Finding clues beneath the surface - part 2

This is the second of a three-part series in which I analyze and offer my perspective of three specific findings from the 2023 Customer Success Leadership Study that was released on Oct 18. The study is an annual collaboration between ChurnZero and ESG and this year it was sponsored by SaaStr and HubSpot.

I’ll repeat what I said in the first article. I encourage all Customer Success professionals to read it thoroughly because you should see many of your organization’s challenges and opportunities sprinkled throughout. But don’t let it end there. In this tough economy, and in this modern business world in which structured knowledge sharing from your bosses is at best inconsistent, we should all know that one’s career growth cannot be outsourced to the company and its leaders. So, everyone needs to educate themselves as much as possible. We need to dig deeper and question not the validity of the study but, rather, the reasons behind the findings. That’s the point of this Peter’s Perspective.

As with any report for any study, we often come away with more questions than answers. We can find ourselves both better-informed and more bewildered. To help, I want to zero in on just a few of the key findings from the study and offer my comments to each and recommendations for how leaders and individual contributors can take some immediate action.

Key Finding #1 - Reporting structure is shifting

My confidence level in the finding and why I feel this way

Medium – Although the reporting that 51% of Customer Success organizations now report directly into the CEO (a 32% YoY increase) might strike the reader as a very positive sign that CS has finally reached its long-dreamed-about parity with other organizations and has an equal say at the executive level, until that number stays or increases over time, there might be another explanation. We just endured a year of tumultuous change in Customer Success, a year in which legions of CSMs lost their jobs, and entire teams and organizations were disbanded. Through that lens, perhaps it makes more sense that for those companies in which CS has lost leadership (that would include a lot of companies), the temporary structural change would be for the CS org to report directly to the CEO until the entire leadership team determines the best next step.

Key Finding #2 - Customer success teams are small compared to benchmarks

My confidence level in the finding and why I feel this way

• High – As mentioned immediately above, while it’s certainly not the only organization that suffered, this past year has brutally impacted Customer Success. So, it shouldn’t come as a surprise that we see smaller teams given the severe contraction in budgets. I actually think this is something we should expect to see going forward. We will see that, in regard to hiring and even factoring in the accepted benchmarks, companies will make the conscious decision, even when budgets relax, not to hire CSMs at the same volume they did in the past. The high cost of money dictates a new, or renewed, sense of business rigor and business governance. We will see a higher percentage of CS budgets directed towards non-CSM investments (CS Ops, CS Marketing, AI, tools, etc.). As CS organizations improve their ability to deliver more targeted and precise information and guidance at scale, we should also see more CSMs reskilling in order to move into the kinds of roles that the new tech-enabled Customer Success organizations require. ?

Key Finding #3 - 55% of teams have maintained or reduced headcount

My confidence level in the finding and why I feel this way

• High – I do believe this number and I believe it’s also a strategic direction that is years overdue. Companies have long over-hired for their sales organizations but that was always easier to justify given the easy measurement of each person to revenue. That same crude measure does not exist in the world of Customer Success. It’s become much more difficult to justify headcount and – as stated above – the benchmarks might not apply any longer. The new tech-enabled Customer Success organization will need fewer people. If any growth occurs, it will be in CS Ops and especially in roles that focus on data analytics.

I have a few ideas listed below about actions CS leaders and Individual Contributors might want to consider for each of the above findings.

Key Finding #1 - Reporting structure is shifting

• Advice for CS LeadersBecome the CEO of Customer Success. In an environment in which executive responsibilities (along with actual people) are constantly shifting, you as a CS leader need to step up your ability to be seen as a senior leader. Approach your CS book of business as a CEO approaches theirs. Know that all aspects of customer success need to operate smoothly and that the better the orchestration, the better the results, and the better you will be positioned to benefit as an individual as the smoke clears.
• Advice for Individual ContributorsThere is not a lot you can do independently to make much of a difference when it comes to affecting decisions about reporting structure other than excelling at your job. Obviously, that is critical but you can help your CS leader to be successful in the way they attempt to do their job – which could make a significant difference – in the manner depicted above.

Key Finding #2 - Customer success teams are small compared to benchmarks

• Advice for CS LeadersInvest in a CS Operations function that will seriously address the need for your organization to have benchmarks of what works for customers, what doesn’t work, which activities work best for what types of customer and customers in what kind of state, etc. This is why I mention data analytics skills as being important for Customer Success organizations going forward. Even with AI, and maybe even because of it, data analytics will move closer to the core of the CS mission.
• Advice for Individual ContributorsImprove your ability to identify patterns of behavior with customers. The identification of patterns is the basis of machine learning, and you can establish that skill for yourself that you can then use to participate in conversations and planning activities for how technology can be better leveraged to scale reach.

Key Finding #3 - 55% of teams have maintained or reduced headcount

• Advice for CS LeadersAccept that staff optimization is part of the modern business leader’s job. Just as in the industrial age, societies had to make massive staffing adjustments when it moved from being largely agrarian to becoming more a more urban one based on steam-driven machinery. We are in the early age of AI and it will have similar massive effects on societies and on companies. The key to being a participant will be in your ability to learn, to see around corners, and to adapt.
• Advice for Individual ContributorsSame advice for you as for the leaders above.

The items I focused on in today’s article are significant and profound. They hint at transformational change in our business world and no one will be spared from its effects. Much of what we will see and experience will feel like it’s completely out of our control but that’s not entirely true. As humans, we will always have agency to make changes at the personal level and at the team level. The decisions we make should always be grounded in what makes sense for the business and for our customers. That’s going to force all of us to be extremely adaptable and that’s why I am a believer in a simple truism… learning is a life-long endeavor.

We should figure out how to enjoy the ride.

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