome to is what really drives it.

Alex Bridgeman: Yeah, I love that. What are some of the more unique actions or results that you’ve tied comp to? I like the hardware example of turns and SLA, that’s especially a unique one. What are some more examples around granular?

Savneet Singh: In the call center we’re going to do one this year, which is like, okay, we want to cut call center by using AI, and so we’ll create a metric around that. On the developer side, what is our cost per feature? How is that declining every year? I think that’s a really unique metric for R&D. HR, what do you own? Well, HR team, they say, well, we’re kind of like advisors. I said, no, no, if you do a good job advising, the company does better. So, you own employee NPS, you own the performance management programs. You put really tough targets. You find the things that each individual job actually owns and then you put a target on that. So that’s one that I always thought is kind of interesting. Or you have a big KPI, like IT team, like it’s not cost, like do we launch with salesforce.com? Do we finish the ERP system? Do we get the outcome, not the output? And what you end up discovering is when you do this is a lot of people are focused on output. Like, hey, I put out the performance management program. I’m like, that’s not what we’re hoping to have. We’re not hoping to have a performance management program. The hope is that the performance management program creates a new outcome. That’s what you should be measured on. So like, if you’re a company, you have a diversity policy, getting the policy out the door doesn’t matter. Did you become diverse is actually the metric that we should measure against. And so changing your team on this mindset from output to outcome I find to be really, really, really powerful in driving results. I’ll give you another one. We give every employee, if you go find a dollar of savings, you get 5 cents. And so every year, we get tons and tons of submissions of, I switched from DHL to FedEx, or we can cut out these instances of these tools that no one’s using. And so, there’s all sorts of creative incentives you can do to find cost savings. But at the leadership level, it’s really, really about being super specific about the goals that those people drive.

Alex Bridgeman: Have you built a leaderboard for cost savings, like who’s saved the company the most money?

Savneet Singh: We haven’t, but we should, it’s a good idea.

Alex Bridgeman: It’d be fun, you could make a playoff of some kind. There’s got to be a way to make that into a leaderboard of some kind.

Savneet Singh: I’m stealing that.

Alex Bridgeman: I remember that from our last chat, like you get 100 bucks or maybe it’s $1,000 if you can save a 60 minute meeting or a 30 minute meeting.

Savneet Singh: Yeah, we used to do all this stuff like that. But it’s just about creating the momentum behind it. Again, the money doesn’t mean anything, it’s like the culture of it that’s like, oh, this is what’s cared about and rewarded at PAR.

Alex Bridgeman: Absolutely. What have I not asked you that is top of mind and you’re spending a lot of time thinking about right now?

Savneet Singh: In the details of what my life are really about, okay, PAR very specifically is, hey, we’ve kind of uncovered how to cross sell products. So how do we accelerate that? How do we function and structure our teams? That wasn’t- our success the first two years was not that. So where do we consolidate? I think a lot about this incentivization question, how do I keep the next 20 people here forever? And what can we do to make sure they’re focused on the right goals? So, I spend a lot of time thinking about the team, are they in the right seat, are they in the right places, are we mentoring and doing our best job there? And then I spend a ton of time on M&A. M&A’s worked really well for us, and so thinking about what’s the next vertical or product we want to add to PAR.

Alex Bridgeman: How do you incentivize the cross-selling piece, especially if you’re bringing an acquired company that has a unique product that you can now integrate and use? There’s got to be a huge piece of education with the sales team and product team so they know what that product does and how it fits.

Savneet Singh: Yeah, it took us a while to figure this out. So I think one thing is you get the best cross-sell if you have the same salesperson selling it. And then you make the quota relevant, it doesn’t matter what product you sell, you still get the quota. But what I like to do is, and I encourage our sales leaders to push this in place, when you’re starting to cross-sell, pay more for the product you want cross-sold. Pay way more for that. And then when you notice that six months later, it’s not selling, then you’re like, maybe that product wasn’t meant to be cross-sold. Because if you’re paying double commissions or something and it’s not happening, then you kind of know. And so, I like that as a data exercise just to figure out, can this thing be cross-sold? Not all products can be cross-sold. Maybe it’s a different buyer persona. Maybe it’s just not a good fit, maybe it’s not a good product. And so I like to sort of overcompensate on that cross-sell if that’s the momentum you’re trying to create. So that’s kind of what we do. And then if we’re sort of doing cross-sell amongst different business units, which is now a very common thing at PAR, we do spiffs, we do sort of retirement quota, but I would just say the key thing on all sales comp is you just got to keep it fresh, you got to keep changing it, otherwise things get stale.

Alex Bridgeman: The cross selling is especially interesting if you’re buying a product that maybe you were losing deals beforehand because you didn’t have that ability, but now that you have this product, you’re going to- together the two companies as one will win more business because they each can do the other. Is that a lens you look at M&A through in terms of do both these companies generate more revenue together because they have overlapping customers?

Savneet Singh: That is the main lens. And so, the main lens is if we add this product, does the collective get- can you sell more of the collective? We’re not a private equity fund, and so I always tell the team, if we buy this product, we have to have a different outcome than if a private equity fund bought it because we should be able to create synergy there. But that point you made is 100% tied to product. Are you creating innovation or connective tissue that makes it easier, simpler, or creates better product outcomes for the customer? That is all a product question to me.

Alex Bridgeman: How do you review customer feedback like that? Or like, hey, this deal, these ten deals that we lost this quarter, here are the reasons why, what are your ways of kind of reviewing those?

Savneet Singh: Well, listen, I think winning and losing deals is the best way to figure out what’s happening. So, it’s not that hard to know if something’s not selling or not. But then we do call recordings to figure out what happened, why did we lose. Customers are pretty good. These are long sales cycles. And so usually a customer will invest a little bit of time telling you why you lost. You talk to the sales company, you talk to the salespeople, and you just get in the field and hear what’s going on. You have a lot there. Conversely, when you buy something and it’s not working as well, a lot of what you can do is also just talk to your customer success team and see the data and be like, what’s happening? Like, is the product not working? And they’ll be like, listen, honestly, the product’s a piece of crap. Like, it just doesn’t work. Or they’ll be like, we just got to get our act together. And then you’re like, that’s a good sign. Because if it’s just about getting our act together, we can do that. Fixing a product issue, 10 times harder.

Alex Bridgeman: Boy, no kidding, yeah. Well, Savneet, thank you for coming on the podcast again. This has been a ton of fun. I always enjoy getting to chat with you. And I’m jealous that I missed the Joys of VMS Q&A you had, but this is certainly a phenomenal consolation. So, thank you for sharing your time.

Savneet Singh: Thank you for having me.