Want to make a significant impact on your net retention in 2023? Focus on these two leading indicators.

I'm a big fan of leading indicators and my eyes opened even wider to their importance in Customer Success (CS) after I read the Four Disciplines of Execution a few years ago. Most companies struggle with leading indicators when it comes to customer success compensation structures. In creating our CS Compensation plans for 2022 at SmartRecruiters , the leadership team and I chose to focus on three core metrics, two of which were leading indicators. As a result, our customer success is on track to achieve nearly 100% renewal forecast accuracy for all four quarters and improve our retention by seven points bringing us into best-in-class territory :-)

How did we do it?

Predictability. Our focus on forecast accuracy drove our teams to adopt new behaviors around how we engage with our customers, the questions we ask and the quality of our quarterly business reviews (QBRs). We shifted our thinking around risk from "red" and "green" to more specific dollars and root causes (more on this in a future article!). CSMs should make the forecast call at least a quarter out from renewal and in enterprise accounts, the call should be closer to six months out. Even if your customer is not up for renewal, why not ask: If you were to renew in the next (quarter, six months)...would you?

Customer Success Qualified Leads (CSQLs). I created the CSQL concept many years ago simply from copying the MQL approach used in digital marketing and applying the same philosophy to customer success. I love seeing other customer leaders adopt this concept too! Having CSMs own opportunity identification in their accounts inherently requires that their customers be "healthy" and primed for growth. It's a fantastic leading indicator that encourages CSMs to become value-centric, relationship-oriented and move with urgency alongside their commercial peers. SmartRecruiters is the third company I have brought CSQLs into and I continue to learn and improve on how to best leverage CSQLs with each experience. My top lessons learned so far:

• Don't give a strict quota. Put the CSQL goal as a % of growth against the overall book managed knowing that the book may shift year-to-year as accounts change and allow for some flexibility.
• Make the CSQL goal an annual goal. It takes time to develop opportunities, particularly in enterprise accounts.
• Hold CSMs accountable for qualification. We use SPICED (I'm a huge fan of Winning by Design ), but yours may be MEDDIC or something else. Ideally, it should be aligned to what your sales team uses and you should require your CSMs to complete the same level of qualification that your sales team does and you should have a clear definition of what stage a CSQL gets "sales accepted" (ours is when it moves from S1 to S2).

CSQLs create strong CS-Sales alignment. At SmartRecruiters, our Account Managers drive the opportunity from S2 to close. This past year, a majority of our CSMs achieved their CSQL target, creating a pipeline of growth opportunities amounting to roughly 15% of our starting ARR in 2022 with a close rate of over 50%. This is consistent with what I have seen in the past and in other companies that are using CSQLs. (Anywhere between 40-60% is great!) Remember, these are warm leads from your customers. If they are well-qualified, they should close at a rate that is at least 2x better than your new sales team.

I'm really proud of our team's achievements this past year. I want to thank Alexis Krenzien , Anita Bowness Rachel Phipps and every SmartRecruiters CSM for not just working hard to achieve these goals, but also embracing new and different ways of working that will continue to improve our performance in 2023! Leading indicators can be incredibly powerful if adopted and leveraged the right way. What leading indicators are you considering making a priority this year? I'd love to consider more in the future and learn what others are doing.