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7 December 2021

Assembling A World-Class Customer Success Organization: An Interview With Stephen Fulkerson, TSIA’s VP Customer Success Research

by Rida Ahmed Reading time: 8 mins
customer success team structure

Level Up Your Customer Success Organization

In the subscription economy, there’s no debate about whether or not to invest in Customer Success (CS); 70% of rapidly growing businesses say that Customer Success is extremely important (Hubspot, 2017). The question now is, how big should CS organizations be, and what’s the best way to staff and scale its success?

To uncover how today’s CS leaders are successfully building and scaling their CS organizations, Valuize’s Founder and CEO, Ross Fulton, spoke to TSIA’s Vice President, Customer Success Research, Stephen Fulkerson. Stephen is a Customer Success Executive in the SaaS industry, specializing in customer renewals and relationships, with 20+ years of organizational development experience. During their conversation, Stephen imparts his wisdom about how to approach budgeting for customer lifecycle investments, including Customer Success, and shares best practices for staffing and scaling a high-performance Customer Success organization to drive best-in-class Net Dollar Retention.

Q: Why do you think sizing a Customer Success organization is such a challenging and confusing equation to solve for enterprise organizations?

A: “We’re past the phase of whether there is a need for Customer Success, that’s a given. But, there’s still a lot of organizations that are just getting started on this journey, so they don’t know what they don’t know. When it comes to sizing a CS organization, there are 4 major factors that companies tend to struggle with: budget, segmentation, charters and complexity.

When it comes to budget, organizations often haven’t established where the investment is coming from to fund the CS team. Is it going to be Cost of Goods Sold Monetized, or Cost of Goods Sold Non-Monetized? Is it going to come from the Sales and Marketing budget, or General Administrative budget? In order to scale a Customer Success organization in a way that’s meaningful for your engagement strategy, the budgeting aspect has to be clearly defined from the beginning. 

The second challenge organizations face is two-pronged: segmentation and engagement. Organizations need to figure out the best model for their CS motion: a high-touch, low-touch or digital touch. We’re seeing a huge shift in the industry towards digital touch; TSIA collected over 6 years of data illustrating that 3 tiers of segmentation is the standard. In 2021, standard segmentation shifted to 4 tiers, signaling an industry-wide switch to digital engagement.

The third is charters; organizations are still trying to figure out what their swimlanes are. Where does Sales, Support, Training & Education play and what does the handoff look like? If those swimlanes, roles and responsibilities, aren’t well defined, it’s going to be difficult to build an optimal Customer Success team structure.

The fourth challenge is complexity. Complexity plays a big role in the sizing of an organization, yet a lot of leaders don’t take it into consideration when they forget to factor in their product. Leaders must determine if their product has a low, moderate or high level of complexity because a high complex model may require technical account managers, additional resources, and engineers. The complexity of the product greatly impacts the sizing of an organization.”

Q: What are you seeing in regards to the budgeting equation and how this affects the sizing of a CS organization?

A: “We typically see organizations falling within seven categories. Of the 140 plus member organizations that are in TSIA’s CS practice, about 40% of those leverage the Sales and Marketing budget, 8% fall within the Operations budget, and another 1.5% leverage Training & Development. When you get into Cost of Goods Sold Monetized and Non-Monetized, that’s where you see it pick up; Non-Monetized is about 32% and Monetized is about 13%. At TSIA,  we heavily focus on the monetized portion because that’s the easiest way to fund a Customer Success organization. 

There are three things that happen when organizations monetize; their Net Promoter Scores go up between 17 to 27 points, their expansion rates go up by 10% and their retention rate goes up by 2%. TSIA conducted a research study at the beginning of the year on the monetization of Customer Success and found that 45% of the industry was already monetizing. Monetization of Customer Success adds a lot of value because it accelerates time to value.”

Q: What are your top recommendations for organizations looking to build an optimal Customer Success team structure and scale their CS organization?

A: “Organizations often ask us; how do I hire for Customer Success? What are the types of roles I should be hiring for? We always counter with the foundational question; what are your charters? Your charters must dictate how you hire as the skill sets you recruit need to align with, and complement, your charters. For example, if I’m hiring for an adoption-focused role, then former CSMs, Support Services, or Professional Services individuals, people that know how to enable, engage and implement an account to make them successful, are an easier hire. Organizations need to do a skills assessment to thoroughly understand their team’s key competencies and improvement areas; as a leader, this exercise will help you understand how to help your team drive growth, provide adequate training to ensure everybody’s on the same level playing field, and build an optimal Customer Success team structure.”

Q: When we talk about benchmarks for sizing an CS organization, we often get asked about ideal CSM ratios. I think this is dangerous territory, because this ratio tends to be very bespoke to each enterprise. In your opinion, is there an optimal CSM to customer ratio?

A: “The short answer is no. There isn’t a mathematical equation that definitely answers this today, but we’re in the process of trying to develop that formula. Instead, start off with a simplistic approach; divide your total number of customers by your total number of Customer Success Managers (CSMs). This will let you see what your ratio of accounts to CSMs is, which is essentially your capacity. From there, you can then look at the number of high touch accounts that you have and divide that by the number of CSMs, giving you the total of your high touch coverage. You can do the same exercise for your low touch accounts. Together, this is going to give you a robust version 1 of your coverage model. Once you’ve implemented that, the next step is to  look at your Voice of Customer metrics. If the customer is not happy, they’re not going to spend money with you, stay with you or grow with you, and vice versa for happy customers. That’s why the Voice of Customer metrics play a critical role in determining whether you’ve sized your organization correctly – that’s ultimately for the customer to decide.”

Q: Where do you recommend leaders start when it comes to sizing a CS organization and navigating these challenges?

A: “There’s still some confusion about what Customer Success is really trying to do. If you look at the charters, 84% of the industry is focused on motions of adoption. So, if the industry is focused on motions of adoption, then sizing and funding this team is imperative because renewal and expansion is an outcome of adoption; in other words, it’s what happens when adoption is done right. When adoption is done poorly, churn happens. So, first and foremost, I recommend that CS leaders garner and secure adequate funding in order to build and staff a robust CS team.

In addition to correctly allocating your customer-facing roles, you also need to consider your vital behind-the-scenes roles. Who are the people that are behind the scenes that are creating your journey maps, success plans, playbooks, and analyzing your Voice of Customer metrics? Roles like data scientists and CS Operations professionals are crucial to scaling your CS program and need to be taken into consideration when sizing your organization and building an optimal Customer Success team structure.

Lastly, you should carefully consider your software capabilities. I always say digital is your “third hire”; if your first hire is Customer Success leadership and your second is CSMs, then digital is your third. You need to have the right Customer Success technology to support your team. You also need an individual or team that is dedicated to helping you enable that technology and dive deep into the analytics. When it comes to sizing, it’s important to never underestimate the power of CS Operations.”

Lay The Groundwork For Growth

When it comes to Customer Success, there’s no one-size-fits-all model to build and grow a thriving team. Each organization is on its own journey, requiring a bespoke plan to address their unique challenges and needs. By developing a clear understanding of your charter, designing a thorough segmentation strategy, and building a robust team with the right skill set,  your organization will be ready to drive phenomenal customer growth.  

Listen to Stephen’s full interview on the Customer Valuecast podcast for an in-depth look at how you can staff and scale a world-class Customer Success Organization and deliver market-leading growth. 

Rida Ahmed

Rida is Valuize's Content Specialist. With a multi-channel marketing approach, Rida works to share Valuize's story as well as that of its team, clients and partners.