- Variable compensation based on goal overachievement motivates CSMs and is sustainable for the business
- Bonuses tied to retention can motivate CS teams to be even more involved in customer-focused work
- Knowing your performance numbers and finances helps you understand whether applying variable compensation fits your business
- Capping variable compensation helps keep things predictable
Tell us a bit about your role and your company?
As the Director of Revenue Operations at Greenhouse, I focus on post-sales revenue operations and customer-facing groups. I manage operation teams for professional services, customer success, and support.
Greenhouse is the hiring software company. More than an applicant tracking system (ATS), we help businesses be great at hiring through our powerful philosophy, complete suite of software and services, and large partner ecosystem – so businesses can hire for what’s next.
How does Greenhouse handle compensation models for Customer Success?
For a bit of context, I’ve seen two main customer success models. Either CSMs are managing a book of business and then have a counterpart who handles renewals, upsells, and expansion, or they are responsible for both revenue and the relationship.
At Greenhouse, it’s two separate roles. Our CSMs are not directly responsible for revenue, the account management team owns renewal and expansion. Our account management team has always been compensated based on retention, but it was a new idea to bring variable compensation to our CS team.
Prior to the big change in 2021, our CS team had a base salary and a company variable component. This is a relatively typical compensation breakdown for non-revenue-based CS orgs, but we really wanted to elevate that.
We built an additional variable component, which was on top of our CSM’s base compensation. This was a way to ensure we were attracting top talent for our CS team. So overall, we have base compensation, the company variable, and then a team variable component that is a bonus on top of previous salary packages.
What sort of targets or KPIs are influencing your calculations for variable compensation?
We started really simple since our CSMs aren’t managing a book of renewals. We started with team goals. It’s either everyone achieves it to some degree, or no one achieves it. The whole department has that shared goal around dollar-based net expansion. It’s a very straightforward attainment, and that helped build the business case for adding it as part of our variable compensation. It’s purely based on overachievement of our company goals – pure profits that we’re pulling from for the variable component.
How much experimentation did you have to do before finalizing the specifics of the compensation structure?
We did a lot of experimentation on the ops side. Basically, we ran a few different models to make sure that we were correctly budgeting for the levels of overachievement we had – and we had to ask the right questions. At what point past exceeding the goal should we start paying out? Where do we cap it to ensure it’s a great incentive, but also predictable? Once we had a good idea of some options that would work, we did a session with a few CSMs to get their feedback and reactions before finalizing.
What drove the decision to move to variable CSM compensation?
There were a few things that drove this decision.
1. Despite them not being directly responsible for revenue, our CSMs have a very close partnership with the account management team. They’re constantly teeing up opportunities and partnering consultatively with a customer. CSMs have a ton of work and impact on expansion.
2. We really want to attract top talent and this was a great way for us to build a much more competitive compensation package. It attracts CSMs and since it’s based on profits, it’s still sustainable for the business.
3. It’s a motivating factor for collaboration within our organization. We’re able to change behavior and incentivize our team to stay closer to business performance than they otherwise would be when they just had base compensation.
What kind of effect has this had on team morale?
Really positive! We’re doing quarterly engagement surveys, which ask if employees see themselves staying at Greenhouse long term. We have incredibly high engagement, and it’s still going up. We received a lot of direct feedback, and the variable component is a large part of that.
How long did it take Greenhouse to roll out variable compensation?
Less than six months from idea to execution. That’s because we have an executive leadership team who are very open to change and new ideas. We were able to identify this as a potential gap we wanted to close. We started to build the case, and then had it approved by the end of Q4 so we could actually roll it out and announce it to the team Q1 of 2021.
If an organization wants to adopt variable compensation, what’s the first thing they should do?
I think the first step is actually looking at your business performance and collaborating with the finance team to understand what sort of flexibility you have around compensation. When you know how your business is performing, it’s much easier to consider a variable component on top of what you’re already paying out – especially if it’s based purely on overachievement of goals – because there’s very little risk from a business perspective.
If you are not in a position where your business is consistently outperforming goals, it will definitely be harder to make the case.
Greenhouse Software is the fastest-growing provider of enterprise talent acquisition software. Thousands of the smartest and most successful companies like Cisco Meraki, Time Inc., and Airbnb use Greenhouse’s intelligent guidance to design and automate all aspects of hiring throughout their organizations, helping them compete and win for top talent. Greenhouse has won numerous awards including #1 Best Place to Work by Glassdoor, Forbes Cloud 100, and Talent Acquisition FrontRunner leader by Software Advice. To learn more, visit greenhouse.io.