In this webinar, Irina Cismas, CMO of Custify, sat down with Mikael Blaisdell, Executive Director at the Customer Success Association, and Ed Powers, Principal Consultant at Service Excellence Partners, to discuss the essentials of capacity planning for Customer Success teams.
The experts shared their strategies for scaling CS teams effectively, ensuring resources are allocated efficiently, and balancing workloads to drive business success.
Read on to discover:
- Biggest CS Capacity Planning Challenges & Solutions – What’s holding CS teams back and how to fix it.
- Top-Down vs. Bottom-Up Planning – Finding the right balance for realistic staffing.
- Optimizing Customer Segmentation – Why tiering accounts is key to resource allocation.
- Spotting Overloaded CSMs – How to identify when CSM workloads are maxed out.
- Leveraging AI & Automation – How technology streamlines CS operations at scale.
- Proving CS ROI to Leadership – Data-backed strategies to secure buy-in.
Summary Points:
In this session, we explored how Customer Success teams can efficiently manage resources, align with business priorities, and scale effectively.
Key takeaways include:
- Scaling Smarter, Not Harder: CS teams are under increasing pressure to do more with less. Effective capacity planning is essential to align workloads with both customer needs and business objectives without overloading teams.
- Top-Down vs. Bottom-Up Planning: Capacity planning should combine a top-down approach (driven by business forecasts and financial targets) with a bottom-up analysis (based on actual workloads, customer needs, and CS team feedback). Reconciling both ensures realistic staffing levels.
- Customer Segmentation & Resource Allocation: Not all accounts require the same level of engagement. Companies should categorize accounts into high-touch, low-touch, and tech-touch segments and allocate CS resources accordingly. This prevents spreading resources too thin across all customers.
- CSM Workload Management: Tracking the time spent on different customer interactions helps determine optimal CSM capacity. Utilizing Customer Success Platforms (CSPs) like Custify can help visualize workloads and prevent burnout.
- Aligning CS with Business Goals: Capacity planning isn’t just about managing headcount; it’s about ensuring CS drives measurable business impact. Companies should evaluate Net Revenue Retention (NRR), expansion revenue, and churn reduction to justify CS investment.
- Addressing Overloaded CS Teams: A common pitfall is CSMs taking on too much support work. To optimize efficiency, companies should clearly delineate responsibilities between CS and Support teams, ensuring CSMs focus on strategic customer engagement.
Podcast transcript
Intro
Irina 0:02
Hello everyone, welcome. I’m super excited to have you all here today. I’m Irina Cismas, CMO at Custify and I’ll be your host for this session.
I have to apologize in advance for the voice that I have. It’s not the real one, I just had a terrible flu and basically I lost my voice in the last two weeks. That’s the best I can do today.
But today is not about my voice, today is about the CS teams that are under pressure, I would say more than ever. It feels like we need to do more with less and we are all trying to figure it out, to figure out how to scale efficiently without burning out our teams. And that’s where capacity planning comes in.
It’s not just about juggling resources, it’s about working into a leadership meeting with confidence. Knowing that your team workload aligns with both customer needs and business priorities. And honestly, for me capacity planning is one of those super technical CS topics.
So I knew we needed the right people to break it down. And that’s why I brought in today, Mikael Blaisdell, Executive Director at the Customer Success Association and Ed Powers, Principal Consultant at Service Excellence Partners. Mikael, Ed, thank you both for being here and for spending an hour helping us make sense of capacity planning models.
Mikael 1:38
Great to be here. Yep, one of our favorite topics.
Irina 1:43
And at Custify, we spend a lot of time working with CS teams that are navigating this exact challenge, figuring it out, how to structure efforts, prioritize accounts and make sure that CS teams are scaling in a way that it actually makes sense. It’s something that we see day in and day out. So I’m really looking forward to today’s conversation.
And before we dive in, I have to address, like always, a few housekeeping items for everyone. This event is being recorded and you will receive a copy afterwards. It’s the number one question that I always receive prior to.
So no worries if you couldn’t attend live. We do appreciate the ones that are joining us. More than 70 people are with us today.
We really value your participation. So please feel free to ask questions using the question tab chat function. We’ll try to answer them throughout the session if they make sense in the context of the discussion or during the Q&A at the end.
And we’ve got a packed agenda and only one hour. So I would say skip the plot and dive right in. And I’m gonna start with you, Ed, because I know that you prepared a six-step process for customer success capacity planning.
And I want to basically give you the stage to dive directly into the topic.
Customer success capacity planning process
Ed 3:09
Yeah, well, thank you, Irina. And it’s good to be with you and your audience today. Yeah, Mikael and I know each other for years.
We’ve been working together, I think probably 10 or 11 years now, something like that.
Mikael 3:22
Yeah, I think so.
Ed 3:24
Yeah, so we go way back. And part of the work that I do is I have been an executive customer success VP on a few occasions. I’ve also been doing a lot of consulting over the last dozen years.
So what I’m gonna share with you is kind of my approach, what’s worked for me, the six-step approach for planning customer success operations. My friend Mikael here is gonna then talk about a little different way of doing it. In support, it’s kind of a different animal because we’re dealing with queues and things like that.
So capacity management looks a little bit different. So I’m gonna take the stage first and then my friend Mikael will jump in. So I wanna share with you what’s worked for me and what works for my clients when I go down this path.
And we pick my screen here and here we go. Okay, so these are six steps that I use, that I’ve used very well for capacity planning. And how this works typically is that it’s a combination of top-down and bottom-up, right?
The top-down, the C-levels, the CFO, they’re looking at their pro forma financials, they’re projecting into the future, they’re looking at managing their costs. So they start from that perspective, but we in operations, right, we’re running a function, we need to make sure that that’s realistic, right? So it’s usually this combination of top-down and bottom-up.
And we’ll talk through this a little bit as we go and I’ll share an example. So the first step and very important is to tier the account base. And we’ll talk a little bit more about that in a minute here.
The next is to do a top-down capacity estimate, right? Just taking from the top line, roll it down, see what happens. Third is really important, you wanna map your journey and understand what does this engagement process entail and get some estimates of that.
That’s the time and resources involved, that’s step number four, let’s put some numbers on that. Number five is do a bottom-up capacity estimate, right? And then we reconcile the two.
And what I found most times is that it’s a little bit of both, a little bit of column A, a little bit of column B and you find your answer matching those two together. Mikael, I know you work with a lot of different customer success organizations. Is this kind of similar to what you do?
Mikael 5:55
Oh, absolutely. But, and each new manager of a customer success group that starts out, the CEO gives them the magic wand and says, here, go create our customer success group. We’ll face this.
Now, you may face it early or you may face it later but you are going to face this. This is something that cannot be avoided. But really before that, there’s a foundational thing that you need to have a conversation with the C-suite of your company about.
And that is any powerful, complex product is going to require the customer to make an investment in learning if they’re going to get the benefit, the productivity and the profitability benefits. So that’s not an option for you. You are going to help your customers use the product.
The only question is where and how you’re going to do that help. Now, if you do it early at the point of product design, you have less money to pay for it but you can be much more effective. And if you wait until later till we get to education and onboarding and then the customer success group and finally the customer support group, the later along that line that you address this issue of that learning burden, the more you have to spend and the longer you have to spend it.
But the bedrock reality is for everybody is you are going to spend money on this.
Ed 7:25
That’s a great point. That’s a great point. And the fact that you need to think about it well in advance and design it in is really critical especially at scale.
So let’s talk about this first one here. Tier your account base. One of the things that happens kind of naturally and maybe I’d love to get your perspective, Mikael is when companies first start out, a startup kind of a company, people, customer success leaders wanna be egalitarian.
We wanna give everybody the exact same experience no matter what, right? We’re gonna spread the peanut butter where everybody’s treated the same way. Everybody gets white glove service, right?
And then eventually people start to recognize that doesn’t make a whole lot of sense because you notice that not all accounts are created equal. You have a small set of accounts that buy a whole lot from you, very high ARR and you’ve got a very large number of accounts that buy just a little. And then maybe you have some that are kind of in between.
So Pareto’s principle always wins here. And eventually everybody kind of starts to understand that. What’s been your experience on that, Mikael?
Capacity planning for startups
Mikael 8:44
Well, when you come into a startup as a new brand new customer success group, you may only have a handful of customers. And there’s a couple of things about that. You don’t know what you’re doing with them.
You don’t have a set procedure that says at this phase of the customer journey, you do these specific actions. You’re inventing it as you go along on the fly, flying by the seat of your pants as the pilots would say. But again, as time goes on and you get more customers sooner or later, you do discover the workload’s getting pretty heavy.
And that’s when you have to say, okay, we can’t really provide the same level of service to everybody. So we have to pick the ones that make the most sense and focus on them. And what I say, people call this tiers of customers.
I tend to prefer the Horton Business School term of portfolios. So that you know how much that portfolio of customers is worth to you. And therefore how much money you can spend on managing it and what services you have to provide.
So yeah, it’s an absolutely vital step as your customer success group starts to mature. You’ve got to work with those tiers of those portfolios and you have to treat them accordingly.
Ed 10:02
Exactly, exactly. Well, let me run through a quick example just to kind of illustrate how this works. And we’ll stop and hopefully you’re starting to collect some questions, Irina, as we go.
So let me start with this top-down example as we talked about, spreading the peanut butter. What does spreading the peanut butter look like, right? Just do a top-down flow.
Let’s say you’re a $20 million company, right? And you have 2,350 accounts. Well, if you divide 2,350, sorry, 20 million divided by 2,350, you get about $8,500 an account on average, right?
That’s just simple division. And let’s say we’re spreading the peanut butter. Everybody, we have one tier here.
Everybody gets exactly the same level of service regardless of who they are. Well, I’m gonna use this number over here and I know my friend Mikael here cringes when we use this number. This is from Jason Lemkin, who’s widely known in, you know, Saastr.
He’s a big, well-known name in customers or in the SaaS business. And he uses this 2 million per head number. Now, it’s not ever 2 million a head.
It’s kind of in the ballpark. And Mikael, I know this annoys you because this number is really all over the map and there’s no one correct number. You know, it varies depending upon the organization, but as a starting point, we’re just gonna try to use this and see what happens.
And correct me if I’m wrong on this one, Mikael, but let’s say we, go ahead.
Assigning CSMs by ARR
Mikael 11:44
You know, the $2 million number, you know, the basic concept is you were assigning CSMs by ARR, whatever that number is for you. You know, it might be 1 million, it might be 100,000, who knows. That’s why it’s all over the map.
But that’s the, what I call the Lemkin fallacy is you’re picking a number out of the air and saying, ah, well, one CSM should be able to handle that. You don’t know that because you haven’t got the data and you can’t do science without reliable data. Back to you.
Ed 12:15
Great point, great point. So let’s just, for sake of argument, because CFOs may have heard this number and many of them do, they kind of have this in their heads. So with a CFO, if we say it’s 2 million per resource or per head, if we take 20 million divided by 2 million, obviously that’s 10, right?
So we are justified, we are entitled to 10 CSMs, right? But if we do this math, right? 2350 divided by 10 CSMs, that’s 235 accounts per CSM.
How is that even practical? Well, the answer is it’s not, right? So let’s tier it, right?
What does tiering look like? And this is just an example, but we take that same 20 million and we spread it out. These all total the same.
I haven’t done anything to the numbers, but I’ve just kind of clumped them out. And in this first tier, which I’ll call high touch or portfolio, if you prefer that, Mikael. In this example, 50 accounts make up half the revenue.
They’re doing 200,000 each, 50 accounts. That’s half your total revenue is 50 accounts. And that’s fairly typical when you start to see Pareto’s principle, right?
Something around there. Well, over here, on the other hand, the tech Dutch accounts on the other end of the stream, you got $4 million is contributed by 2000 accounts or about $2,000 per account. And that’s 20%, right?
So if we just take these numbers and flow them down and say, well, you know, let’s think about this a little bit differently. If we take that same 2 million against that 10 million, well, that’s five resources, right? Divide this 50 accounts by five resources, that’s 10 accounts.
Well, I can manage 10 accounts, right? And maybe I can do more with them than I can with 235. On the other hand over here, okay, we’re gonna deal with them differently at scale.
We’re gonna do more tech touch automation and so forth. And you’ll notice over here, I have number of CSMs or equivalent dollars. These do not have to be headcount, right?
This could be a CSOps person and a bucket of money that they’re gonna spend on automation. And then this light touch group could be maybe two people in their own budget, right? So now we’re doing some things in light touch, one to many, we’ll do more webinars, we’ll do some community, we’ll be opportunistic.
Here, we got three people handling 100 accounts. We’re not gonna deal with all of them the same way, but we can be selective, we can be opportunistic. Wow, these accounts look like they’re going somewhere.
I’ll spend some time with them and deal with the other ones in cohorts. That’s a way to do that, right? But now we’re getting a whole lot more efficient because now we’re starting to put our resources against where the opportunities are, right?
So this also provides us some very handy financial guidelines. Let’s say, again, these are our revenue buckets, right? And we say, you know what?
If I assign a smaller number of CSM or smaller number of accounts to my CSMs and they’re bigger accounts, hey, guess what? I think I can grow them a little bit more. I’m gonna produce 107% error, I think I can.
Either I have evidence that shows I can or I have really good intuition, I believe I can, and I can make a credible argument for that. I focus my CSMs, and I’m actually gonna grow those accounts a bit, 107% NRR with customer success there. I’m also gonna make the counter argument of, let’s say we strike out customer success altogether and we don’t exist.
What would it be without us? 95%, right? That’s my assertion.
I may have some evidence on that, who knows? But let’s see what happens now. We take 10 million times 107%.
That’s 10.7 million NRR with CS versus 9.5 million without. The difference between those two is $1.2 million. That’s just a simple subtraction.
Now I pull out my fully loaded CSM costs. I got five CSMs, that’s 600 grand a year. What’s my net?
Well, my net or my margin contribution, how much cash I’m putting back into the business, $600,000. Not bad, not bad. Now we can do the same thing in these other categories and we can start to move the levers and say, well, okay, how would this pencil out?
What are my assumptions about net recurring with and without? What are my costs? And over here, got a little problem, I’m underwater.
That could be something by choice, or that could be just something by circumstances. But I have some wins, some losses, but on average, how do I turn out over here? What’s my net, net, net at the end of the day?
If I’m putting $620,000 back in the business for a fully loaded cost of 1.2, very nice return on investment here. That’s 52%. As an investor, I’ll take a 52% return all day long.
So this is really good. But because we have these parameters, now we can move the levers up and down. We can look at our cost to serve.
We can figure out what’s a good way of doing this and how do I get these kinds of numbers? Now I have some guidelines to work with, right? So what do we do next?
Well, we’re still just flowing everything down. What about the bottom up? Best way to do that is to understand, back to our six-step process, what is my customer journey?
And surprisingly, the customer journey is fairly consistent regardless of tier or portfolio. But as you talk about tech touch versus high touch, there’s gonna be differences in how you do that as Mikael said, right? So the how is important.
So here we get into, and this is an example of high touch. You got all these people involved in this high touch tier, everyone playing different roles, right? And we’re executing our process as we go through here.
What do we do with that? Well, we get some estimates, right? We collect all of those tasks for those CSMs. We write them all out in a spreadsheet and then we start to put in some estimates. And when Mikael talks here in a couple of minutes, I think he’s gonna agree that in a support environment, you can observe this. You can actually measure it, right? You can see how long it takes for people to manage and to handle calls and chats and things like that.
You can directly measure. In customer success, a little bit more difficult to observe that. But what I found is that if you ask a sampling of different people, hey, what’s your estimate, high, medium, low?
How long does this typically take you? And you ask multiple people, you get a pretty good estimate if you average all of their responses. It’s the crowds coming back.
Real workload vs ineffective work
Irina 19:21
I wanna ask you about this. How do you differentiate between a real workload versus work that exists because of inefficiency? How can you realize, or how can you make this difference?
And then I wanna address two questions from the audience and start commenting on those.
Ed 19:44
Absolutely, yeah. And I’m just about done with this example and I’ll pick up on the one thing about inefficiency next. Okay, what we’re doing right now, again, we’re just trying to get on the ballpark with our estimates.
We’re not necessarily looking to change anything. We’re just trying to figure out how do I allocate my money and resources optimally at this point. To your point, when we start to dig into the inefficiencies, now we’re talking about productivity and quality improvement.
That’s a powerful next direction. Now, if we go through and we ask for these estimates, what do we do? Now, this goes back to a little bit of what you had asked, Irina, is what are our assumptions here?
How much time do we have here? Annual hours, 1,920. If you take 40 hours a week times 52 weeks, it’s 2,080, but people don’t work on Christmas and New Year’s, right?
So we start to subtract out company holidays, vacations, things like that. In this example, it comes out to be about 1,920 hours. We can’t invent more time.
That’s how much time we got here, right? So we have 1,920 hours. Now we have utilization, which kind of goes to your point, Irina, is how much of that time am I actually spending interacting and serving my customers, right?
This says that 30% of my time is doing something other than that, right? I’m using, I’m doing company, I have team meetings, I got trainings, I got company-wide, whatever. I got events.
So maybe 30% is not utilized, right? 70% is. 70% times 1,920, 1,344.
That’s what I got to work with, total hours in a year. We add in our churn estimates. What do we do?
We tally this all up. We sum it all up. Total labor per account per year.
We’re just doing some arithmetic here. We add it all up. We adjust for the churn because you’re going to have some accounts that are leaving and some accounts that are coming in.
So you got to make sure this percentage is in the mix, right? And then you just, you back into an FTE. If I take 1,344, divide it by 113 hours per account for high touch in the high touch group, that’s 12.
I said before 10, I can really probably do 12. So what’s the answer? Well, somewhere between 10 and 12 is probably about right, right?
So my loading should be for a high touch area, somewhere between 10 and 12. Now, it doesn’t mean it’s exactly 10 or exactly 12. You’re going to be a little bit more, a little bit less.
That’s where some judgment comes in. Wow, this account is taking a whole lot of time. Not so much for this other one.
When I do my loading as a manager, you want to make sure everybody’s roughly equally loaded and you might move some things around a little bit, right? But that’s the approach. I’ll stop there.
Capacity planning without historical data
Irina 22:40
Yeah, I want to start addressing some questions. So I have a question on chat from Anna. How do you make this with or without CS analysis if you don’t have the data from previous years? The company due to data tracking issues and CS is now the one cleaning it up with churn tracking.
Mikael 23:09
Right. You did get into that. If you’re starting out, you don’t have data.
So your first challenge is you’re going to have to collect it because, and look, if you’ve been doing the job, then you generally know what your customers need and what you’re doing. That’s fine. I’ll trust your hunches, but your CFO won’t.
They’re going to want some hard data and you don’t have any. So you start collecting it. You start testing assumptions.
You build your data set and modifies as you need to.
Ed 23:45
Yeah, that’s a great point. And I think you’re touching a little bit and that question had to do with, there’s a tremendous amount of stuff that rolls downhill to a CSM. Things are broken upstream and guess who has to fix it downstream because that’s the person dealing with all those customer issues.
It is possible to go through as you do your mapping. If you’ve mapped out your journey, you can critique what that journey is. Why is it that we have to spend so much time in this one place doing this thing?
Why is that? Oh, because it’s broken up here. Well, if we fix it up there, then we don’t have to deal with it down here.
What are the economics of that? So now you can justify through your analysis, as Mikael said, the financial analysis, you can go back and say, if we spend a buck here, we can avoid spending a hundred bucks down here. Which do we wanna do, CFO?
That sounds like a really good idea. Let’s go fix it there. Yes, let’s go fix it there.
Adjusting capacity planning for onboarding-specific teams
Irina 24:51
I wanna address another question. It seems that they are starting to come in. Georgia is asking, do you have any experience with how you would adjust capacity planning for an onboarding-specific team as the client projects aren’t ongoing like CS?
Ed 25:14
Right, so for onboarding, onboarding is a process, right? So if we close a deal, we’re gonna start doing the onboarding as Mikael said, and we’re gonna get to a point where something good is gonna happen, right? They’re using the product, they’re getting value out of it, whatever that thing is, that is a process.
We can quantify that process in a couple of ways. We can look at time, cost, and quality. Quality being what, so what?
So what we did that process, what are the results that come from it? How effective is that process? How does it move the needle, right?
Versus when we don’t do that process, what does that look like, right? What is the impact on retention and growth? We can measure that, we can quantify that, and we can show that value.
So we have the effectiveness question, and we also have the time and the cost question. We’re making an investment in that process, what’s the return on that investment? So everything that we’re talking about applies to onboarding.
We’re just taking a piece of the customer journey, and we’re looking at that, and absolutely we can figure out what is the capacity that we need, what are the resources that we need? We can back into those numbers and show that return.
Mikael 26:25
It’s actually easier in onboarding to do that, because you probably will have created a statement of work. You’re gonna have a project plan for that onboarding, the steps that you have to go through. So you have your steps identified, and after you’ve done some onboarding, you know about how long each one of those steps is likely to take with a particular kind of customer.
So you have the data. And then of course, as with everything else, it’s where are you gonna spend your resources? How do you justify this?
It happens in communication. You’ve got a lot of different communications that you’re going to do with a customer over the lifetime of that relationship. Where and how?
I mean, for me, talking to clients, my focus is on the money. You know, you always wanna have money conversations, human to human. The other conversations, maybe we can automate them.
Test that, see if it works. Maybe it works with some kinds of customers, doesn’t work with others. But again, it’s analyze, use your data.
If you don’t have your data, start building some and test it.
Capacity planning with a stagnant customer base
Irina 27:32
We have two more questions. And I know that I interrupted the presentation and everything, but I wanna make sure that the audience who is watching us live gets their answers. And just to pick your brain.
So Donato asks, how would you approach this with a company that has a stagnant customer base and without a CS approach? I’m referring, how would you approach capacity planning with a company that has a stagnant customer base and without a CS approach.
Ed 28:04
Well, I would just say this applies no matter what you’re doing, right? If you’re doing professional services or you’re doing sales or account management, things like that. Mikael, I’m hoping we’ll jump in here and talk about support, because that is different.
When we’re talking about queues, we’re talking about service levels, we’re talking about other kinds of things that drive that kind of level of staffing. But if we’re talking about continuous flow kinds of things, everything I just said applies to all functions, not CS.
Mikael 28:33
Yeah, well, let’s talk about support for the sake of the example, because a lot more and more support organizations are being folded into customer success. And this is a good thing. It keeps the two organizations in alignment.
It’s also a risky thing, a dangerous thing, because it’s very easy for CSMs to get involved in support work, and you don’t want that. But let’s focus just on the calculations for the support team. You typically will have the data on the interactions.
You’ve got a case management system where you’ve been recording and tracking all the details of the cases that you’ve been working on. You may have a phone switch if you offer phone support. You may have an email tracker if you take your cases in by email, or if your case channel is through your application, the application will have collected volume.
How many kinds of cases do you get? When do they arrive? How long do they last?
What’s the priority? You’ll have a wealth of data to start to work with. And then the question you have to ask to begin this process is how fast does fast have to be?
If you got a customer with a level one or a priority one support ticket, you need to get on that and solve that quickly. If you have one that’s a low priority, gee, I’m thinking I might like to change this, you know, this switch in the product, that’s a lower priority issue. You still wanna get to it, but it’s a lower priority issue.
So once you know how fast fast has to be, we call this a service level. And in terms of the phone, in going into support again, when you tell me I want to be able to pick up, to address, to start working on, you know, 90% of cases within one minute. Okay, that’s a good service level goal.
So what we do is we run that through a calculator and this calculator actually began life in, up I think in Norway in about 1913, back in the old days when, you remember that the old movies where they ring the phone and say, hello Central, give me long distance? Well, at the other end of that, there’s a bunch of people sitting in a room and they’re pulling plugs and making connections. And the question was, how many people do we need sitting there pulling plugs and making connections in order to meet our service level with our customers?
It’s science. This is where this began. So if you tell me, you give me the service level, you give me the volume, you give me the average handle time and you give me the skillset needed to answer those questions, I’ll plug all that into the calculator and say, okay, at nine o’clock on Monday morning, you need 15 support reps on deck, ready to take cases.
And as happened to me many, many times where the C-suite says, Mikael, you’re out of your mind. We can’t afford 15 support reps. Okay, that’s fine.
Then you can’t have that service level. It’s a seesaw. If you tell me it has to be fast, pull this line down, the staffing level goes up.
If you tell me I can’t afford this and you pull the staffing level down, the service level slows down. It’s science. Now, as we’ve been talking, that you don’t really have that kind of data to do that with customer success.
So Ed’s approach of, and what I’ve used too, is go through, identify all the tasks, get your people to tell you about how long does this take? It’s not as precise as if you’ve collected machine data, but it’s got data. You can work with that and you can adjust it later if it doesn’t quite work, but you have to have the data.
Back to you.
Irina 32:30
Back to you, Ed. We still have one question, but I’m gonna leave it for a later stage. I don’t wanna hijack the whole presentation.
And I know there are more that you guys wanna share. So back to you, Ed, and we’ll do another speech with the questions as they keep coming.
Ed 32:53
Yeah, I mean, that’s pretty much all I wanted to present is kind of that model of think top-down, then do bottom-up, see where they marry in between. And I’m glad Mikael talked about how it’s very different in support because in customer success, you don’t necessarily have very often backlog. You don’t have people waiting in queue, but you do for a support environment, right?
There’s only so many resources. The phone’s ringing, people are waiting on hold or waiting in a chat or whatever. And that staffing level and the service level that goes with it, that’s a choice, right?
In customer success, you work your process, you work your flow, and you say, if this process has value and causes the same result, this is what I need, right?
Mikael 33:40
Well, that raises an issue for us too. How do you look at the utilization of your customer success managers? So how do I know when I’m overloading them?
Well, product like Custify, for example, that tells you, that gives you a dashboard of what all the CSMs are supposed to be doing and their due dates and all of that. And when you notice that a lot of these due dates are not being met, then you wander around to the team and say, what’s the problem here? One of the things you run into is, again, as I alluded to earlier, if your customer success managers are getting involved in support cases, they’re not doing the work that they’re assigned to do.
So when you discover that, and it’s often invisible, you have to go and talk to them and dig into exactly what’s going on, because let’s be honest, if I’m a CSM and I get an important customer in my book that calls me up and says, look, I got a hell of a problem. I can’t get this support case resolved. You think I’m gonna tell that important customer, sorry, not my job.
The CSM wants to talk to that customer. So are they gonna take the opportunity to say, relax, that’s why you have me, I’ll fix this for you. And so they go and they fix it.
The customer’s happy. We have a satisfied, healthy customer. But the CSM at the end of the day looks and says, I was supposed to get four presentations done today and I didn’t get to any of them.
Well, I have to get in earlier tomorrow. And then we start playing games about how long of a day am I going to have? And all of a sudden, what was supposed to be an eight hour day is now kicking towards 12.
That’s not sustainable. You’re burning your.
Ed 35:36
That’s exactly right. That’s spot on, Mikael. One of the things that you triggered me, I thought about, there’s something in psychology called the Yerkes-Dodson law, which is there’s a point of optimal stress.
And it looks like kind of a bell curve. You want people at that optimal stress level. Too much stress and the curve drops off.
They’re not productive anymore. They’re overwhelmed. Too little stress and they’re not engaged enough.
They’re not actually executing at their optimum. So what you want is optimal stress. What you’re looking for is, what are the parameters here?
When do people, when are we actually overloading them? What does the evidence say? It’s very, very hard to say with precision, but you can get a pretty good general idea.
And the challenge for managers is to make sure your people don’t burn out and to take out the non-valuated steps that Mikael was talking about. Hey, don’t worry about doing those five presentations. The most important thing you did today was to serve your largest customer and solve that support issue.
Use judgment, right? Never let policy get in the way of good judgment. As a former boss of mine, a CEO used to say all the time, and he was exactly right.
Your judgment is what drives everything. And when you have these large customers, you know what? They expect a whole lot.
And they’re entitled to that and you are there to serve them. Little guys out here, appreciate the business, thank you. But if you churn, it’s not gonna hurt me as much as my multimillion dollar account.
Mikael 37:18
Yeah, this is why I always start laughing when I come into a situation and I see one of the metrics that is being applied to the CSMs is logo churn. And I tell them, look, you got a hundred logos and you lose one. So you got a 99% retention rate.
Wow, aren’t you, you know, your stats are looking really good. Oh, but except that one that churned, 50% of your company’s incoming revenue. So the ARR is not looking so pretty in that.
Now, I see a question over here about how do we do competitive modeling in ARR? How do we put employee costs into that? Well, yes, this is where, and I get into this with support issues with people too, is they wanna take the number of cases per month, divide by the people that come up with a cost per case.
I said, no, it doesn’t work like that. You have to go a cost per operational minute. You have to have a billing rate for your people so that, you know, if I use resource A, if I have Joe do that, well, I’m paying Joe, pick a number up, $50 an hour.
So I’m spending $50 an hour to have Joe do that. Versus if I have Fred do it, then I’m only paying $10 an hour because he’s less experienced. You see the cost difference there?
I have to pick which resource I’m going to use and assign to this for maximum efficiency and cost effectiveness. I mean, I’m sorry, people don’t really, they don’t like the idea of, oh, well, it’s so technical. You’re being so picky.
I’m sorry, customer success is a science and you cannot do science without data. And if you don’t like that, then maybe your career path ought to go more into counseling and things like that. Because in the business world, we run on money and we have to tie back to that.
Well said.
Big customers, small customers and their issues
Irina 39:21
Ed, you were mentioning at some point and the difference between big customers and the small customers, but in some cases, smaller customers are the ones consuming the most of the resources because they are very needy because they do need a lot of handholding. So how can we solve this? What’s the solution?
Or what are our options, I would say? And how can we adapt when it’s very expensive to serve?
Ed 39:53
That’s where good management comes in, is that you tackle that problem, right? You look at that problem and try to figure out how can I do this, not by throwing a body at it, necessarily an expensive body, like Mikael said, how can I get the same result, but do it in a clever way and make this customer happy without spending a whole lot of money doing it, right? And there’s a lot of options you could do and a lot of options I’ve seen work really well.
Like for example, oh, you spend $2,000 a year with us. If you want our premium level support, we’d be happy to sell it to you. That’s another $1,000 a year, right?
I can provide that and charge some of these smaller accounts for that level of service and support that I do for my premier accounts and I can make money on that, right? How important is that? Pull out your wallet, right?
At the same time, there’s some minimum standard because you need to compete, right? Even on the long tail, you need to compete with other companies. You need to still be able to deliver that where those same customers look at that and say, yeah, they’re still the best option.
That’s where I wanna wind up, right? So this is the challenge of management is not to throw up your hands and say, well, they’re asking for more. Let’s put a body on that.
That is not sustainable, right? So it’s up to good management to go figure that out.
Mikael 41:19
Yes, and when you look at your options, now we can go with an online community, it has to be managed, of course, but we can answer questions and handle some of these needy customers by getting our community involved in that. Like I work with companies on developing an ecosystem of their corporate allies and their partners and their power users and their entire body of the customarium of all the people that are associated with that company. You have lots of options in that.
You may have, okay, if they’re really needy, sell them a training course, get your training department involved in that and let them provide that service at a profitable basis. Or if you’ve got a partner that does training, give the lead off to the partner, let them handle this. There’s ways to deal with it.
You simply have to identify what your resources are and what your options are and put the puzzle together.
AI and its impact on tech touch portfolio accounts
Irina 42:25
We have two or three more questions from the audience that I want to tackle. Donato asks, what is the panel’s view on the current trend in having AI address TechTouch portfolio accounts? Isn’t AI just a delay to having a human work with the customer?
Ed 42:46
Yeah, this is the bright, shiny object that everyone’s paying very close attention to. Now, I will say that there’s some really cool stuff that AI can do, but I don’t think it’s found its niche. You know, it depends upon the problem that you’re trying to solve.
There is no such thing as a magical technology that’s gonna solve all the world’s problems regardless of what you read, right? That’s what you call motivated reasoning. People are out there making a lot of hype, but when it really boils down to solving a particular problem, you need to say, okay, does this technology help me solve this problem, reduce time, reduce costs, improve effectiveness, run it through the Litton’s test?
And there are some examples of that. So, you know, I mean, we’re all using things like, you know, Zoom summaries and things like that can be huge time savers and we’re getting better and better. I mean, I’ve been impressed lately.
We can use AI to do code generation and we can use AI for a lot of different things, but we need to look at that critically and say, does this really help? If it doesn’t, don’t just, you know, don’t just chase the next shiny object.
Mikael 43:56
Yeah, that shiny object thing, there’s lots and lots of hype and, you know, it’s a cure-all. It’s going to solve everything. It will do the dishes.
It will walk the dog. It will do the laundry. Oh, it won’t.
You need to look at how it does it and you need to look especially at your customers. I mean, how many times have you called a company to resolve a service issue, a bill or something rather, and you’ve gotten their intelligent voice response unit on the phone and it gives you a collection of options that have nothing to do with what you need and you’re trying to get to a representative and it keeps sending you around and around in a circle saying, if you just do this, I mean, I called my internet company provider because my internet was down and the phone switch said, did you know that you can solve these problems on our website? Well, that would be great if I could get to the website. How often have you ended up screaming into the phone, representative?
It happens to us all. But if you’re using an AI, there may be nobody to hear that scream from the customer that this isn’t working. So don’t assume it’s going to work.
You’ve got to tailor it to your customers. There’s customers that really like playing with the AI. I have a friend who has long conversations with that word that the Amazon unit use.
I can’t say it because I have one here in my office. But he has long conversations with that thing. Okay, if you’re having fun doing that, have a good time.
But if you’re not having fun, you need to have a way of breaking out of that and talking to a human.
From support to CS and capacity planning
Irina 45:42
We have another question from Andy. My experience with smaller, less mature CS team is they start doing support. So as part of planning, I would then need to make the case for behavior change in my organization.
Any insight into how to communicate the needed changes in roles and responsibilities as part of the capacity planning?
Mikael 46:11
Sure, okay. Yeah, I’ve done this. I mean, the classic example was I did it with a support company, so support operation that I re-engineered to get them.
They were answering calls in about five minutes or so and the balance of them in about 10 minutes. We re-engineered their process and got them down to they got 99% of calls in 60 seconds or less with no additional headcount. But the way we did it is we got small teams together and we said, okay, you analyze your process.
How long does this take? Where are the bottlenecks? What’s going on?
And you propose a solution to it. So you work with them to explain why you’re doing this, what the issues are. It’s a resource problem.
I only have a finite amount of resources. Where am I going to spend them to get the most bang for the buck? The fun thing about that project was is the senior management team said, how can we fix this?
And I walked over to the whiteboard and I drew out the process flow. And I said, see, if you do this, you get to 99% of your calls in 60 seconds or less with no additional headcount. And they said, ooh, cool.
Let’s start this on Monday morning. And I said, nope, because they don’t understand it. It’s not their project.
So we went through a process where we put together small teams. We analyzed what we were doing and why. We did the decisions.
And then I said, I’m sorry, you’re going to have to sell this to senior management. And I already briefed senior management that they’re supposed to be skeptical about this. So in came the teams that did their presentations and said, this will fix us.
We know it, we want to do it. And senior management said, well, if you’re sure, we’ll give it a try for a week or so and see what results produce. And of course it produced the results.
The teams all felt good. Senior management felt good. And the customers felt good at the end of this because everybody involved knew why you were doing this and what you were working with in your resources.
So you have to do that with your staff. If they don’t understand what’s going on, if they don’t buy into how we’re going to fix this, it won’t happen.
Ed 48:29
Yeah, that’s a really good point. And I think I’ve seen exactly the same thing, Mikael. I’ve started down this path with some of my clients on the consulting side.
And we see a disproportionate amount of support going on in customer success. You can’t fix it there. You got to fix it in support.
The best thing for customer success is a really good rock solid customer support organization because if they’re effective and efficient, then that takes the burden off of customer success, right? So like Mikael said, figure out why, why is this happening, right? Start asking some questions, gathering some data and say, where should the fix be?
Oh, it’s over here. It’s not over there, right? So it’s making that case.
Mikael 49:10
Yeah, one of your issues in the support and success area is that when a customer success person works on a case, they usually aren’t putting notes into the case management system detailing what they’ve done and the fact that they did it. So your support database is now a little bit off because it doesn’t have important data that happened outside of it. So now you’re making decisions on incomplete data.
But yes, the two, if you know why, I mean, if they’re working hand in glove, the support people know when to bring in the success people when it moves into becoming a success answer, which is support is good. How does this work? If it breaks, I’ll fix it.
Success is how do I use this tool to increase my profitability and my productivity? So you do a handoff about, you need to talk to our product, our business expert, our advisor over here, your customer success manager, because that’s where they specialize in. And you’d gracefully hand it off and go back to what else you’re doing.
Different ways to capacity plan your CSMs
Irina 50:19
We have another question from Sabrina. In the context of a company where the revenue depends on the engagement of the customer with your platform, business travel tool, charges occur when customers book more. Would you evaluate the need for a dedicated CSM differently, not so much on ARR related?
Ed 50:43
So this is a consumption, not a subscription is what I’m hearing. So, yeah, like it’s an e-commerce kind of a thing where you’re buying, yeah. Yeah, I mean, customer success is kind of a broad term.
What does that mean? What does that mean in this business versus what does it mean in a subscription business? It may mean something totally different, right?
And you may not put a resource on that. If you’re doing that at high volume, someone’s ordering it online and consuming something. What makes them successful from the consumption that they get?
What are those other factors? One of the things that I really work with, with my clients is trying to understand what does this look like from the customer’s perspective? You know what it looks like from your perspective, but let’s try to see it through their eyes.
What are they really trying to do here? What are they trying to get from this? What do they expect?
What’s working well? What’s not working well? And almost always we’re missing things.
Almost always there’s some additional help, some additional service, some additional value that we can add that we’re completely unaware of because we look at it from our perspective, not the customer’s perspective. So what I would recommend is go figure out why are they buying this? Why are they consuming?
What are the challenges with that? What are they trying to accomplish at the end of the day? And how can you facilitate that?
Mikael 52:07
Yeah, I see another question here about one of our thoughts on CSM’s owning up sales. My approach is, and I mean, there was this, at one of the earliest meetings of the Customer Success Association in San Francisco, this is, and we’re talking 2012. And somebody asked, well, should we be involved with money?
And I said, yes, because in any organization, any organizational life, power follows money. If you’re not necessarily connected to strategically significant amounts of revenue, you will always have less clout than those who do. So my perspective is, yes, the sales guy sells and gets the contract signed.
Everything after that belongs to customer success management. Now, that’s gonna vary from company to company. But by and large, the model that Edge started out showing you where the manager of customer success was walking in to talk to the CFO saying, $650,000 is 62% profit.
You know, not bad, eh? You need to have those conversations.
Ed 53:24
Right, and it doesn’t mean that customer success should be quota-carrying salespeople. That is not required, right? Everything that we’re talking about here is what’s the difference with or without.
If you can demonstrate in the data with evidence, look, we increase the odds that a customer is going to renew by a factor of five and a half times because we did this versus when we didn’t do it. Well, that is real money. If you can demonstrate that without doing quotas and commissions, great, right?
If your business, like Mikael said, you can do some upgrades, you can do some things that are commercially tied, maybe you can identify a lead and hand it off, all of that’s value added. But we don’t necessarily have to make everyone a quota-carrying salesperson. That is not always required, yet that’s what’s easy.
And that’s what a lot of companies are doing is like, let’s just put them on quota and commission and see what happens. Well, guess what? They’re gonna focus on their monthly number.
They’re not gonna focus on the job of helping customers achieve value.
Mikael 54:27
Yeah, you get what you motivate people for. And if you reward them for doing certain behaviors, that’s what you’ll get. I noticed there’s a lot of questions that people, and I’m sure there’s more that they want to ask.
If we don’t get to them, then join us in the Customer Success Forum on LinkedIn and we’ll handle them there. Or shoot me or add an email and it’s better to do it on the forum because then everybody could get a look at the answer. But I’ll be glad to continue to talk to you after this.
Signals that show you need to change your capacity planning
Irina 55:01
I have one more question before we end this conversation because we only have four minutes and I wanna be mindful with your time and with our audience time. I wanna ask you, what’s the signal that the capacity model needs to change? Is it driven by team feedback, business growth or financial pressure?
How do we know it’s time to adjust?
Mikael 55:26
I would say yes. What I would look at is, again, I would look at my dashboard in my Customer Success Platform and see how the adherence of my CSM there and their objectives. If they’re doing their customer value reviews, I hate the word QBR, quarterly business review.
It’s a value review. If they’re not getting those done, then you go have a chat with them. Why isn’t this getting done?
Why is there a consistent delay in these? And if they look back at you and say, okay, here’s what I have to do. Which would you prefer that I do?
Because I only got this amount of time per day and I’m not gonna work 24 hours a day. So you have to keep your eye on the signals from a variety of sources.
Ed 56:25
And I would just add, it’s all about what is the pain that you’re experiencing, right? And you can ask the question, what if we don’t do this? What if we just stay on plan and we just continue to do this?
Well, our people are going to burn out. They’re gonna leave our customers unsatisfied. The company will not be profitable.
Do you want that outcome? Or do you wanna look at the problem a little bit differently, right? So I would say, the pain will indicate what you need to do.
Company’s not profitable. Customer’s leaving, people burning out. We got a problem.
Yeah.
Irina 57:04
So indeed, we could easily keep this conversation going for most probably another hour and we should continue discussing about this topic. But I think it’s time to, okay, wrap it up. And I wanna thank you both to Ed and Mikael for sharing your expertise and breaking down the capacity planning in a very practical way.
I saw messages on LinkedIn. Our audience wants to also receive the slides and have the chat. So we’ll share this as well.
And of course, big thank you to everyone who joined us live and start asking those questions that kept this session interactive. There’s one takeaway, at least from my side, is that capacity, that scaling CS isn’t just about working harder. It’s also about working smarter.
And that’s exactly why at Custify, we help CS teams manage capacity, automate workflows and focus their efforts where it truly matters. Whether this is breaking the cost to serve, improving segmentation, making sure your team is spending time on the right customers. That’s where we come in.
That is for today. Thanks everyone. And see you next time.
Once again, thank you, Ed, Mikael and for everyone who joined us live today.
Mikael 58:40
Right. It was fun.
Irina 58:42
Let’s do it again. For sure. Keep in touch guys.
