Customer Success Manager Compensation

When I attended Totango's 2015 Customer Success Summit, one of the most highly attended sessions was on customer success manager compensation.  As customer success is a fairly new field and can mean a variety of things to companies, how to compensate a CSM is not as clear as in other fields such as sales and support.

In my experience, CSMs are not motivated by high variable compensation.  They are generally motivated by their customer's success and enjoy working in collaborative, team environments.  I've seen CSMs act against their own self-interest when it comes to bonuses if it's the right thing to do for the business or the customer.  In the excellent Gainsight webinar "Customer Success Incentives & Compensation", Bernie Kassar, Chief Customer Office at Xactly Corp, says it best:  “Customer Success Managers are rewarded, not incentivized, by their compensation plan.”  

As a result, I recommend a 10% annual bonus.  It’s interesting but not a life-changing amount.  I recommend paying it out quarterly as the frequency is compelling for CS teams and can be used to drive process and behavior changes. 

I prefer to pay out the bonus as: 

• 50% based on overall retention metric, paid to whole team with opportunity to overachieve.  This encourages team work and equalizes situations for team members with particularly bad territories (the strongest team member is usually given the most challenging accounts and may have the worst individual retention performance as a result.) 
• 50% based on individual performance:
  • Personalized quarterly to each team member
  • Set goals and parameters per quarter
  • Used to encourage behavior / adoption of new processes
  • Successful renewals of specific accounts
  • Reward for creating new assets

For example:

• 50% based on retention goal
• 50% individual performance goals:
  • 20% - Modify sales handoff process and present to sales engineering team (process needed changing)
  • 20%  - Logging emails and meetings into Salesforce (new process that quarter)
  • 10%  - Working with marketing team, create new case study for use in sales process

If the CSM owns the renewal and upsell process, I recommend that they get a small percentage of upsell sales as well.  If the CSM is supported by the sales team, both should get compensated for the upsell amount to encourage teamwork and recognize the work the CSM has done, though the CSM’s percentage would be lower.