Beyond the First Sale: How to Design Comp Plans for Account Managers & CSMs
The CFO's Calculus:
Acquiring a new dollar of revenue costs $1.00+. Retaining an existing dollar costs $0.10. Your CSM compensation plan isn't just an expense; it's the primary driver of your company's valuation.
This is Part 3 of our "Plan Design Series." Read Part 1 on AE Plans and Part 2 on SDR Plans.
Most companies treat Customer Success Managers (CSMs) like "Support Reps with a Quota." They give them a high base salary and a tiny, vague bonus based on "customer happiness."
This is a mistake.
In a subscription business, Net Revenue Retention (NRR) is the single most important metric. If your NRR is above 120%, you are a rocket ship. If it's below 90%, you are a leaky bucket.
You need a compensation plan that aligns your "Farmers" with financial health. Here is the framework.
Step 1: Define the Role (AM vs. CSM)
Before you set the numbers, define the motion.
- Account Manager (AM): A commercial role focused on Growth. They carry a quota for Upsells and Cross-sells.
- Customer Success Manager (CSM): A relational role focused on Health. They carry a target for Retention and Adoption.
The Pay Mix: Farmers need more stability than Hunters (AEs).
- AM Pay Mix: 60/40 or 65/35. (They still need to hunt in the existing base).
- CSM Pay Mix: 75/25 or 80/20. (They need to be trusted advisors, not just coin-operated salespeople).
Step 2: The "Two-Engine" Variable Model
The best CSM plans split the Variable Compensation into two distinct engines.
Engine 1: The Retention Bonus (Defense)
- Weight: 60-75% of Variable.
- Metric: Gross Revenue Retention (GRR) or Logo Retention.
- Structure: The Cliff.
- Do not pay linearly from 0%.
- Pay 0% if retention is below 85% (the floor).
- Pay 100% if retention hits 95% (the target).
- This protects the company from paying for mediocrity.
Engine 2: The Expansion Commission (Offense)
- Weight: 25-40% of Variable.
- Metric: Expansion ARR (Upsells/Cross-sells).
- Structure: Flat Rate or Accelerator.
- Pay a flat % (e.g., 5-8%) on every expansion dollar.
- This turns every support call into a potential revenue opportunity.
Step 3: NRR is the North Star
For mature teams, you can combine Defense and Offense into a single metric: Net Revenue Retention (NRR).
NRR measures the total value of the cohort over time.
- Starting ARR: $1M.
- Churn: -$50k.
- Expansion: +$150k.
- Ending ARR: $1.1M (110% NRR).
If you tie the CSM's entire variable comp to NRR, you align them perfectly with the CFO. They will naturally fight churn and hunt for expansion because both drive their number up.
Frequently Asked Questions (FAQ)
Should CSMs get commission on renewals?
Generally, no. Renewals should be the expected baseline (The "Defense" Engine). Paying a % commission on flat renewals eats into your margins. Instead, pay a Quarterly Bonus for hitting a Retention Target (e.g., 95%). Only pay commission on Growth (Expansion).
What if the product breaks and customers churn?
This is the "Uncontrollable Churn" debate. To protect morale, you can exclude certain "House Churn" events (e.g., product sunsetting, M&A) from the rep's calculation. However, keep this list short, or you dilute accountability.
How do we split expansion between AE and CSM?
If an AE is brought in to close a complex upsell, you can do a Double Comp (pay both) or a Split (50/50). While Double Comp sounds expensive, it encourages collaboration. Fighting over "who owns the deal" kills revenue faster than paying an extra 5%.
Related Reading
Model Retention vs. Expansion
How much should you weight Retention? What happens to the payout if NRR hits 110%?
Use our free Plan Design Wizard to adjust the sliders between "Defense" and "Offense" and see the impact on your CSM's earnings.
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