"Judge a man by his questions rather than his answers."
If you’re a CEO, you know that your entire company is looking to you for answers. You probably spend a good part of your day responding to emails asking, “what should I do next?” Or, “what’s the plan here?” As important as it is to have those answers, good leaders know that it’s just as vital - if not more so - to ask the right questions. My whole team knows that when they meet with me, they better be ready to answer some difficult questions. If you’re an experienced CEO...
- ...you've been through enough bruising quarters to know how to interrogate your head of sales about the forecast, the pipeline, rep performance, and that shockingly large expense report.
- ...you’ve seen enough empty trade show booths and "PR campaigns" covered by no one but “PRNewswire” to know how to scrutinize proposals from your VP Marketing.
- ...you’ve seen enough slipped releases to know how to sanity-check your engineering leader's estimates to see if he or she is smoking something or just sandbagging.
But how do you grill your Chief Customer Officer or VP of Customer Success? Because Customer Success is such a relatively new discipline, a number of CEOs have asked me, "what questions should I be asking my CCO or VP Customer Success on a regular basis?" So I put together this top 10 list. If your leader can't answer these questions with conviction, he or she might not be right for the role.
1. What does success mean for our clients?
Many Customer Success leaders transitioned out of Customer Support or Services roles. In those positions, success equals “case closed” or success equals “project launched.” But if you’re a CSM, success isn’t so much about what you accomplish, but what your client accomplishes. Your success depends on their success. And for a client, success is based upon a business outcome (more revenue, happier employees, etc.) and your product is just a tool for achieving that outcome. Their endgame isn’t to renew or expand, though ideally both of those things are functions of it. Your CSM leader’s job is to ensure they are. To do that, he or she needs to know the core goals of your clients.
2. What are early indicators of risk?
In many companies, part of the CSM role is to be Smokey the Bear - prevent fires before they happen. To do that, your Customer Success leader needs a clear vision of the drivers of risk for every account. These are things like sponsor change, support issues, technical issues, low adoption, long onboarding, etc. The best CSM leaders have a strong framework of risk so you can talk about risk in a consistent and quantitative way.
3. How can we tell if a client is sticky?
Orthogonal to risk, a CSM leader should have a view on what makes a client sticky so that they are likely to stay long-term. In the subscription economy, a six-month or one-year client is quite potentially a net loss for you when you factor in all the costs of acquiring it and onboarding it. Lifetime Value is the definitive measurement of a client’s worth to your company. That being the case, your CSM team needs to be on top of the factors that increase your clients’ LTV. How intrinsic is your product to the success of your client? Measuring that stickiness could involve assessing deep workflow usage, API integration, levels of data integration, or other factors.
4. How should we segment our clients?
This sounds like an easy question. Segment your clients by revenue, right? It’s not so simple. Sophisticated leaders think hard about the unique needs of clusters of clients and their short-term/long-term economic value. We talked about Lifetime Value. Your CSM leader needs to project which low-revenue clients have high-growth potential and segment accordingly. And what about new verticals? Let’s say all your clients are US-based B2B tech companies and you’re looking to expand overseas or into B2C or healthcare. Your first clients in those verticals need a higher level of touch to set the tone for your entire expansion. They may have lower revenue right now, but they still belong in a higher tier. Does your CCO or VP Customer Success think in terms of big-picture strategy?
5. What segments should we not serve?
Once you have a segmentation, you need to be strategic about who we choose to serve, but equally important is who we choose not to serve. No company has unlimited resources. Every company has a spectrum of capabilities with hard limits at both ends. Past that limit at the top end of the spectrum are high-value clients who, unfortunately, need more than you can offer -- at least not right now. Under the limit at the low end are clients who will take up way too much of your resources without returning enough value to justify the costs. Obviously there are always exceptions, and it’s your CCO’s job to recognize where the limits and exceptions are. Great leaders can tell you where you're not delivering on your promise and where the economics don't work out.
6. How do you decide on how many accounts your team members manage?
Great leaders also know how to play to the strengths of their team. A big part of your CSM leader’s job will be strategizing how to vary CSM workloads by segment, revenue, and account-based loading. It’s all about using the right tool for the job -- and tools become essential for organizing your CSM touch levels. Your CCO or VP Marketing will definitely be incorporating pure or partial automation for many clients. He or she will need to make the call on which clients get which level of touch.
7. What's our cost model?
When you talk to your head of Sales, you don’t just ask about revenues, you ask about costs. Just like you make sure to have a target gross margin, CSM leaders should have a perspective on target Customer Retention Cost - both today and long-term. The best Customer Success executives have thought through an overall model of the total annual cost to retain a given amount of revenue. Customer Success is rightfully concerned with the total LTV of customers, but the immediate day-to-day costs need to factor into your equations.
8. What's your economic value - how should I measure you?
When your Sales team consistently misses goals, it’s a pretty cut-and-dried situation. A VP Sales knows that his or her value is intrinsically tied to revenues. But how is your VP Customer or CCO measured? Churn? Renewals? Upsells? All of those events are heavily influenced by every other customer-facing department. However they do it, top leaders put a dollar value on their work. Get your CSM leader to turn health scores, renewal rates, Net Promoter Surveys, and other data points into an ROI for their team and their job -- then hold him or her to those standards.
9. What do you need from the rest of the company to drive success for our clients?
As I said, every interaction a customer has with your company and your product is a potential hinge-point for their success. Their overall health is going to depend on your CSM team, yes, but also on your Product team, your Sales team, Services and Support, and others. World-class VPs of Customer Success build processes to feed customer input to Product teams and qualification criteria and messaging to Sales teams. As a CEO, it’s your job to make sure that your whole company is aligned on Customer Success. In the subscription economy, it quite literally is your bottom line.
10. What should I do and NOT do to culturally support Customer Success?
You don’t become a CEO by being insular to the culture of your company. When you read stories about failed startups and burnt-out executives, they always have a huge cultural component. The only way to lead in this area is to constantly be in touch with your executive team and your employees. Specifically to Customer Success, you want a CSM leader who is pushing you to put the customer at the center of your strategy. When you make a decision, your VP Customer or CCO better be convinced it has the best interest of your client base at heart. The strongest executives challenge their CEO on his or her calendar, messaging and priorities to always keep customers' success top of mind.
Of course, this is all a moot point if you don’t have a CCO or VP Customer Success. I know there are some companies out there that are still waiting to hire an executive. If that’s you, you’re behind the curve. If you’ve already hired an executive, continue to challenge them with questions like these to make them the best they can be.