Customer Success - Operations Department or Revenue Department?

Jordan Silverman

Hey all! We are doing a re-org in 2023 and I wanted to get some advice from others here. Does Customer Success live in Operations? Revenue? Or Both?

Historically we have never had an Operations department, this all lived under Revenue so we are trying to figure out how to split it up.

Two things in reality:
1) SMB Customers
- We are an SMB driven business
- SMB customers make up: 60% of our customer base, 50% of our churn, 25% of our revenue

SMB customers have a 1 to many business model aka an unnamed CSM.

Which department should own SMB customers? We have dedicated roles for SMB CS (customer experience + automation)

2) Onboarding
- Onboarding Specialist + Trainer lives in Operations
- Right now 25% of our customers churn during onboarding
- How heavily should the Revenue team be involved for mid-market and enterprise customers?

Anything I am not thinking of or missing? To me it comes down to who owns Churn - both departments or one.

Brian O'Keeffe

Customers don't really care about the CSM: they care about getting the help/advice/expertise they need when they need it to get the most value out of the product. (I am ready for the barrage of rotten tomatoes.)

Calling it an unnamed CSM immediately devalues it and creates the well-known "a named CSM is always better mentality" that is so common. We gave it a very different name internally (defined as CSM via Community and a pool team) and that helped rebrand the concept. 

Tech touch can and will be every bit as successful as a named CSM model when it is built to be responsive, address customers needs and business objectives and treated as an equal part of Customer Success.

Yuya at Commune

Hi Jordan,

At commune.us, CS reports to CRO (revenue). CS should sit under the revenue dept as it's one of the biggest revenue drivers IMO. Of course, the CS team needs operational folks, but ultimately they operate to maximize the revenue.
Hope this helps!

Sarah Patel

How do your sales team sell to SMBs? do they have a named account manager? or are the SMB sales people given very large territories and don't get so much customer engagement?
Considering your high churn during onboarding it sounds like you'd want Sales to have more skin in the game to this failure for the Customer's to achieve ROI. Are they selling to the 'wrong' customers? Is the handover to Success / Onboarding not working? Or is your onboarding process not well enough supported / too complicated??



I've seen CS reporting into the COO (Operations), CRO (Revenue) and CCO (Customer).
In fact where I last work the CS function moved from one to the other to the other.

A Re-org is the perfect time to look at where Customer Success should sit. And at the same time to check and adjust the alignment of the other functions.

Where CS feeds into the COO / Operations - Customer Success can tend to be seen as a cost, and as aligned to Support. CS often tasked with making problems go away. If revenue generating professional services are not in the COO line this also emphasizes COO = cost. And can mean people don't think about billing for premium Customer Success / Onboarding / Support services (and of course you may not want to). And of course companies are always wanting to reduce costs - this can lead to a variety of initiatives that focus on reducing cost to serve, which can spark innovation or can lead to an over stretched and under resourced org. Benefits can be joined up use of tooling, and a shared Customer-centric caring culture

Where CS feeds into the CRO / Revenue - if the CRO runs the function as a traditional hunter / accretive revenue sales function then it can be all about hero-ising the Sales Execs that bring in new deals, all Sales Ops revolving around deal process & getting the contract signed. In this case have CS report into CRO can help the Sales Execs see CS as partners (we're on the same team), but can also have the Sales Execs see CS as a 'sales support' role, again there to make problems go away and to do the admin. Here CS is 'just' another support function for Sales.
If (especially with the re-org) your organization looks at ALL REVENUE and focuses on the ARR brought in by existing customers, driving growth from the Customer base, and sees Customer Success as a partner - then coming under the CRO with Sales and Success as peers is brilliant.
A downside can be all the debates about compensation as Sales people tend to be very motivated by targets and commission and Services/Success people may be more motivated by being a trusted advisor and don't want to be sales. There's no problem having separate compensation plans, it's just illustrative of the diversity of thought you get in a CRO combining pre-contract (sales) and post-contract (success).
Also traditionally Sales have more investment in Ops which can be handy to share, and a much higher attrition of people, which Success can help balance.

Where CS feeds in the CCO - this really spotlights that your organisation is Customer centric, and you're putting your flagship Customer Success function right in the heart of that CCO space. You're not Ops, you're not Sales - you are Customer. The one capability truly focused on your Customers' success. But... you then are not in the same silo as Support (Ops) or Sales (CRO) so you need to ensure great cross-functional collaboration. And determine things like who 'owns' retention, renewals, escalations, churn etc... It's a great alignment for focus, but you can't just stick in a CCO function without adjusting CRO and COO so that they work in harmony.

One more possibility is to align CS with 'Services' - wherever that fits in your organisation. Whether billable (directly or part of the software license) or not billable. If you're aligned to Services this can emphasize the service nature of Customer Success (esp. onboarding, any consultancy etc..) but Services tends to focus on billable utilization and profit margin - so will this help or hinder? We sometimes found a 'free' CSM was requested because the customer had refused the level of billable professional services needed and everyone was now struggling.

Finally - where does Marketing fit? Marketing can usually be focused on the Sales world: enticing customers in to sign. When you're re-orging check there's enough attention being put on the in-life & post-contract customer community. Marketing will align well with user groups, community (digital and in-life), customer comms etc...

Hope this long rambling and more than a bit opinionated answer helps you ask the good questions in your organization! 

Erin Birrell

This article may help if the re-org involves creating CS Ops:

CS Ops is the 2.0 Leader’s Secret Weapon (nuffsaid.com)

jennlgamble

We aligned the CSM team under one leader who had sales, marketing, customer success (CSMs and Implementation/OnBoarding) - sales/marketing dubbed as the GTM team and post sales as Customer Success. If you are churning 25% in on-boarding you need to get alignment between those who are selling and those who are onboarding/implementing - there is a disconnect there. What is operations to you? I think of operations as "running the business" - less about delivery and engineering (though I know people classify it that way also). To me operations ensures all business operations are running smoothly and supporting the teams with data/metrics/materials/strategy execution/etc... I don't really think a customer facing team would "sit in ops". If you classify operations as on-boarding and implementation and support and engineering, then I guess you could put CS there, but I personally feel it belongs under a customer leader or sales leader. The SMB CS should sit with the higher touch resources - at the end of the day - you have a customer journey/framework that should be consistent across ALL customers - how you execute those touchpoints/moments - be it a one-to-one or a one-to-many might vary, but the touchpoints are the same, separating SMB into a different area than the rest of the CSMs really puts them on an island.

Bodin Pollard

There's a pretty good argument to say that Customer Success exists to grow revenue. CS can contribute in so many ways, but first and foremost, you want to see positive NRR from your existing customer base. If you have more customers upselling than churning, it's an almost totally reliable sign of a healthy business.

Benefit #1 of being "revenue" - close alignment and shared goals with Sales are ultimately good for onboarding new customers, and onboarding sets the tone for the customer's initial experience with your company. Get this right and you drastically improve your upsell and churn numbers... delivering improved NRR.

Benefit #2 of being "revenue" - where do companies cut first during tough times? Do they cut revenue drivers, or services/operations? Rhetorical question, right? Why would you even want to be considered a "services/operations"-based cost centre if you could avoid it?

As far as who "owns" churn, that's the responsibility of the whole company. Every part of the prospect-to-customer lifecycle impacts the 25% churn number you're experiencing during onboarding. You didn't create that number alone and you can't solve it alone.

What's wonderful about being in CS (and having a revenue mindset) is the insights you can provide back out to every other part of your business:
- Product feedback (for Engineering and Support teams)
- Testimonials and Promoters (for Sales and Marketing teams)
- Why customers stay (almost everyone is so focussed on churn, they forget to focus on success!)

Own revenue. Accept the role you play (alongside everyone else) in fighting churn, but never be afraid to own revenue. The most successful CS teams I've been a part of were incentivised on revenue growth.

kmulhalljr

While our organization places it within 'operations' we have been arguing for it to be nested within revenue. I don't see how CS is not an extension of the sales process. Where a CS team, imo, reaches out to collaborate cross-functionally with marketing and finance to communicate (and keep a strong eye on) ROI and other KPI's valued by the company.

Ed Powers

Hey @Jordan Silverman--

In my view, the CEO owns retention and expansion. It's an enterprise-wide effort, not a Customer Success functional concern, and it can be easily shown by analyzing why customers leave and why others stay and buy more. A well-constructed Pareto chart speaks volumes--nearly every function contributes. 

In progressive, top-performing organizations, the CEO owns continuous improvement in products, services, and processes. C-level functional leaders reporting to them have clear metrics, end-to-end key business process ownership, participate and lead narrowly-focused breakthrough improvement initiatives, and plan, execute, learn, and lead change using a supporting Strategic Management System. In these organizations, where any function happens to report on the org chart is of secondary concern--the organizational design is based on how well it contributes to more effective workflows, value creation and delivery, and business results. In run-of-the-mill organizations, however, org design is more a function of politics than good policy. 

If you're interested in learning more, here's a study on structuring process-based, rather than typical functional-based organizations: https://core.ac.uk/download/pdf/6908833.pdf. There's also some very interesting research in Organizational Network Analysis that shows about a 70/30 split in functional/cross-functional relationships between individuals optimizes communication, knowledge transfer, and rapid change. Blending a horizontal process focus with depth in functional capacity and capability very effectively supports this.  

Happy to chat more about this subject any time. 

Ed