How to Build a Customer Success Culture with Strong Sales Alignment

Editor’s Note: The following is a transcription from OpenView’s recent webinar ‘How to Build a Customer Success Culture with Strong Sales Alignment’ featuring Dave Blake, founder and CEO of ClientSuccess, Mitch Macfarlane, SVP of Customer Experience at Instructure and Marc Maloy, Executive Vice President of Worldwide Sales also at Instrucutre. The webinar was hosted by OpenView’s Market Strategy Manager, Brandon Hickie.

The following has been edited and condensed for clarity.

Brandon Hickie: Welcome to OpenView Venture Partners’ webinar series. I’m Brandon Hickie, Market Strategy Manager for OpenView Venture Partners’ portfolio companies, and I will be monitoring today’s discussion. Our discussion today will be on how to build a customer success culture with strong sales alignment and collaboration.

For today’s discussion I will be joined on the call by Dave Blake, founder and CEO of ClientSuccess, a customer success management platform that’s used by many of our portfolio companies as well as other employers in the B2B software space.

Prior to ClientSuccess, Dave was the VP of Global Account Management at Adobe, where he prioritized strong retention and growth for strategic and enterprise customers and launched the Customer Experience and Insights program there. Dave is one of the initial trailblazers in the customer success movement and brings a unique perspective to today’s conversation as a former operator and now vendor in the customer success space.

Our other two panelists are both from Instructure, an OpenView portfolio company that has revolutionized the learning management space and IPO’d last November. The first of those panelists is Mitch Macfarlane. Mitch is the SVP of Customer Experience at Instructure. Mitch has been with Instructure since 2011 when he joined the team to build out the client services practice which was later rebranded to customer success.

Mitch has overseen the evolution of his team and its mandate from the early expansion days through the IPO. In that time he’s seen the organization grow from 3 employees to more than 227 employees today. So he brings a very interesting perspective to the table and has spent a lot of time thinking about customer success and sales alignment. It’s important in a hyper growth business.

Marc is his counterpart and is on the opposite side of the house in sales. Marc Maloy comes as our third panelist. He’s the Executive Vice President of Worldwide Sales at Instructure. Marc has built out and led two sales organizations from early expansion stage through IPO, first with HireRight and now with Instructure, where he manages a sales team of just over 200 people. Marc offers a unique perspective on how to think about sales and success alignment from the sales perspective. He’s seen it both from the early days of expansion all the way through IPO as well.

I hope you all are as excited as I am to learn from these experiences. If you have any questions please send them via chat to the organizers and panelists in GoToWebinar. We will set aside some Q&A time at the end of this call to answer any of these questions that aren’t able to be answered during the discussion. Please send them as they arrive so we can’t attempt to incorporate them. Without further ado I’m going to go over and hand off the lead to Dave Blake to kick off our discussion around best practices and alignment. Dave?

Dave Blake: Thanks, Brandon. I appreciate the opportunity to be on this OpenView webinar. Thanks to the OpenView team for hosting it. I’m honored to share this discussion with two of the top sales leaders out there, Mitch Macfarlane and Marc Maloy. Both of these gentlemen are very experienced, as Brandon shared, in building and scaling sales and customer success teams in a world class company, in a world class organization.

Today we’re going to focus on some key things around sales and success collaboration alignment. In doing that, SaaS companies typically have a focus on revenue. Revenue is king for all SaaS companies. Most SaaS companies spend a tremendous amount of time and effort building sales and marketing engines. The most savvy SaaS companies also focus and invest heavily on the customer success side of their business as well as they know that the life blood of the SaaS business is really the existing customer base.

Today we’re going to talk about how aligning sales and success and driving deep collaboration across the entire organization will help you maximize your revenue across your SaaS business and also drive long term customer success and lifetime value to the customer. With that, we want to talk about four main pillars or foundations to driving this SaaS and success alignment. We call them the four Cs:

• Culture
• Communication
• Collaboration
• Compensation
• Let’s jump right into it and start with culture.

We have a saying at ClientSuccess that customer success is a culture, it’s not a department. Driving the culture of customer success throughout an entire organization is key to your long term success as a company, especially within SaaS. To do that, it has to start at the top of an organization. You need the buy-in from your CEO, your senior executive team, and ultimately your sales and customer success leaders.

I want to start by asking Marc and Mitch to talk a little bit about Instructure. I know that they have a very focused culture of customer success. I want to start by having them share a little bit about their culture, how that’s driven from the top, and specifically how they drive a culture of customer success in their organizations.

Mitch Macfarlane: Sounds great. Hey everyone, this is Mitch Macfarlane. I’m thrilled to be a part of this webinar today. As far as the culture at Instructure, very early on, in fact, one of the reasons why I took this job is because our CEO believes in providing a world class customer experience. That is pervasive throughout the organization. It doesn’t matter if you’re dealing with our finance team, our legal team, or our sales team. Everything that everyone does is aligned around the customer experience, essentially setting ourselves apart in the marketplace, differentiating ourselves on that customer experience.

We have seven core values at Instructure. One of those, and I will tell you it’s the real centerpiece, is customer experience. It’s something that we drive home hard to all of the employees. Anytime new employees are hired I have the opportunity to go and meet with those folks and tell them all about how we are aligned as an organization behind the customer experience.

It’s not just my job running the customer success organization, but it’s really everyone’s job. If you’re in marketing, product, or engineering, all of us have this goal of providing the world class customer experience.

Marc Maloy: This is Marc. To build upon what Mitch said, a little bit of the guts under this ethos around really taking care of your clients, Mitch in particular runs an unbelievably fantastic customer success organization. What that means to me is it’s all formulaic and it’s all trigger based. Picture what happens. Let’s say your business is growing from $50 million to $75 million in bookings or something like that. You intend to grow 50% year over year.

If everyone is looking around the table and thinking about, “Gee, when we grow that quickly, how are we going to support our clients? Is Mitch going to have to ask questions and fight battles with the CFO about hiring additional headcount to deploy against the success that you had in your sales organization?” If you have to have that conversation, you’re kind of not doing it the right way.

In other words, everything is based on quantity of salespeople. It’s backed in from a budgeting perspective. That allows Mitch and his team to really focus on onboarding people very effectively to deliver an outstanding experience to our clients.

Dave: Mitch, let me dive in a little bit in that. How would you describe the difference between customer experience and customer success?

Mitch: There is a difference. Essentially my job as SVP of customer experience is to look at the entire customer lifecycle even if the folks who are interfacing with customers don’t report to me in the hierarchy. As our lead gen team is interfacing with customers or our RFP writers, if they’re doing something that creates a less than world class customer experience, I get involved.

Customer success, the organization that I run, is really built around making sure that customers are successful. Whatever their vision is for the product that they’ve purchased, making sure that they achieve that and maximizing customer lifetime value. However, the customer experience title is broader than that and extends across the organization, across the hierarchy to ensure that all touch points are positive and world class.

Dave: That’s great. Thanks for sharing that. If we think about other aspects or profiles of world class companies that have a customer success culture, these bullet points share some of those attributes. They have senior customer success executives that are focused on this, that have the right titles around the executive table. You have significant focus on customers and customer success in board meetings. You have executive bonuses tied to customer success and cross-functional accountability. Do you guys have anything in your organization along these bullet points that you found is more successful than another as you’ve really tried to drive that culture there at Instructure?

Mitch: Sure. The second bullet that you’ve got here, Dave, I think is really important. It’s not just board meetings, it’s all executive meetings. It’s anytime you get a group of employees together, somebody always needs to ask the question, what is the resulting customer experience from decisions that we’re making today? That significant focus has to be pervasive throughout the organization. I think that’s key to our success here at Instructure.

Marc: I’ll build on that. I think for me it’s number four. Having everybody really rallying around the end outcome, an awesome outcome for a client is super important. The fact that our customer success organization shares very openly with every employee in the company their KPIs for what success looks like, retention rates, net promoter score, both logo retention and revenue retention.

Sharing that very transparently across the organization serves as a rallying cry to really get everybody behind the outcomes that our clients are seeking. For me personally, being able to look across the organization and see exactly what Mitch’s organization is doing on behalf of the entire business has been very good for the sales guys when they’re out in the field selling.

Dave: That’s great, Marc. I know we had a specific thing that worked well at Adobe where we really wanted to improve the overall customer experience and change the culture to be more deeply focused on customer success. We implemented this third bullet point. We added executive bonuses tied to the executives based on customer success, retention, and overall customer experience. That had a huge impact in evolving the culture to be more focused on the customer experience and one that I’d highly recommend to the organizations on the call today.

Marc: I was just saying that we do that as well here. It really does help.

Dave: Really quick before we move on, what other types of compensation or KPIs do you tie to the executives? Do you have one or two you could share really quick before we move on?

Mitch: I think the two that are applicable here are revenue, and the revenue goals are not possible without a very high revenue retention rate and in fact a net negative churn rate, so beyond 100% retention. The other one is NPS scores. Those two factors play into executive bonuses.

Marc: For those of you looking to take your company public one day or raise more money, the net negative retention rate absolutely warrants paying a higher forward looking revenue multiple.

Dave: That’s great. Those listening on the call today, think about your organization and your company. Which of these attributes are implemented at your company? If you don’t have those, then it’s definitely worth taking a step back and looking at how you can evolve your own organization to establish that culture of customer success. That’s the foundation for everything. Let’s move onto communication.

Communication is key in everything we do, in sales and customer success. When we talk about communication and alignment it’s not only internal, but it’s also external with customers, having transparency with customers, having a united voice of customers, and really understanding your customers’ needs.

One of the first places where communication is absolutely critical is in the handoff, the initial handoff from a prospect to a customer from sales to post-sales within an organization is critical. We just had an experience in our company. We started a relationship with a new service provider, had a very good sales experience, but the transition from sales to execution and go forward was a mess. As a result we had very little communication. We had no transparency. We had no vision of our journey from closing the deal to getting up and running and a real lack of attention to detail.

For us as the buyer it really broke down trust. We started questioning our decision. We had no excitement. We want to really talk about, in this section, the handoff. How do you orchestrate the handoff that builds trust, confidence, and excitement with your customers? We know that the long term success can really be determined in this window of opportunity. Mitch and Marc, I know you guys have really focused on nailing the handoff between your two teams. We’d love to have you guys share some of the best practices and keys that you’ve found in this stage of the customer journey.

Mitch: Sure. Ideally we would love to have the salesperson on the kickoff call with the customer facing operations folks, our customer success manager, our implementation consultant, our trainer, etc. With RDs who travel, and we want them out hunting new deals, it isn’t always possible.

We’ve had to adjust by creating essentially a question set that accompanies that customer from the very early beginnings of lead generation when they contact our market development representatives. Those folks ask questions, record the data. That data gets passed along to sales. Sales enhances that data set with the customer’s goals, vision, and what they want to accomplish, what their key points of interest were, what their challenges are.

All of that data gets transferred along to the customer success manager who now has essentially this history of the client and can really hit the ground running with them. Even though sometimes we’re not able to get that salesperson on the handoff call, all of the information has been transferred. That puts customers at ease very quickly when they know that we have an understanding of who they are and what they’re trying to accomplish.

I think one of the other things that we do because we have such a big org, especially in support, we use our own product. We have a corporate training platform called Bridge. We create Bridge courses that include details on specific clients for our support team. All of the support reps are required to pass off that they have knowledge on this new client that’s being added as a tier one support offering. That’s another way we make sure the knowledge transfer happens and that our folks are up to speed on the details of that client.

Marc: Let me build off that one as well. This is, I think, really important as you’re marching up the scale stage in your growth businesses. The way that Mitch and I think about it is our job is to earn our unfair share of the various markets that we serve. We do that through a variety of ways. One of the four key ways that I think about it is we have a really well understood and articulated demand gen process. When demand comes into house and that demand is converted we do a really good job of doing what Mitch just said, keeping track of who the client is, what’s important to them.

The second thing we do is we push that demand into a written sales process where we certify all of our sales reps on how a deal goes from cold call to close or start to finish, how it flows through qualified evaluation, short list, negotiation, and close. It’s not enough just to tell people and put it in a knowledge base. You have to certify them on the process so they all do it the same way. That then becomes a basis from which you can predictably forecast your revenue not only in the quarter but the next quarter.

Then we certify folks on their demo and the message that they delivered during their demo. It’s not like we want everybody to do it our way. We want reps to exercise judgment. There’s a foundation from which we really want to build upon. We call that our sales pick and roll.

The fourth thing we do is we certify the methodology. If you do those four things really well and you have that foundation, it really allows you to build a predictable cost-effective revenue engine where client data follows the client from cold call all the way through renewal and allows all of our teams to be much more successful. We train our teams using our product.

Dave: That’s great. Maybe give an idea of what the tools are that you use to capture that information. I know you use Salesforce. A lot of that information is captured there and then shared with the rest of the organization. Is that how you continue that knowledge transfer at the beginning and ongoing?

Mitch: That’s correct. In the beginning it’s Salesforce through our lead gen activities over to the sales team and then over to the CSMs. A little plug for Dave’s product here, essentially that data then gets fed out of Salesforce into the ClientSuccess app that we use. That’s how our CSMs consume it. That’s what they update, which feeds back into Salesforce. Say a regional director wants to follow up on their account. It’s all at their fingertips.

Marc: When they do that it kind of gets handed off to an install based salesperson at some point as well. We use Chatter pretty extensively to keep track of state of the union with the account.

Dave: That’s great. How often do you guys, you talked about understanding the client’s key objectives and sharing those. How often do you find you’re going back to update those? Marc, specifically what role does your team after the sale play in that continual conversation with the customer about their needs and their ongoing goals?

Marc: Frankly very little is the truth. Mitch’s organization handles all of that. He’ll describe this in a moment but he runs a very tight QVR type of process. If an existing account then becomes competitive again, whether it’s an RFP or the need to change significantly, maybe there’s some kind of shopping event, that’s when Mitch will hand it back to my team to go run that engagement.

Then there’s the reverse handoff, if you will, at that point where we do the reverse data dump from the client success organization to the sales organization. That’s really about it. We’re truly a hunting-farming organization, if you will.

Dave: Great. One of the things, we’ve talked about the handoff, but the collaboration that you two, you can feel it on the call. You two as leaders are speaking frequently. You’re collaborating. You’re on the same page. It goes onto this ongoing aligned communication between the success team and the sales team.

Tell us how often do you two meet? I’m sure it’s formal and informal, but how often do you formally meet? What do you encourage your teams to do as far as regular cadence of communication with your respective teams?

Mitch: Sure. Informally, daily. Marc and I see each other all the time. We’re very quick to address issues that come up. If there’s a misunderstanding or we want to know more details about a deal or Marc wants to know the status of a renewal, we just walk to each other’s desk and say, “Hey, what’s going on?” We reach out through Slack. We’re an organization that uses Slack.

We’re very in touch. That has reduced the need for formal meetings. We used to have a fairly regular cadence every couple of weeks. We’d get together with the sales leadership, talk about big deals that were coming. What we found is that the informal communication, while being reinforced through leadership, is really what’s making this ship sail well. We’ve eliminated the need for big, heavy meetings with the leadership teams. It’s really about the rank and file coordinating with each other.

For example, one of Marc’s salespeople will reach out to our head of higher ed customer success management, or a head of K12 customer success management. Let them know details about an upcoming deal, even assign a customer success manager early so that they can get involved in some of the late stage pre-sale process. It’s that tight collaboration. I think we’re jumping onto your third C here, Dave. It’s constant communication that leads to tight collaboration.

Marc: Yeah. Mitch, I think this is the critical piece. It starts before the sale. As we have a very large pipeline and deals progress through the sales process that I described, oftentimes for the larger type deals where it’s maybe 200 to 300 grand or more in ARR, you form a huddle and you do strategy review on the deal prior to it being sold. That’s when you generally would involve Mitch’s team, whether it be an implementation consultant or whether it be Mitch itself.

Mitch has diamond status so he does a lot of pre-customer deals with me and my team. It’s absolutely fantastic to have that level of support from the client success organization just to clearly articulate to a prospective client what they can expect post-sale. That’s just really good communication that actually goes to the client as well.

Dave: That’s great. I was able to benefit from a sales counterpart when I was leading a CS organization at Omniture. His name was Steven Freeder. Like you two, we had an incredible amount of communication together but then really encouraged that and fostered that throughout our entire teams. It really was a strategic advantage for us where we really got to the point where we knew each other well. We were tag teaming for our customers’ benefit and had this proactive and transparent communication. It was absolutely critical between these two organizations.

Let’s go onto the third one. We talked about collaboration. I love this principle that Disney often says. When you ask about who owns the customer, they say everybody does. Somebody always owns the moment. They collaborate and almost choreograph how they’re going to deliver this amazing customer experience throughout the entire journey of the customer. We want to talk a little bit about collaboration.

We believe that it first starts with having clearly defined roles and responsibilities across the teams. As we look out there today in the market, we see three models that are at play across different SaaS organizations. Model 1 is where the sales team owns all sales activity including expansion and renewals. The customer success team is really about driving value, usage, and adoption.

The second model is where the sales team focuses primarily on new logos. The customer success team takes expansion and renewals. The third model is where they introduce a third, sometimes called a renewal specialist that really focuses primarily on renewals and expansion. Mitch and Marc, which model do you guys use and why?

Mitch: It’s really been an evolution. We started out with Model 1. We moved to Model 2 because the CSMs were closer to the customer, understood the environment a little bit better for upsells and renewals. Frankly, we didn’t have to pay them as much as RDs. We wanted the RDs out hunting whales, not picking berries.

We really moved towards Model 3 there where we have an expansion team. We’re an install based sales team. We’re currently contemplating if we follow a similar path with renewals. There are pros and cons to that. We’re weighing that out as an organization to determine what would be the best path forward for the customer.

Marc: Exactly. We’re really at Model 2.5 right now where my team handles expansion but Mitch is still handling renewals. We’re contemplating going to Model 3.

Dave: Marc, the expansion team reports into you? That’s all they’re focused on is expansion and renewals?

Marc: Just expansion. It’s just renewals that’s handled by Mitch’s team. The expansion team is really in charge of trying to share additional value with the installed based on clients whether it be support services, statement of works, whatever. They actively prospect against the base.

Mitch: Yeah. A key piece of information here is as Marc and I looked at, and we weren’t really looking at these models, what the organization needed, as we looked at upsells we said we think we need a separate team. Where should it report? Ultimately Marc and I got together and said, “Hey, neither one of us really cares. It’s not about building a kingdom. How do we make these folks successful?”

We came to the conclusion that we want them living in the sales org and living, sleeping, breathing the sales mentality of being hunters rather than the empathetic, super compassionate culture that I breed down in my department.

Marc: Conversely, when you really think through that, my opinion, and I think Mitch’s as well, we’ve talked about this, is you don’t want your client success manager to feel pressure under a quota. You want them to be patient, gentle, thoughtful, help their clients avoid landmines, really help them navigate various alternatives as opposed to doing that but you actually have to hit a number or your job is in trouble. We’re really trying to separate those two things.

Dave: That’s great. You’ve clearly defined the roles and responsibilities within Instructure. It sounds like it’s a continued evolution. The next area of focus, and I know you guys have done a great job of this is really mapping out the customer journey and proactively managing to that. As Disney says, understanding who owns those moments, tell us a little bit about your experience and the process of Instructure really coming to your current customer journeys, how that’s been successful, and really proactively managing to those.

Mitch: Sure. It sort of goes back to the idea that egos really aren’t allowed at Instructure. It’s not about what’s best for me. It’s about what’s best for the customer and what’s best for the company. This has been, again, an evolution in terms of our understanding in how to best satisfy the customer’s needs and provide that world class customer experience.

In fact, right now we’re doing a deep dive, a customer journey map on all of the touch points customers have to evaluate whether or not our current model is working and providing the experience that we want to be known for. Dave, it’s really been an evolution. The journey where we are right now, the start of lead gen activities, hand off to sales, hand off to CSMs, punt back to sales, it becomes competitive. This is something that we have worked out over time and feel very comfortable with.

Marc: When you think about what clients like and what they don’t like, when you think about what the buyer journey looks like and then what the client journey looks like, the outcomes that we all talk about, think about, and strive to achieve are, we want the buyer journey and the client journey to be very simple.

Everything in our organization is really built around that overall goal from it’s really simple for someone to begin a shopping effort with our demand gen team. It’s really simple for them to not have to answer thousands of questions in a discovery session because that actually annoys people. We purposefully don’t do that.

It’s really simple for the salesperson to get the client data from the MDR SDR and have an effective conversation without having to re-ask the same questions. Once they get the contract, our contract is intentionally built in a very client-friendly way where we eat a lot of the risk. Frankly, it’s very short for a traditional MSSA. Clients look at it and they’re like, “Wow, that’s really simple.” Our pricing is very straightforward, no nickel and diming. No hidden surprises. Very simple. You build your organization around that ethos, you really get a good result.

Dave: I love that, Marc. I’m a big believer in keeping things simple as well. I definitely learned over the years that customers do not want to absorb the complexity of your business. They don’t care how things get done. They expect a simple, clear journey and be able to know that somebody is taking care of them throughout that journey. Last question on this topic, how often are you tweaking your buyer and customer journey maps?

Mitch: The map itself, this is the first time that we’ve really formally gone through the process. In terms of the interactions, it’s every three months or so we look at it, reevaluate, and say, “Hey, you know what? We’re noticing a trend here. We really need to adapt.”

Marc: One of the things on the pre-customer front that we changed that made a huge difference from my perspective is we pulled the SDR MDR team out of sales and put it into marketing. It was closer to where demand was generated. That’s where those folks sit. Interestingly, the sales folks here at Instructure rarely work leads now. They’re really working only opportunities. Those opportunities are very well [inaudible 00:35:36].

They’re real ones through budget authority and [inaudible 0:35:38] that have been identified. I say I’ve never even heard of a company doing that model where all of opportunity creation is actually handled in marketing. It really works well here because our brand is very tightly coupled with the experience that we want our clients to have.

Dave: Yeah, I like how you guys have given the vision that the customer journey isn’t just sales and customer success. It’s all the interactions with the company from initial marketing through every other function, whether it be the billing team, product, or others in the organization. Let’s move on to the last C, compensation.

This one, from my experience, can be an interesting conversation about how compensation plans between customer success and sales complement each other or not, whether customer success managers should be on a variable comp or not. I’m just curious where compensation drives action and behaviors, how do you guys look at compensation across your team driving the right behaviors across your team with compensation and KPIs?

Mitch: That’s sort of a broad question there. We believe in compensation. Yes, Dave, we feel like it should reinforce the right behaviors. On the CSM side of the house, we have two components of variable compensation for them. One is the NPS score that they get from their own clients, the clients they manage.

It’s an NPS CSAT survey that goes out three times a year. They have a bonus component that they get based on that. The other half of their bonus is based on market segment logo renewal rate. I want folks looking at individual accounts. Let’s not neglect an account because it’s got a small revenue figure.

Essentially, if we accept someone into the Instructure family and sign a contract with them, we’re going to take care of them. We focus on logo renewal rate. The entire department lives or dies by that number, which creates a very collaborative environment. They end up helping each other out with their renewals because they know even if they hit all of their renewal targets, if Sally doesn’t hit all of hers that they’re not going to get bonuses. We found that to be very effective on the CS side of the house.

Dave: That’s great. It’s a team target for the logo retention. There are some out there that say it’s okay to lose a customer and really chase a revenue number. Your philosophy is, no, we want to keep every logo that we can.

Mitch: Yeah. Me as CS leadership, I’m chasing the dollars. Let’s be honest. That’s what the company needs. I feel like for the culture within my team, I want them taking care of individual logos no matter how small. That really reinforces the empathy, the shared goals, the compassion, the interactions that I want my folks having. I don’t want them giving up on an account just because it’s a small number.

Dave: Yeah, that’s great. Marc, you were going to say something?

Marc: Yeah. Sales side, we have a traditional MRR or monthly recurring revenue comp plan. That gets kicked for longer term customer relations. If we sign something that’s three, four, or five year deal, the rate gets kicked. That’s in alignment with keeping customers for a very long time, number one.

We’ve got provisions, although we don’t exercise them very often at all, in our comp plan to claw back in the event of, say, one of my sales folks goes off kilter a little bit and sells someone something they shouldn’t have which then causes churn. We’ve got provisions to claw back. I’ve got to tell you though, we do a pretty good job, number one, although there are instances where we sell something we probably shouldn’t have. That’s about it from a sales standpoint.

Mitch: Dave, I think you’ve got another slide here. I took a sneak peek at it. I would love for sales leadership, not individual salespeople but sales leadership to be comped on retention. It’s something that I’ve advocated for within the company. Hopefully it’s a battle that one day I will win. I think that having sales leadership aligned behind lifetime customer value is a very powerful concept. It’s going to ensure that they’re selling the right kind of deals.

I think if we didn’t have the kind of alignment that Marc and I have that this would be more important. It’s really not necessary at this point because Marc’s team doesn’t sell stuff that we don’t have. We don’t have a churn problem. We’ve identified the customer segment that matches our identity as a company. We do very well selling into it.

Dave: That’s great. I think from my experience, when you talk about compensation plans that are complementary or that reward the right behavior, we had a senior customer success manager who was managing a Vodafone relationship, really worked hard the entire year, really led out that relationship to the point where when it renewed, it renewed at a multi-year deal and multi-million dollar contract. Afterwards the CSM called me up and said, “Hey, I was the lone wolf on this account. I got a $2000 bonus and my sales rep got a new yacht out of it.”

That was the first time we thought about, how do we start compensating the CSMs for their role in really driving retention and growth? This slide is just an example of how organizations might consider it, having this complementary where there’s clear, no-doubt focus on the primary goals of each function, growth for sales and retention for CSMs, but also reward each other for collaborating around their respective goals. Just an example of one of many types of comp plans that could be implemented to drive that collaboration.

Today we’ve really talked about the fundamentals, the foundation of driving sales and customer success alignment around the four Cs, culture, communication, collaboration, and compensation. Hopefully, I know that I’ve really enjoyed hearing Mitch and Marc share their experiences and what they do in their world class organizations and have been able to get some other best practices or pointers to take back to your teams. I’ll turn the time back over to Brandon and we’ll go into some Q&A.

Brandon: Thanks, Dave. Thanks, Mitch and Marc. I think that was a great discussion that we had. It’s obviously generated a number of questions from the audience that I’d like to put out there and see what you guys think and how you reflect on them. The first question we have is around KPIs with the organization. It’s from Nick Anderson. He asks, “Are customer success KPIs tied to each customer’s specific goals, or are they standardized? How do you translate that standardization?”

Mitch: Great question. Largely they are standardized. What the team is measured against are standard goals. Although in check-ins, when a manager is checking in with the CSM on his accounts, they are going over the individual details of that customer’s goals. For our product, being an education product, they may want x number of enrollments after one year.

We dig into that as the manager with the employee. In terms of measuring KPIs across the department, they’re standardized. It’s based on the CSAT, the NPS, the renewal rate. We also do upsell lead gen through that team. These are all things that we measure.

Dave: I’ll add to that. I agree. I think KPIs should be clear across the organization so that every individual in the organization understands how their performance contributes to the overall performance of the company. We’ve built out here at ClientSuccess what we call a KPI tree that shows our goals from a revenue perspective. It flows down through the organization so that everybody is aligned to these specific KPIs that we can clearly see and connect the dots of how it contributes to our overall goals.

Brandon: Okay. The next question is really around account planning. It’s from Depi Perdeep. I apologize if I mispronounced that. Are there specific accounts for which CS and sales conduct joint account planning? If so, what is the cadence and best practices around this?

Mitch: They’re rare. For example, last year we won the State of North Carolina. That required significant collaboration between the two teams and planning as we scaled up the customer success team to bring these folks on board and needing to understand their unique situation. Often it happens around really large accounts.

For the everyday deals, it’s much like what we discussed earlier where an individual sales rep may reach out to the head of higher ed, K12, or corporate CSM and do some handoff, share some information, get a CSM assigned if they feel it’s something that’s warranted. Otherwise it’s the standard process.

Dave: I’ll add my two cents there as well. This is Dave. In managing the strategic accounts team at Omniture, we definitely did account planning for those strategic accounts, as Mitch said as well. We try to keep it simple. There’s a lot of methodologies out there that are 11 page account plans.

We try to keep it to two pages because our philosophy is we’d rather keep it simple and execute than have a long plan that wasn’t executed. The frequency that we use to do it is to try to encourage sales and customer success to plan together once a quarter, but then obviously have those ongoing regular touch points as they are executing the plan throughout the quarter.

Brandon: Okay. The next question we have is from Brian Erwin. Is there a typical number of customers you see in a single CSM be aligned to? What are the factors that impact that variable?

Mitch: Sure. I think this is something that varies greatly with the type of company that you are and the size of deals that you sell. For us at Instructure, we’ve found the sweet spot to be about 40 customers per CSM of our standard deals. When we have very large deals, I’m talking seven figure deals, then those will be a much smaller ratio. We have maybe one or two or three to one. Then we have some very small accounts. We pass those to what we call our priority services team. Those folks are about 100 to 1 ratio.

It depends on the type of customer, the size of the deal, the nature of the interaction. I think it’s up to each company to find that sweet spot. I know there’s a rule of thumb out there that folks ought to have a $2 million or $3 million book of business per CSM. That might be a good guidepost. I don’t know that we stick to it religiously. We’re more focused on the customer experience than on the revenue piece of it.

Brandon: Anyone else on that one? Okay. Another question that’s related to this from Nicholas Bryant, “How do you guys segment your customers for this purpose, to determine what that ratio is? What are the key factors you’re using? Is it MRR, market segments, expansion or upsell opportunities? How do you think about that? What’s the model you use?”

Mitch: Those are all criteria that factor in. The primary criteria is just the size of the deal. If there is large upside potential in the deal, then we will keep it with our enterprise CSMs. If there is any sort of large upside in terms of additional products or additional licenses or if they’re a marquis client, it’s a name that we really want to take care of even if they don’t have the growth potential. It’s a name that we want to be able to tout around the marketplace. We’ll lead them with an enterprise rep rather than our priority services team.

Dave: This is Dave. I think the key thing here that I’ll add to what Mitch said, I agree on both of these points with everything he said. The key thing is to have a clear strategy of how you’re going to segment your customers when you get to the point that you can do so. There are different strategies based on how you’re going to engage with smaller customers and how you’re going to engage with your larger strategic customers.

Rather than try to build out a strategy that’s a one size fits all, make sure you segment your customers in those different segmentations. Really focus on the customer journey and how you’re going to deliver an excellent experience across all the segments.

Brandon: Perfect. We have another question around the sales handoff process. Andrea Carpentier asks, ‘The handoff, can sales transfer the client to the entire CSM team, or do you recommend always having a CSM specifically assigned to the client? Why?”

Mitch: We always recommend having a single CSM assigned to the client, at least for our enterprise clients. For priority services it’s sort of a pooled model, although they have a primary person responsible for the initial onboarding and implementation relationship. For us, we always assign a CSM so there is a single point of contact and the customer feels like they know the person’s name who is responsible for their wellbeing.

Brandon: Okay. The next question we have here is from Peggy Pavidis. She asks, “When measuring for incentives, do you compensate based on the retention rate, or the net retention, or a combo of those factors? For instance, if retention target is 95% but the individual has 90% retention with a 125% net retention, how would you compensate?” I think this is really thinking about what is the KPI structure by which you drive compensation. How much of that is at the individual level versus at the team level versus at the corporate level? How do those come together? I’ll hand it over to you guys.

Dave: This is Dave. I like to drive the behavior of growth. I know that it’s sometimes a controversial topic when you talk about CSMs driving growth. The way I look at it is if our CSMs are driving value and they’re aligned to the customer’s KPIs and their goals, then there’s naturally going to be growth within that account. I like, some call it negative churn, or I call it net growth number while still balancing that with logo retention as well.

Mitch: Yeah, I agree. You have to emphasize growth. One of the principles that we follow is that we’re all about enabling sales. We believe that given the stage of the company, we have to make sure that we’re doing everything possible to win new dollars. For me personally, we do logo retention in the CSM group.

In the example given, if somebody didn’t hit the logo retention target but upsold a whole bunch, yeah, considerations can be made. I don’t think there’s anything rigid especially here at Instructure. It prevents us from doing the right thing even if the specific parameters weren’t met. This is specifically why I’ve chosen to do a team based goal around logo retention. It may be that one CSM had a bad batch of renewals coming up that year.

Marc: Frankly the way we do it is if we churn a client, the client probably shouldn’t have been sold, right? That’s kind of how we think about it. To Mitch’s point, that actually happens sometimes where, I’ll just give a real example. Prior to our launching this Bridge platform which is focused on corporate learning, oftentimes we would have corporate clients buy our Canvas platform which is intended to be for the higher education in K12 market.

It’s very difficult for a salesperson to say, “Gosh, Boeing, you’re a company. Therefore, we’re not going to sell you Canvas because it’s intended for these markets, even though you really want it.” What oftentimes ends up happening is if you point the wrong people at the wrong product even though they really want it, as a sales executive you’ve got to have the courage to do the right thing and walk away from a deal.

Brandon: Perfect. I think that was a great way to think about the difference between integrating the customer success aspects into sales. Thanks for sharing that piece, Marc. We have two minutes left. I wanted to see if any of the three speakers had a closing point they wanted to make here before we close out the webinar.

Mitch: Hey Dave, Marc and I are looking at each other saying this is all you.

Dave: Thanks, guys. I think, like I said, I’ve been fortunate in my career to have sales counterparts that really collaborated with us where we shared a common vision, we had mutual respect, and we really worked for the benefit of the customer. Hopefully today, between the three of us we have been able to share some great best practices and pointers you can take back to your business and drive that kind of collaboration and alignment within your business. It’s been a pleasure to be on the call today. Thanks to Mitch and Marc and the OpenView team.

Brandon: Thank you so much for attending OpenView’s webinar on customer success with both ClientSuccess and Instructure. I hope you’ve enjoyed it. Thanks.