Customer Success Leader Bonus Plan

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[Deleted User]
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edited September 2020 in CS Org Conversations
Good Morning, I received an email from a fellow CS Leader who is looking for advice on how the Leadership Team within their organization should be compensated.  

See the snippet below: 
My company is moving to a model  where CS is holding renewal responsibility in 2021. Our leadership team is in agreement that our CSMs should receive commission for renewals. My question is what about the leadership team? Is it common that CS leaders would get commission? Or is a bonus based on a specific renewal rate more common? I am a regional manager with 9 direct reports, expecting to add 2-3 more in 2021. What's being proposed by our leadership team is a bonus based on a specific renewal rate. Any resources you could point me to, I would be very grateful for. 
What're your suggestions? 

@Kristi Faltorusso @Ziv Peled @Jay Nathan @Chad Horenfeldt @Matt Myszkowski
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  • Brian Hartley
    Brian Hartley Member Posts: 184 Expert
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    edited September 2020
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    Hey @Jeff Breunsbach I, along with the rest of the leadership team, are compensated based on Change in ARR ( Total New ARR + Downgrades + Losses) paid out quarterly but can be tied out at the end of the year (i.e. if we miss one Q but kick a** the rest of the year and meet our annual target we would get the entire amount.).  I like that all of the leadership team is held to same standard, win and lose as a team.

    So while I am not personally tied to a a renewal rate persay, the downgrades/losses have a direct impact to the renewal rate.  Hope this helps.


    ------------------------------
    Brian Hartley
    Senior Director, Customer Success
    ------------------------------
    -------------------------------------------
    Original Message:
    Sent: 09-04-2020 07:49
    From: Jeff Breunsbach
    Subject: Customer Success Leader Bonus Plan

    Good Morning, I received an email from a fellow CS Leader who is looking for advice on how the Leadership Team within their organization should be compensated.  

    See the snippet below: 
    My company is moving to a model  where CS is holding renewal responsibility in 2021. Our leadership team is in agreement that our CSMs should receive commission for renewals. My question is what about the leadership team? Is it common that CS leaders would get commission? Or is a bonus based on a specific renewal rate more common? I am a regional manager with 9 direct reports, expecting to add 2-3 more in 2021. What's being proposed by our leadership team is a bonus based on a specific renewal rate. Any resources you could point me to, I would be very grateful for. 
    What're your suggestions? 

    @Kristi Faltorusso @Ziv Peled @Jay Nathan @Chad Horenfeldt @Matt Myszkowski


    ------------------------------
    Jeff Breunsbach
    Director, Customer Experience | Higher Logic
    ------------------------------
  • Chad Horenfeldt
    Chad Horenfeldt Member Posts: 58 Expert
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    edited September 2020
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    The leadership team should have a similar bonus structure to the team but on a larger scale. It depends on what your CS team encompasses. As an example, if there are multiple teams, the CS leader may span beyond the CSM role (and renewals). 

    The CS leaders may also need to ensure that there is cross-functional alignment.
  • Effie Mansdorf
    Effie Mansdorf Member Posts: 76 Expert
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    edited September 2020
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    While our CSMs do not own any of the expansion or renewals, we are measured and compensated on it. The leader gets measured on the larger scale. So for example, I head the entire CS team, so I get measured and compensated on both NAM and EMEA.
  • Ronald Krisak
    Ronald Krisak Member Posts: 48 Expert
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    edited September 2020
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    Hi @Effie Mansdorf  who owns the renewal responsibility in your Org....is it the Account managers?
  • Effie Mansdorf
    Effie Mansdorf Member Posts: 76 Expert
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    edited September 2020
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    Correct. AE's own the renewals and expansions from a commercial aspect. Each have a lifetime assignment to the account and work closely with the CSMs throughout the customer journey. CSMs jobs are to nurture, prove value and ensure adoption so that when the customer is ready for commercial discussions or demos of new products, they are prepared. CSMs can also act as a lead gen for the AE for new opportunities within the account. Of course the lead to opp conversion rate should be high for this. This is a metric that I am starting to measure through SFDC.
  • Ronald Krisak
    Ronald Krisak Member Posts: 48 Expert
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    edited September 2020
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    OK, thanks for that explanation.  So I assume the AEs receive commission on the renewals, to incent them to focus on the renewal aspect of the account, as opposed to just expansion or other new sale opportunities?
  • Ed Powers
    Ed Powers Member Posts: 186 Expert
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    edited September 2020
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    I've learned that "pay for performance" systems often lead to unintended consequences. If your renewals operation is characterized by simple, repetitive tasks, CSMs have significant influence over outcomes, you value short-term instead of long-term gains, volume is more important than quality, there are safeguards against abuse, and participants are oriented more to extrinsic than intrinsic rewards, then go for it. But if you want people who are highly engaged, persistent, creative, curious, proactive, flexible, happy, team players, and act with integrity, perhaps it's time to rethink your approach. Don't take that from me--instead look to 40+ years of research on human motivation. At the end of the day, the system, not the people, produces the results, and leaders, not individual contributors, are responsible for the behavior of the system. We explored this a year ago at a Colorado Customer Success Meetup: https://youtu.be/7X5_7ms0R50
  • David Jackson
    David Jackson Member Posts: 36 Expert
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    edited September 2020
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    I agree with Ed.  Compensation plans rarely drive meaningful performance improvements.  There is a second issue with narrowly focused comp plans: they drive a narrow focus when we all know that great CS requires a company-wide approach.  For me, that also means company-wide incentives.  My favourites are CLTV, NRR and/or Net ARR growth.
  • Jeremy Donaldson
    Jeremy Donaldson Member Posts: 71 Expert
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    edited September 2020
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    I have been on both a bonus structure with quarterly and annual payouts as well as commission. Build a plan based on the outcomes you are trying to achieve. I would recommend striking a balance between the renewals / upsell portion as well as selecting one or two other key metrics like customer advocacy, building the right relationships, improving the customer health score, NPS/CSAT (or something more proactive), customer engagement: references / marketing activities, alpha/beta participation, etc.

    This will keep you and the CSM team from getting to landlocked on one specific metric and grow healthier relationships.
  • Chris Guzek
    Chris Guzek Member Posts: 18 Thought Leader
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    edited September 2020
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    I agree with you Jeremy. I have structured a similar comp setup and it's focused on those actionable and attainable goals every CM should be able to hit. If they hit them the rest like renewal and up sell will naturally fall into place.
  • Matt Myszkowski
    Matt Myszkowski Member Posts: 143 Expert
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    edited September 2020
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    Sorry for late response but chaotic last few weeks.

    I have a view that the CS leader (and team) should own a unique number, one that differentiates the value of what you do in comparison to any other function so I would consider that. I think of things like NRR or CLTV so would suggest one of those 2.

    For a CS leadership role, I think there is a lot to consider before you determine their comp structure but start with the desired behaviours you want to see (or deliver) and then put the metrics and comp in place. Too many people do this the wrong way round.