Customer Success Compensation: 5 Key Decisions

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By Kristen Hayer

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It’s fall. If you lead a Customer Success group, now is the time to consider adjusting your metrics, goals, compensation plans and team structure for 2018. Over the next 2 weeks I’ll be focusing on how to build CS compensation plans that drive high performing teams toward achieving key metrics. In this post, I’ll cover the 5 decisions you need to make before you start building your plan. For more details and ideas on this topic, you can visit this article I wrote last year.

Decision 1 – Total Compensation

You need to make sure that your total compensation package allows you to be competitive with other, similar companies who are recruiting CS candidates. There are a number of different ways you can track down compensation information. One of the easiest is to use a tool like Salary.com or Payscale. While these paid services aren’t cheap, they do offer a comprehensive look at compensation by role, seniority and location. You can also check out job descriptions online. While many don’t include salary information, some do. Finally, check with colleagues in your area. Many of the customer success forums have discussion strings that cover CS compensation.

Decision 2 – Variable or No Variable

Once you’ve made a decision about your total compensation package you need to decide if part of that will come in the form of variable compensation. Variable comp is simply a lever that helps you drive performance. Team members who perform better are paid more. Variable compensation is not the only way to drive performance, so if you don’t have executive support, solid goals, or a budget, you can turn to other management tactics. However, variable compensation has been shown to be a very effective performance lever (sometimes too effective, cough, Wells Fargo!) Pull that lever if you can.

Decision 3 – Variable Percentage

If you decide not to move forward with variable comp, you’re done. If you decide that variable compensation is an important part of your performance strategy, you need to decide on a percentage. In a selling or persuasion-oriented role (account manager or CSM with revenue goals) the variable percentage of total compensation should be higher. A typical range is 20-25%. For a role that is support-focused (implementation specialist, technical support engineer, CSM without selling responsibility) the variable percentage should be lower. A typical range in 10-15%. Again, check your compensation tools and network for comparable packages so you can be sure you’re competitive.

Decision 4 – Bonus or Commission

There are 2 main types of variable comp – bonus and commission. Commission works great for revenue-oriented, short-term goals like selling 10 training plans a month or keeping retention rates at 98% of revenue for the quarter. Commission requires individual goals, and is typically paid on a per-transaction basis. For example, if you renew 98% of the revenue in a quarter, you might earn 2% of each renewal you close. Bonuses are more flexible, and in many cases easier to implement for customer success teams. You can have bonuses based on project completion, specific activities or achievement of goals, and they can be tied to either individual or team performance. Many CS teams employ a combination of both commission and bonus.

Decision 5 – Payout Timing

In a perfect world, your payout timing will match the timing of your goals. Do you have a monthly expansion revenue goal? A monthly commission payment is a great fit. Have a quarterly NPS metric? A quarterly bonus would do nicely. The idea behind payout timing is to place the reward as near to the desired behavior as possible. This reinforces the behavior and rewards great results. The more senior the staff member, the longer term the goals should be, and the longer the reward payout can be. It is completely appropriate to offer an annual bonus to a people manager who should be focused on the achievement of annual metrics and goals.

Once you’ve made these decisions, you can build a model that helps you visualize how a low, typical or high performer would be paid. Use that to dial in your dollar amounts and percentages, and you can write it up, get it approved, and roll it out. Next week I’ll talk about how compensation plan execution is the key to great results. Until then, happy planning!

Need ideas for your compensation plan? The Success League is a customer success consulting firm that offers an online course on Developing Compensation Plans. Our next classes are offered on October 10 and November 17, 2017. For more information on this class, as well as other courses in our CS Leadership Program, please visit TheSuccessLeague.io