How to define KPIs for CS teams
Startup for Startup
Darya: Hi, everyone, I’m Darya Wertheim and today we’re going to talk about KPIs, and specifically one of the most challenging areas to set KPIs in, customer success teams. If you’re here for the first time, then you’ve reached Startup for Startup, the podcast in which we at Monday openly share knowledge, experience and actionable insights among startups. Let’s start.
Darya: So I’m here today with Nir Fogal, Client Services Group Manager. Hi, Nir.
Darya: And Tom Ronen, High Touch Group Manager who has joined us all the way from New York. Hi, Tom.
Tom: Hey Darya. Great to be here.
Darya: Great to have you two with us. So, Tom, tell me a little bit before we start, why are we even talking about this topic?
Tom: In customer success, there’s a lot of consideration that Customer Success Managers need to take. We’re talking about client retention, customer adoption, it can also be upsale and upgrades that CSMs are looking into, and with so many things to keep in mind, it’s very hard to find that one or one or two, three numbers that are kind of the North Star for the CSMs.
Darya: OK, so before we dive into this topic, let’s take a step back and talk about what do we mean when we say customer success, because every company looks at it a bit differently, right?
Nir: Yeah, exactly. So if we talk about the customer success group, we basically split it to customer experience and customer success. With customer experience they deal with problem solving for, for all our customers, mainly focus on the smaller customers, in customer success we are focusing on the larger customers and we give them more hands on kind of like dedicated people jumping on calls with them and helping them to succeed and bringing them to the value and we focus on the larger customers.
Darya: OK, so today, we’re going to focus on the customer success part, right …
Darya: not the customer experience part. Before we dive into the challenges in setting KPIs for CS teams, I want to first understand what are the actual KPIs we’re using in the team?
Tom: Yeah, so I’ll start with the High Touch customer success team. So if you think about what that team does, each Customer Success Manager owns a portfolio of accounts, these would be the largest accounts that Monday.com have, they’re managing around one point five million dollars ($1, 500 000-00) each. And so we’ve set, before, different KPIs, three (3) that are usage based, and one (1) that is more kind of an operational KPI that we are usually rotating. So the first one would be the net growth in the amount of weekly active users that your portfolio has, an example can be, your portfolio today holds a thousand (1000) weekly active users across all of your accounts, we want you to grow that by X amount, and this is a KPI that is aligned across the team, we want to see a certain amount of growth. So we’ll measure you on the percentage of achievement towards that target, another, so the other two are more value based KPIs that we have towards our customers, are all about the customer health score that we’ve developed. A health score is that metric that looks at different areas of usage of our Monday.com platform, and gives it a score, and with that we have a red account, a yellow account or a green account; and the KPIs are focused on these yellow and red accounts to ensure that we’re focusing on areas where we see a risk in retention. The final KPI is really more on an operational level. We’re measuring how many executive business reviews, a customer success manager is doing a quarter. Yeah, Nir, what about your KPIs?
Nir: So in the client services, we basically have projects, we have onboarding project professional services projects. So when we came to define the KPIs, we started to think, what do we want the team to do, what do we expect every individual to do and then we came to the conclusion that we want everybody to run as many projects as we can, as good as we can and as efficient as we can. And then we came to define the KPIs around them. So when we look at the quality like as good as we can, we wanted to focus on the health of the customer, but also the satisfaction of the customer, and that brought us to the first KPI which is very easy, very simple, it’s the customer satisfaction survey. So we have targets that we want as a team and as individuals to get to a specific target. Then we wanted to come up with another KPI that will allow us to mix the efficiency, the volume of the projects and also the quality of the of the projects. We call it Green Points. We basically collect points for every project we finish based on the size of the project, based on the health score of that specific account, like the adoption rate, and also if we finish it on time. So assuming everything is cool, we collect all the points, and then if we are late, or if the adoption level is not as we expect, then we collect less points. And every individual and as a team, we want to collect as many points we can during the quarter to get to the target. So those, the Green Points together with a customer satisfaction survey, they cover everything or almost everything we expect the team to do, and the individuals to focus on.
Darya: So let’s dive right in. We’re gonna start with three main dilemmas you’re facing on your day to day job, right?
Tom: Yeah. So the first dilemma I think we will bring up today is looking at the lagging indicator versus a leading indicator, and with customer success, the ultimate lagging indicator is retention rates. The interesting part within customer success, the lagging indicator is really the indicator, the KPI, that the higher ups are looking at day in, day out.
Darya: Right. So just to make it clear, if I’m the company’s CEO, eventually, I want to know that the group of customers that is being handled by the CS teams is keeping up with the with the product, right? I want to know that they’re renewing their service, and they want to keep using Monday.
Tom: Exactly, yes. So at the end of the day, the goal of the customer success arm at Monday is to ensure that the renewal rates are high, that customers stay and even expand their subscription with us. We get there by providing the most value out of the platform to our customers, and here comes kind of that leading/lagging tension. In order to ensure that customers are renewing their subscription with us we need to make sure, and we usually have the first year, so we sell annual subscriptions, we have one (1) year to show them this, that the value exists. If you think about it, it’s kind of like a never ending sale motion, where every year the customer needs to make another decision, looking at the value and the return on investment they have with Monday, and thinking whether they want to renew the subscription, maybe downgrade or upgrade. So for our Customer Success Managers focusing solely on that retention number, kind of like a salesperson is, in our opinion at least, not necessarily the best focus to give our Customer Success Managers, there are CSM teams that are focusing heavily on the retention number.
Darya: But why isn’t necessarily the best one?
Tom: Because when you think about a KPI and you think about a tool that will help you motivate your team and understand that you’re on the right track fast, retention is a number that you’ll be, let’s say we sign a contract today. Nir’s team is starting to handle the customer, only a year after we’ll get to, we’ll actually see, if we’re only focusing on this number, if the outcome was a positive outcome or a negative outcome. So we need something along the way to tell us that we’re on the right track.
Darya: Right, I can have an entire relationship with a client, and only at the end of the year find out that he wasn’t really satisfied, and then he discontinued his subscription.
Tom: Yeah, exactly. So when we talk about leading indicators, there’s a lot of different KPIs and metrics that we can follow along the way to predict, in a way, whether or not the customer is about to renew their service with us or expand or things are going the other way around, and will also give us time to respond.
Darya: So you mentioned that there’s a conflict, right? The managers want to see, at the end of the day, customer retention, but you want to see whether the customers use the platform or not. So eventually, I’m guessing, you need to decide which KPI to rely on. So what do you do? Do you communicate to the managers one thing and to the team a different thing?
Nir: So I think that when we look at that kind of dilemma, if we choose to go with a KPI which is not the bottom line, as we just mentioned, we need to make sure that we choose KPIs that will lead to the bottom line. For example, in our case, when we look at active users, or when we look at health, then we know that if we work very well around those KPIs, they will lead to a great success in retention, expansion and the bottom line will be good as well, and then it’s also easier to discuss it with the Senior Managers in the company. I think that another tool we are using is to have those bottom line KPIs, lagging KPIs, on the team level and keep the individual level with the more leading KPIs, which is another kind of way for us to address that.
Darya: Yeah, and that leads us to the second dilemma we wanted to talk about, so the second one is actually setting KPIs at team level or individual level. So let’s talk about that.
Nir: So that’s a great discussion, and I think at Money.com we always focus on great teamwork, collaboration, our product is around collaboration as well and it’s very important for us, and many times when we come to define a KPI that is individual, we take the risk of like, creating an environment that is too much competitive and kind of like breaking that great teamwork spirit on the team. So that’s the risk of defining individual KPIs, and many companies choose not to do it in customer success and just to define team KPIs, but we think that the power of individual KPIs is amazing. It helps us to shape the behavior and the focus of the CSM’s toward the same goal. towards what we want them to focus on, and we think it’s so powerful that we don’t want to give up on that; and we focus a lot on teamwork and collaboration at the same time. So it’s very clear, we hire people that are great team players, we focus a lot on team and collaboration, and we kind of balance that together with individual KPIs, and we see that it works. People work very hard toward their KPIs, but also help each other and collaborate in a great way, and it’s possible, so if I have to kind of like give a tip to anyone, don’t be afraid to set individual KPIs, it’s a great tool also to value your team members, also to help them to grow into and to improve, and at the same time we also define team KPIs, which is basically a way for us to focus on the bottom line, less kind of like adoption and more like close to the money kind of KPIs, more retention, and expansion and KPIs like that.
Darya: But I want to talk a bit more about that, because on the one hand, I can really relate to what you’re saying, I can think of my team, we have individual KPIs, we’re not in the CS world, but we still have individual KPIs, and team KPIs, and I can see how the individual KPIs really help each and everyone work on their goals, really achieve them faster maybe, because you have something personal, you want to do it, you want to go for it, but I do feel it, it does take something out of the team KPIs, meaning I have my individual goals, this is my first priority, you know, I want to work on them, I want to know that I reach them at the end, you know, at the end of the day we have personal feedback talks, not necessarily team feedback talks, so how do you prevent it from really holding back team KPIs?
Nir: I agree with you, when we have individual KPIs for each individual that’s the most important thing, but I think KPI is not everything we do. So it’s a lot about what kind of topics we bring to the table, what kind of statistics we show to the team we talk about. It’s not only about the KPIs. So I think, for example, if we have a drop in satisfaction, we always measure satisfaction, so as a team we look at the satisfaction, if we have like a drop of satisfaction, we start to focus as a team around this area. So once we focus as a team, we talk about it in one on ones, we talk about it in team meetings, we can group every, everybody together toward the same goal even though we don’t have a personal KPI. So it’s kind of like it’s always a balance between the targets, the KPIs, and the focus of the managers on the team.
Tom: I’lll also say that for both Nir’s team and my team, the team KPI is really the one that’s more business oriented, and one that is kind of globally aligned around SAS, for example, gross revenue retention or net revenue retention on renewal rates, in our case, in the High Touch and customer satisfaction in Nir’s team and the client services, these are very kind of ‘sexy’ KPIs, you can say, these are numbers that everyone across the industry would know, and so the fact that they’re so close to the business side, to the money side it does create a level of excitement and of alignment around why they’re important if, you know, I address the team and I say that our renewal rate is lower than we expected it to be everybody understands that this has a massive impact on the company, as opposed to if I’ll say that currently our customer base is seventy-three percent (73%) green and we’ve set a target of seventy-six percent (76) green, when we’re talking about the health score, so if the team KPI is one that everybody can easily relate to, and also has a kind of a big meaning for the company’s success that also helps kind of rally and augment the fact that yes, everybody wants to be perfect as an individual, but it definitely helps put the weight on the team KPI as well.
Darya: OK, so let’s move to the third dilemma, which is about compensation.
Nir: Yeah so, first of all, as kind of like value and vision, we don’t believe in setting compensation based on performance for employees and we kind of like, we don’t have it across the company. And we believe this is the right way to do, to motivate people. You can see that even when KPIs are not linked to the compensation people are still motivated, highly motivated, because people want to address their KPIs, they want to be promoted, they want to be successful, and that’s the way for them to build their careers. And that’s a very good motivation. And they also want to help the company succeed, which is kind of like naive to say, but we can see that it works. When we have the compensation around it, it’s always creating a lot of pressure and, also it’s very hard for us to be flexible, like when you want to change a KPI, you want to change the targets and things like that, it’s very hard when it’s linked to the compensation, people are taking it too personally, and we want to be in a position that we set the KPIs based on what the business need and we think it’s much better not to align compensation with KPIs and goals; and of course, we make sure that the compensation work for them and we don’t need to add on top of that, also, some kind of like bonus or something like that. And we see it, you know, working across the company in a beautiful way.
Tom: You don’t really need to use this tool, which, like Nir said, puts a lot of complications around, you know, something as basic as setting a KPI, setting a goal for a team member, you don’t really need that in order to make sure that people are focused on their KPIs. We use here a lot of different visual aids like dashboards that help motivate people and focus them on the right KPI, but as managers is something that we put a lot of focus on, every one on one is all about how we’re moving towards the KPIs, and we specifically hire and focus our hiring to find these folks that are very driven for their own individual success and that are also looking to be a part of, kind of, a bigger success as a company and be a part of a team, and all of the above really helps us focus everybody towards their KPIs without the need for tying compensation to it.
Darya: So I think, but that’s the point because, OK, I get the focus thing, like you have other KPIs, but what about motivation, because I’m guessing that if someone knows that they will get commission for every happy account they get they might get more motivated to work on things. So doesn’t hurt employee motivation?
Tom: Tying back to our leading and lagging indicators discussion, it’s up to us as managers to under, to be able to see if somebody is not motivated enough, is not putting in enough effort in order to get to their KPIs, and not wait for their renewal of the customer to come in to see that we, because we didn’t tie compensation to KPIs we had a CSM that was not motivated enough and didn’t work hard enough in order to improve their KPIs. In customer success there’s kind of a, there’s a flow where you need to perform an action with a customer and then there’s still time to wait until that action is being implemented, and there’s a whole discussion of what do you want to measure. Do you want to measure the amount of actions that your Customer Success Managers are taking, the amount of calls, meetings and so on or do you want to focus on a leading indicator, but still that has a lagging component to it, if we talk about like usage or the, further along, the lagging indicator of retention. We definitely look at the actions that are being performed by CSMs. The way that we look at it we want a successful CSM should be able to plan a good strategy and then execute the good strategy, and then with our kind of data orientation we want to see that this strategy is actually being successful, but you can’t really overlook the fact that you want to be able to measure, in a way, the CSM’s ability to plan and then execute. So we look at things like looking at the amount of activities that a CSM has logged on sales force and really asking our CSMs on one on one with their managers, what have you done in order to do this, this and that. How many contacts do you have on the customer side? So these metrics are important. They may not be the top KPIs that we measure, but they are very important to focus on, because they help really see if a CSM is motivated and if they’re putting in enough work.
Nir: I think it takes us also to another challenge we have in CS that KPIs cannot cover everything we expect people to do, and everything, basically, people do. And our people they are doing so many different things, they support customers, they work with a product team, they, they do EBRs, they expand, they implement, they do so many different things, and it’s very hard to set a KPI that will cover everything they do, and then if you also tie it to compensation it makes, it creates a lot of frustration when it’s not covering everything they do, for example, many CSMs can have like a quarter where the KPIs will not be met, but we still know that they are doing a good job, maybe next quarter will be better, but we’ll still know that they are doing a good job and then we need to stay away from the compensation, because it creates a lot of frustration that is not really needed and we don’t need it in terms of motivation.
Darya: So it’s not only the results, but also their, the actions they take throughout the way.
Nir: Yeah, we have also a personal development plan, which is built based on five (5) competencies, which they go together with the KPIs. So when we go to a feedback talk with individuals on the team, we have both the KPIs and the five (5) competencies. For example, one of the competencies is product knowledge or relationship management, or the way they manage their book of business or impact, things like that, that are like soft skills that are super important for Customer Success Managers and altogether builds the evaluation of each individual on the team; and if we take it again to the compensation question, it’s very hard to put all that together into the compensation. So that’s another reason not to stick KPIs with compensation.
Darya: So we talked about setting individual goals in compared to team goals as a dilemma, but I’m guessing the challenge doesn’t end in picking one or the other, and that each choice comes with its own challenges. So let’s talk about that.
Nir: So when we look at individual goals, we always want it to be, first of all, like equal as much as we can, and people should feel that this is a fair goal, they can reach that goal. So the first motivation for us is to go and to try to define a goal that is the same for the entire team, so everybody will get the same goal, but then we also want to make sure that people feel that they can reach that goal and sometimes for CSMs, when they start the quarter in a specific situation, it’s impossible for them to get to the same level of health or adoption comparing to other CSMs. Maybe I start with ten (10) accounts that are yellow and red in their health score and my friend is starting with only two (2) of them, so they, we start the quarter in two different positions and then we want to set goals for both of us to improve the structure of our portfolio, but we cannot set just one goal of getting to eighty percent (80%) green accounts, because for my friend, it’s going to be easy, because he’s already there, but for me it’s going to be very hard. because I’m so far away.
Darya: Yeah, it seems unfair.
Nir: Yeah, exactly. So in those situation, we are very flexible, and we try to build the target for each person separately. The advantage of doing that is people can feel that they can reach the goal, it’s realistic, it was built for them. The disadvantage, and we need to kind of like be careful around it, is that people can feel that it’s not fair, my target is harder than the other one, and stuff like that, so we always work very hard to make sure it’s equal as we can, but still we are flexible in defining individual KPIs for different members of the team when, where needed.
Tom: One of the things that we did to help compensate for that, like Nir said, maybe the lack of fairness around it, is to try and paint a picture of what is amazing performance, what is good performance, what is below standard, and so on. So if we’re looking at the example that Nir gave, about the health of your accounts, a way for me, for example, to make sure that our team leaders are setting the right goals and the right focus for our people, is to look at, for example, the average health of a book of business across the entire managed portfolio. For example, I want on average that seventy-five percent (75%) of a CSM’s book of business will be green, twenty percent (20%) will be yellow and five percent (5%) will be red, and if a CSM’s portfolio at the moment is way off of that we need to make sure that the CSM is focusing on getting there, so putting stretch targets on their health score KPI as opposed to, maybe, a very high target on a different KPI that they’re measured on. So kind of making sure that everybody knows what a good state looks like.
Darya: Yeah, like setting an internal benchmark.
Tom: Exactly, setting that internal benchmark is one that will help our team leaders that are setting the goals for the individuals to make sure that they’re focusing on the right area.
Nir: We can give you an example for the adoption rates that we had, like we said, ten percent (10%) at the beginning, and it was the first quarter we tried it on was the Q2, right after the COVID started, and then basically it was very hard to reach that goal, but the quarter later it was so easy for us to reach that goal that we decided in Q4 to increase the goal to like, I think, fifteen percent (15%), or something like that, which was too high. So we always try to play with that target, but even if we set it too high we can always look at the range and it’s not like a big problem, because we look at the entire team and we can compare, and at the end of the quarter we can say OK, the target was too high and those are the great achievements, those are the medium achievements.
Darya: But can there be a situation where, you know, some team members, let’s say, reach eighty percent (80%) of the goals, like not a hundred percent (100%), but eighty percent (80%), but others reach like seventy percent (70%), doesn’t it create like internal competition, even though it’s super individual?
Tom: It does, it can create internal competition, and in a way it’s OK. I think that a good healthy amount of competition is definitely, it’s OK to have. I think you bring up kind of a different point where the way that we maybe present the numbers or the KPIs that we choose they mean something, for example you mentioned a CSM can be eighty percent (80%) towards their target as opposed to their friend that is, I don’t know, seventy-three percent (73%) towards their target, is the person that reached seventy-three percent (73%) like significantly not as good as the CSM that have eighty percent (80%) retention rates, and this is where we started, we realized that this was a small problem that we have with the way that we’re measuring and presenting the KPIs and the data, and now we moved to a place where we created these different kind of buckets of performance; so if you’re between, let’s say, ninety-five percent (95%) to above one hundred percent (100%) you’re going to be exceeding your expectations, and if you’re between, let’s say, eighty percent (80%) to a hundred percent (100%) you are meeting your expectations, and so creating these kind of buckets in terms of performance helps us to communicate the message of what does it mean, if I’m sixty-five percent (65%) towards my target. And that was a recent change that we did, and again, it’s all about kind of iterating the process and improving the way that you are presenting your KPIs, but also looking critically at what you measure, this is something that we always do.
Nir: And risk we may have is, so we shape the focus of the team, but we also drive people not to focus on things, for example when we have the adoption KPI, CSMs, specially at Money.com, they can have one customer that will grow like crazy in one quarter, they can easily focus on that customer, give them all the attention, they will grow, and they will help them to reach their KPI without touching all the other customers. And this is not what we want them to do. We want them to focus on other things and on other customers as well. So that’s a risk that we have to take, and we always need to see how it drives the behavior of that CSM, but …
Darya: So how do you get them to get to engage with other customers and not only the successful ones?
Nir: So what we did in that case, we balanced it with another KPI, which was the health score, and when we looked at the health score, we said, OK, we don’t want to focus on the healthier accounts, because we have the adoption KPI that is already doing it, we want to focus on the accounts that are struggling. So we focused the target around the health score on the red and yellow and then we say, OK, if you want to address two KPIs, both of them, you need to work on adoption, but you also need to give attention to those customers that are struggling.
Darya: What else is challenging about it?
Nir: I think one, another risk that we can talk about is the pressure, and that’s maybe a very interesting part of sending KPIs. Sometimes we can see that a KPI or a goal or target can create a lot of pressure on individuals, especially if it’s hard for them to get to those target or if you have like two quarters that you couldn’t reach the target, the third quarter is going to be very stressful for you. So stress and pressure on people is something that we need to balance all the time. So one thing that we do is always to communicate to the team that the KPI is not everything, it’s a tool for us, it helps us to improve, but it’s not everything, and we have those competencies that are important, equally important as the KPIs, and when we go and we set like a feedback talk, we talk about all of them together. So putting it into the right perspective that it’s not like everything; nothing will happen if you’re doing a lot of dif, a lot of good things on the team, nothing will happen if your KPIs are like a little bit behind in specific quarters, but at the same time we want to keep that kind of like good kind of pressure on people to work very hard towards a KPI.
Darya: Do you change KPIs as you go? Because I’m thinking of, you know, examples like a world pandemic suddenly breaks and the world changes and suddenly maybe the KPIs are irrelevant, maybe companies, you know, they don’t want to spend more money, they maybe discontinue their accounts, because they have no choice. What do you do, then?
Tom: Yeah, so we definitely do, not only looking at the pandemic, but we are, we’ve kind of developed a habit that Nir lead in terms of introducing a new KPI every quarter that’s a bit more targeted towards what it is that you want to achieve, perhaps as a team right now. As a team, when we just started our customer success motion, we didn’t do many of these executive business reviews and they are very, a very important and strong tool for Customer Success Managers to engage with their accounts and to create and to instill action within an account. An executive business review was a cadence and a meeting where the CSM would meet with higher ups on the customer side and with our champions, as well, and it’s our chance to kind of tell the story of the impact of Monday.com, and what it has done to the customer, and it usually kind of brings up a discussion around OK, what’s next, what can we do more, how can we get more out of Monday, and so we wanted to make sure that this activity happens as much as possible on every account and we wanted to also improve how we are going about this activity and so we added a KPI, that we still follow today, is the amount of executive business reviews that a CSM is doing. You think back about what I said about you know, the actions that actually drives the more lagging indicators, it’s a good example of how we actually took one of these actions and made that a KPI. It’s, it has actually been amazing to see how much we went from, Nir, what were the numbers, I think we were, we went from one (1) EBR a quarter to thirty (30), to ninety (90), to now over a hundred (100), so it’s a very strong tool to use to drive maybe more short term focus for your team, whatever it is that you want to drive as a leader.
Darya: What is the hardest thing about it? What haven’t we cracked yet?
Tom: What haven’t we cracked yet? There is some challenges around leading versus lagging. We mentioned the health score as a leading indicator, but we now see how much that also is a lagging indicator of its, of, on its own, the CSM did an action, we’re seeing that reflected in the health score, even later than we would like, sometimes more than a quarter moving forward. So we’re now looking at how we can maybe even break that apart to see different components of the health score and how they change, which is a bit more of a leading indicator. I will add to that that something that we are we are working on right now is to help our individuals to plan and to forecast. I don’t think that the beginning of the quarter today we have good tools to forecast how we can reach those goals, how we can address those KPIs, and we’re working very hard with our amazing biz ops team to get more dashboard statistics reports that will allow our people and the team leaders to forecast how they can move this quarter toward their goal and I think that this is the next step for us, and we are very lucky to have those tools together with us.
Tom: I think, you know, getting to your targets or, you know, even exceeding your KPIs and going the fastest route towards improving the KPI it matters and for me to kind of, you know, put more practical sense into what I’m saying here, KPIs are great, setting them is an amazing kind of first action to take as a CS leader, but working on supporting processes and defining them for the CSM is a super important tool as well that shouldn’t be neglected.
Darya: Yeah, it’s something that I think I’m taking from this conversation is, you know, having that, you know, the guiding light, as you said, that main KPIs, but also looking every quarter and understanding what is, what are the behaviors we want to drive in the team and setting more additional KPIs to do that. I think I just now understand how you can actually, you know, create an entire focus for the team, while, you know, maintaining individual KPIs by doing that. So just before we end, I want to remind our listeners that Nir and Tom will be available to answer questions in our Facebook group; we have an Israeli one and a global one, so if you have any questions you can ask them in our Facebook group or our website. And that’s it. Thank you, Tom.
Tom: Thank you, Darya.
Darya: Thank you, Nir.
Nir: Thank you. Thank you for having me.
Darya: Thank you for listening. Bye.