March 9, 2016

Should the Customer Success Function Report to the Head of Sales or the CEO?

by mike smerklo

 

vince_shlomi_from_shamwow_by_garrett_btm_sm (1)

For any recurring revenue business, there are seven key reasons why the Customer Success function should report directly to the CEO and NOT the Head of Sales.


Customer success has (finally) started to become an established function within SaaS companies. As a startup begins to scale and move from ideation/product creation phase into revenue generation, it quickly becomes clear that resources are needed to help manage customer relationships AFTER the initial sale.

I have been an advocate of Customer Success and the importance of both the function and mindset within SaaS/Recurring Revenue companies since dinosaurs roamed the Silicon Valley…

dinos

As recurring revenue business models have become the standard for technology companies, it has become clear that Customer Success is critical for sustaining growth, profitability and customer reference-ability. In short, if you don’t get Customer Success right, nothing else matters.

As a result of this increased importance, it has been refreshing to see most emerging-growth companies building out functions that focus on all aspects of Customer Success – from onboarding and adoption to support and eventual renewal of the subscription agreement. This function can also take on responsibility for upselling and/or cross selling of additional seats or subscriptions.

In short, this is a critical function for any SaaS/Recurring Revenue business.

But here is the question I get asked more often than not about this function – should this function report directly to the CEO?  My quick answer – why wouldn’t it???

The normal response from CEOs that I work with goes in one of two directions:

  • Well, revenue is involved (cross sell, up sell, renewal) so my Head of Sales is arguing that it should report to her.
  • I already have so many direct reports (sales, CFO, product management, engineering, HR, marketing) that I can’t imagine adding another direct report.

My response is pretty simple and direct (before making sure, of course, that I remind EVERYONE that I was once a CEO so whatever I say must be 100% accurate)….What is the ONE THING that will make or break the success of your business? Hard to answer with anything here EXCEPT Customer Success!


Here are THE seven KEY reasons why Customer Success should report to the CEO:

  1. VISIBILITY. It lets you see exactly what is happening with your most important asset besides your employees: your customers.
  2. CLARITY. Having Customer Success separate from Sales gives the organization visibility into what is really happening after a prospect becomes a customer – and takes away a lot of the typical finger pointing between sales, product management / engineering and professional services.
  3. METRICS. When the Customer Success function reports directly to the CEO, an organization can develop specific metrics that really determine the health of the customer BESIDES how much money they are spending (i.e., sales).
  4. BALANCE OF POWER. In most emerging-growth SaaS businesses, the power within the organization typically sits first with product/engineering (“we need to build something that works”) and then shifts to sales (“we are screwed if we don’t sell something”). By having Customer Success sit OUTSIDE of either of these functions, a CEO can avoid a lot of the natural power plays that happen (resource gathering, budget disputes, etc.) and stay focused on the customer.
  5. SALES FOCUS. If Customer Success reports to the Sales function, there is too much potential for either the customer getting ignored (“I have to make the quarter”) OR the customer’s needs becoming a distraction (“We missed our f#cking quarter because of these customers”). The sales team’s job is to sell – keep it that way.
  6. FEEDBACK LOOP. As a CEO, one of the hardest things to do is to get clarity on what is really happening inside and outside the business. The ultimate is to get insight into what is happening in the magic loop – Plan and Build (product management and engineering) vs. Demand and Sales (Marketing and Sales) vs. Customer Experience (Customer Success).
  7. SIGNALING. By having this function report to the CEO, it tells the world (internal and external) that the organization really does care about the customer. It’s pretty hard to say “the customer is king” when the function isn’t sitting in the Monday morning Executive Staff meeting.

The advent of the Customer Success function is refreshing to see for technology companies, and the industry has come along way from the early days of “sell now, beg for forgiveness later” mindset.

By making the Customer Success function a direct report to the CEO, the long-term health and wellbeing of a business is significantly enhanced.

And it also takes one more excuse away from those Sales Executives when they miss the F#cking quarter – that fact alone might make it all worthwhile.


I hope you enjoyed this post and appreciate your comments.  For more reading on this topic, here are some other great posts:

Bruce Cleveland’s Rolling Thunder Blog – The missing SaaS Metrics

Roger Lee from Battery Ventures – Why Customer Success Needs to be Board Priority

Totango‘s List of Metrics and Goals for Customer Success

Gainsight’s Key Customer Success Metrics

Servicesource’s Blog on How to Jump Start the Customer Success Function