Most CEOs agree, losing a leader is very disruptive to the organization and expensive; it should be avoided if possible. ALL employees agree that losing their job is a terrible disruption and should be avoided if possible! Both CEOs and CS leaders can find value below and improve Customer Success at the same time!
The biggest reason for turnover in Customer Success leadership: CS leader’s inability to grow new skills and mature as the company scales
In 2021 I spoke to over 600 leaders of Customer Success. By the end of 2022, 75% were no longer in their role. There were a variety of reasons, but the biggest by far was the inability of the CS leader to scale with their growing SaaS company. With no alternative, the CEO felt forced to make a leadership change – the good news is, there is a better way.
THE BACKGROUND:
In a startup or a fast-growing company, CEOs must hire for skill – they can’t afford to develop employees from scratch. They also have to prioritize and face difficult tradeoffs. For customer-facing roles, the priority defaults to Sales and Marketing. (Growth is a priority)
Once a company gains a few customers, Customer Success becomes more important, but the company can’t afford to recruit a highly experienced VP of Customer Success. Instead, they hire a solid manager they trust, often promoted internally. They are good with customers they know the product and are expected (hope) to grow into the role. (How hard can it be, right?)
WARNING!!! Internal recruits and early stage CS leaders: It becomes a self-fulfilling death spiral of career failure for even the best of CS leaders.
Once the company starts to scale ‘for reals’, the challenges start. It becomes a self-fulfilling death spiral of career failure that impacts even the best of CS leaders. No one sees it coming. It feels like there’s no alternative and no place to go for help.
WHAT IT LOOKS LIKE:
CS Leaders in this position are already at risk of being replaced – they just don’t know it yet. In rare cases, the CEO hires a COO/CCO to come in over the top, but in the vast majority of cases, the CS leader is replaced by someone with more experience who can speak to the specific needs of the organization. And the process starts over.
Every action they try to take to catch up actually serves to reinforce the problem.
THE REALITY:
For a time CS operates just fine at a certain level with existing capabilities. As the company grows, the CS leader is too involved in the operation to recognize the strategic shift – it just feels busy. Suddenly, and seemingly without warning, the CS leader is behind the growth curve and can’t catch up. No one warned them about the threshold or that today was the day it was going to be crossed (because no one actually knew) but the reality is the company has outgrown the leader’s ability to manage Customer Success. It’s nearly impossible for the CS leader to recover without help. Every action they try to take to catch up actually serves to reinforce the problem. But it can’t remain hidden forever.
Customer Success capabilities act like step costs. Step costs are expenses that are fixed for a range of activities, but increase or decrease once a threshold has been met – think ‘office space’ (the actual office not the movie). It’s a fixed expense for several years, then it’s outgrown and needs to be expanded, becoming temporarily ‘fixed’ at the new level. It’s the same with Customer Success capabilities – they are always evolving but not necessarily in a straight line. Eventually, the new requirements become too complicated and the workload too great.
When there is more work than can be done by Customer Success, the work per customer will be reduced (through efficiency or by omission). It’s either that or hiring more people. Omission (CSMs not finishing the work) is one of the few things that will happen on its own, but it will happen in an unprioritized, haphazard way that disproportionately impacts your top customers!
This is different from traditional consulting
THE SOLUTION:
This situation requires a temporary increase in management labor. (Even if the CS leader is replaced) The existing leader can’t really extradite themselves from the day-to-day operation and they don’t have the expertise to implement the new changes even if they could. But they still have a lot of organizational value and can manage established processes! Rather than replacing the leader and losing the institutional knowledge, or breaking the bank by hiring a C-level executive over the top (COO/CCO) when you don’t need one, CEOs should consider hiring temporary management resources that specialize in CS Capabilities, implementation work, and leadership development. This is different from traditional consulting.
MUCH less expensive than hiring a replacement
5 STEPS TO IDENTIFYING A SOLUTION:
- Consider the temporary help as part of the CS labor budget (not additional professional services)
- Be sure the temporary leader can actually implement and not just provide a report
- Pay as much attention to the leadership development aspect as the implementation (the goal is to save your CS leader AND increase capabilities)
- Be sure they have documented standards, a baseline of capabilities that guides their approach. (Unfocused experience is just a new version of overwhelming.)
- Your vertical (FinTech, HealthTech, HRIS, etc.) is less important than you think. In fact, it’s sometimes better to be outside of the vertical depending on the innovation you need.
Temporary resources are MUCH less expensive than a replacement. The problem will only get worse on its own.
This 3 min video posted on LinkedIn outlines the problem and how one CS leader solved it! (click here to see Kayla and the CEO) a short video that outlines one success story of coaching, assessment, and implementation!
As a CEO or CS leader facing problems similar to the ones outlined above, I urge you to explore some options and get some help. Reach out to me on LinkedIn Daniel Hoesing on LinkedIn, or Book a 30 min meeting to discuss your CS challenges. I can’t work with everyone I meet, but I’m happy to provide some options and get you started.
