#17: Should CSMs Be Accountable For NRR?

There is no question that NRR is the north star metric of Customer Success.

Investors and executives love it because it shows growth sustainability and resilience. CS leaders are passionate about it because it's the first metric to truly capture CS's impact on revenue.

The only people that don't seem to like NRR are the CSMs.

They feel like it's an unfair metric because too many things influence a customer's desire to stay and their ability to grow. It's out of their control.

The result is that CS organisations often end up measuring the team on NRR and the individual CSM on activity metrics. But that can lead to a whole different set of issues. Especially when these activity metrics are gamified. 

The question is: Should CSMs be accountable for NRR?

My answer is Yes.

As long as a CSM has its own book of business, they should be measured in NRR and here are 3 reasons why.

1️⃣ Results > Processes

If you have a well-oiled machine, and a process you know is correlated to high NRR, CSMs should absolutely start there. But as people find better and more effective ways to get to the desirable result, you should embrace and celebrate this.

2️⃣ Accountability for the growth and retention of customers

Arguably, every results metric is too broad to be owned by any one individual. For example, a sales rep can't control the market, what product builds, the leads that marketing sends to them and so on. Nevertheless, they still own the quota and the result. The message to sales is clear: Net New MRR is your responsibility. It shouldn't be any different for CSMs. 

3️⃣ NRR is the best prioritisation tool for CSMs

When CSMs are measured in NRR, you are helping them sort through their large task list of nice-to-haves and would-be-cool-to-dos by posing a simple question: Is this driving meaningful value for our customers?

If it's not, then it's out of the task list. 

For these reasons, NRR is the best-lagging metric we have for CSMs today. 

It's really important to also point out that this should be the only metric used to evaluate CSM's performance. As this is a lagging metric, the behaviours of today can take 12 months to show up in NRR. So you will always need leading and lagging indicators. 

What shouldn't NRR be used for?

Finger pointing.

When sales aren't hitting their targets, we look at the entire funnel to find places to drive improvements. Are we creating enough leads? Are those leads high-quality? Are there key objections we can't overcome due to product features we don't have?

All of these influencing factors are taken into account when sales performance is being analysed. 

It's no different for NRR. If the number isn't where it needs to be, you need to do a deep dive into the influencing factors (eg. usage, adoption, outcomes, churn reasons etc), before jumping into performance management with any individual CSM. 

That's it for today! 

See you next Friday