Customer success teams can provide significant value to their business, but the role is still relatively new. As customer success has grown from a concept to a single person, to a department, to a business mindset, CS leaders have grappled with how to track performance and compensate employees.
As with most things, there isn’t a single accepted approach to compensating the customer success team. Customer success teams have a wide range of responsibilities at a wide range of company maturities and an even wider range of customer types, which means compensation packages and plans are apt to vary at differing stages. Unlike sales departments where roles are more clearly defined and compensation models have fewer variables, customer success is a little trickier.
To better understand how to establish a compensation program for customer success managers, we talked to three industry experts: Cynthia Balusek, Maggie Key, and David Thomson all shared their experience during the webinar Navigating Compensation For Your Customer Success Team.
Here are some of the most interesting points covered in the discussion on compensating customer success teams.
Start with clearly defined priorities and metrics
Before getting into the specifics of customer support compensation, our experts weighed in on the importance of setting priorities and tracking metrics. Maggie Key, SVP of Customer Success at Anaconda, shared that her team focuses on retention efforts. “We’ve actually just this year reduced churn by 10 points just by focusing on nurturing. I know that if I fixated on renewal and growth for variable comp, they wouldn’t have been as focused on nurturing and understanding and being collaborative across the organization.”
That’s why Maggie adds it’s important to consider the state of the company when you’re deciding what metrics to measure performance.
David Thomson, CRO at Winmo, added that some of the metrics his team tracks include “annual targets, the lagging measures of account retention, revenue retention, expansion revenue.” By looking at which customers renew at the end of the year, and analyzing what they did within the first 90 days, his team can set KPIs and benchmarks for driving stronger, longer-lasting contract values.
Cynthia Balusek, VP of Global Customer Success at Revionics, adds that the frequency of touchpoints is essential to track during long contracts. “If you’ve an established client that has been with you for years, they’re not necessarily noisy. They know how to use the software; they don’t have a ton of questions. You still have to keep in touch with them even if things are quiet for them.”
Divide bonuses between individual and team performance
After tackling performance metrics, the panelists weighed in on how variable income and bonuses are divided. Something that David is experimenting with this year is basing monthly compensation on team performance.
“We used to have one percentage number that every account manager would get regarding the revenue retention they were able to bring in the door. We took a different team-based approach, and now that percentage is based on where the team finishes up. Are they at 100%? Are they at 110%? Are they at 90%? Wherever that team is, it determines what every single account manager is going to make for the renewals they’re able to bring in that month.”
Cynthia shared that her team splits bonuses between teams and individuals. “What I’ve done is taken half of the bonus and have it be team-based on the whole department based on renewals. At the end of the day, I have a tendency, probably like a lot of leaders, to give my best players the hardest accounts. You could be a really strong team member and have the worst renewal of anybody because you had the toughest job of anyone on the team. By basing bonuses across the team, it equalizes it out.”
Don’t forget about your base
What percentage is set, and how much is variable? David is on “the 50-50, even somewhat on the 40% salary, 60% commission standpoint.”
Variability can impact your team, so David structures compensation where “you’re not going to end up with a zero. It would take something very special for the team to have a really low number because it’s a percentage tied to what you’re able to renew.”
Maggie added that the size and stage of your company has an impact on what structure you choose. “If the variable piece is a high percentage, it’s a bit risky if you’re just starting your organization.” If CSMs don’t have the opportunity to make a competitive salary because their variable piece is weighted too highlimited at a small company, you risk losing the talent you need to truly succeed in the early stages.
If, however, you are an established company, it’s useful to come prepared with data when presenting your offer to a potential employee. Maggie suggested sharing that “this might seem shocking to you that 40% is your base, but here’s how the numbers play out across the team.”
Bonuses can be more than money
Variable pay, incentives, and bonuses can exist in different formats. David shared that “the compensation piece is obviously really important, but what I’ve seen that’s really incentivized the team frankly more than money a lot of times is just PTO or going out and having lunch. It’s small things like that I’ve seen have a bigger impact than throwing a $500 gift card out there.”
Maggie added that “I think pure recognition goes a long way. We have a ‘drop the mic’ award. Throughout the month, people recognize each other beyond our team because we count on everybody to be successful. You have to constantly be recognizing people for the work they do.”
The compensation model you choose for your customer success managers depends on your company size and goals, as well as what you want employees to prioritize. It’s important to keep in mind that your compensation strategy will likely change over time. As new needs and experiences arise, you have to review and be willing to make changes where needed. Cynthia shared that “We paid out bonuses quarterly, so I got to reset metrics every quarter. It really gave me an awesome opportunity to, every three months, rethink about what’s important, have an area focus on the team and really drive hard to that.”
Want to see what else the experts had to say about compensation? You can access the recorded webinar and transcript here.