Why CS Should NOT Report to a Sales Executive

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Sales and Customer Success have a very important, yet complex relationship that they must nurture and maintain.  Their alignment on company initiatives, customer acquisition, customer happiness and renewal are tantamount to your company’s success.  In today’s blog post, we’re going to discuss the reasons why the healthiest companies have autonomous Customer Success and Sales teams, functioning in a mutually beneficial, but independent fashion.

Less than a decade ago, many companies had a sales/revenue team that was responsible for all incoming, expanding and renewing monies on behalf of the company and a customer support team (often viewed as a cost center) that was responsible for addressing customer issues as they arose and/or providing services as ordered by the customer.  Occasionally, your most strategic accounts have had a team of people responsible to that specific client, but the majority of roles remained split into the two types described above: sales and service/support.

In today’s growing enterprise technology universe, it is imperative to have a third member of the team: your Customer Success Manager.  This team member is responsible to the customer’s success first.  That means that your Customer Success team (a revenue center) knows the contracts that the customer has signed, the expectations of the customer, the business outcomes they are trying to reach. From this, the CSM forms a strategically-aligned, collaborative relationship with the customer, free from the pressure of making a sale.  This team member manages the workings of your company on behalf of the customer and communicates the customer’s needs, wants and positive feedback back through the company.

The value that this provides to your customer is twofold: one, they have a “neutral” party with whom to discuss and plan their business goals, requirements and strategic pathways; two, they have a partner whose primary goal is to work on their behalf to ensure their success and reduce their time-to-value with your product.  By reducing time-to-value and keeping a pulse on the business goals and outcomes, the Customer Success team ensures that your customer’s renewal is a non-event and can even prime them for conversations about expansion.

A customer with a strategically-aligned and engaged Customer Success Manager will more quickly see value in your product, will feel like their needs and wants are heard (even if they cannot be implemented), and will form a deeper relationship with a key member of your team who can directly help them achieve their goals.  This customer will be more likely to promote your product to their network and offers more marketing potential with case studies and testimonials.

The big question is: why shouldn’t CS report to a Sales executive?

The simplest answer is that they don’t have the same micro goals.  Yes, their macro goal (increase and maintain revenue at your company as much as possible) is the same, but below that things begin to diverge. There should always be a healthy amount of friction between the two organizations in order to ensure that you are retaining as much revenue as possible, not just pouring as much in the top of the funnel as you can.

Your sales leadership should be focused on increasing the revenue coming in the door, while reducing the cost to acquire a customer (CAC).  Your CS leadership should be focused on increasing the net revenue from existing customers, maintaining the total number of customers, and reducing the cost to expand and renew a customer (CEC, CRC).  And yes, in case you were curious, we are firmly in the camp of “CS owns renewal numbers”.  It is our opinion (and we are not alone) that in order to build a customer team that is revenue generating, you must put the onus (and the incentives) on them to renew.  We tend to shy away from having CSMs directly responsible for presenting the contract to renewing the customer and opt instead for a renewal manager who works on the CS team and reports to CS leadership.  We’ll talk more about CS incentives and team structures in a separate blog post.

Another factor to consider is expertise. Your VP of Sales or CRO (Chief Revenue Officer) may have experience leading customer teams, but they are head of sales for a very clear reason: that is where their expertise lies.  Hiring an equivalent head of CS means that you benefit from their knowledge.  They are also one of the only executives whose primary perspective is that of your customers.  They will consistently bring the voice of the customer into the room, ensuring that your company makes high-level strategic decisions based on direct feedback from those companies or people who are currently paying for your product.  

As Dan Steinman, former Chief Customer Officer of Gainsight, states, “Alignment with Sales is intuitively easier if Customer Success reports to the VP of Sales or the CRO but some of the inherent challenges may be easier to overcome in a peer-level organization structure.” (source) In order for your company to grow in a healthy way, there should always be pressure to do the best thing for both the company and the customer.  When that pressure gets equal representation in a meeting of executives, your company looks more closely at decisions and prioritizes well for growth over time.  

To use an example from Dan’s article (source above), let’s say that you have a prospect that requires a new feature to be built in order for them to sign.  At the same time, you have multiple current customers demanding better performance and threatening to walk if they don’t get it.  As much as your sales leader will try to weigh both concerns equally, she may be inclined (or unevenly incentivized) to close the deal, essentially robbing Peter (current customer) to pay Paul (prospect).  With a CS leader in the room, the conversation happens in the open with both sides arguing for what they need, stating their case as peers.  The company makes better, more informed decisions and it is clear to all stakeholders why the decision was made.  

Possibly more important than any other point, having a CS leader in the room with your other executives helps morale on the customer team.  Having good morale is absolutely imperative, as these team members interact every minute of every day with your valuable assets - the customers.  Customers can tell when morale is low, or when a CSM is feeling discouraged.  Customers get nervous if your team seems beaten down, negative or pessimistic.  Having an equal voice in senior leadership meetings means that the CS team feels heard and they have a trusted leader who can provide them with context for why the company decided to prioritize the new feature over better performance.  Your CS leader can ensure that your CS team feels like they are an equal part of the company and not like they are the under-appreciated janitor with no voice.

Be sure to follow Sandpoint Consulting on LinkedIn to be alerted for future posts. For more information on anything customer success, send us a note at contact@sandpoint.io.