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The AC in my Tesla went out a few weeks ago.
This is my fifth Tesla and the first time I’ve had to take one to the dealer for a repair, so I wasn’t too upset. Then I found out the first appointment I could get was four weeks away. In Texas, four weeks with an AC that only works when it feels like it isn’t a fun prospect.
When the day finally came, I dropped the car off and picked it up that evening. They had worked on the AC, but it still quit working on the way home. Aaargh. Now I was frustrated, disappointed, and looking at another four-week wait.
It’s not like I needed my Tesla to fly. I just needed cool air.
I completed the customer survey form they emailed me, but I didn’t think it would matter.
I was wrong. Today, I got an unsolicited call from a rep who scheduled a new service visit in just a few days. Now I’m impressed. Instead of being frustrated and disappointed, I’m certain my next car will be a Tesla.
To get this outcome, I never called anyone or escalated anything. I filled out a survey I assumed nobody read. Somebody did read it, and that somebody had the authority to act.
It seems simple, but at a lot of companies, the authority to act just isn’t there. And it’s often a downstream effect of a misalignment at the top of the company.
The question to ask
Most CEOs think they know how their customers feel. That is usually a comforting belief that isn’t quite true. Unless there is well-tended machinery to get customer feedback to them, they are likely living in a bubble.
Once a quarter, ask your leadership team this:
How many times did we hear about disappointing a customer?
A big number is uncomfortable, but it tells you the news is getting through and you can do something about it. A zero should really worry you. If you have hundreds or thousands of customers, you didn’t get through the quarter without letting some of them down. You just didn’t hear about it.
Most of the time, customers won’t tell you when you disappoint them. They just move on and engage less. They stop returning calls and start perusing alternatives. Then at renewal time, they tell you it’s a budget issue. By the time it reaches the CEO, it’s a churn number, and it’s too late to fix anything.
There’s a simple structural fix that is the first step to solving this: The Customer Success department reports directly to the CEO.
Why not put Customer Success under sales?
Plenty of companies put Customer Success under the Sales department. I understand why. Sales sold to the customer initially. Sales knows them, and it looks more efficient on the org chart.
But look at what the sales leader is paid for: bookings, pipeline, momentum, etc. A struggling customer threatens all three, because that customer was supposed to be a reference, an expansion, or the proof point for the next deal. So when Customer Success reports to that leader, bad news has to pass through someone with every reason to wait a quarter and try to fix it quietly, under the radar.
It’s not that the sales leader is hiding customer dissatisfaction on purpose. But when your boss’s bonus depends on the story being good, the story gets softer. The edges get sanded off.
The other thing that happens when Customer Success reports to sales is that the department’s function turns into account management. The job becomes protecting renewals and finding upsells. Those things matter, but they are measured in revenue, not in whether the customer got what they paid for. A customer can renew for two years out of inertia and be unhappy the whole time. A good Customer Success function reads between those lines.
Customer Success is the one function that sees the gap between what was sold and what was delivered. That gap is where a lot of disappointment starts. Whoever sees it must be able to act on it and tell someone upstream, and it can’t be someone who reports to the sales leader.
Sales and Customer Success shouldn’t be rivals, but there is a natural tension between them. They need a clean handoff and respect for each other’s work. And in a young company, the CEO usually is Customer Success. Once you’re a mid-market company with real revenue and customers you can’t afford to lose, that stops working.
Where the CEO comes in
The CEO job exists because there must be someone who manages the business across all functions. Customer Success must report to the CEO because customer problems often span different functions. It’s usually not something wrong in Customer Success itself.
The customer’s dissatisfaction may come from one of the other core areas of the business: issues with the product (like faulty ACs), promises made during the sales process that weren’t fulfilled, pricing that feels out of step with the value derived, and so on. No single function is equipped on its own to diagnose the issue and decide on the proper resolution. It requires the CEO’s 10,000-foot view. The solution will involve balancing across those departments—sales, marketing, product, etc.
This is why you need Customer Success reporting directly to the CEO. It’s not a subsidiary of another function; it is its own core function, serving one of the business’s core constituencies (customers, employees, shareholders). Customer Success needs a proverbial seat at the table precisely so the constituency of customers has a voice to the CEO.
When the head of Customer Success reports to the CEO, three things happen.
Bad news reaches you without passing through someone who has a stake in how it sounds.
Product, sales, and marketing all hear the customer’s side from someone who isn’t defending their own numbers.
And somebody owns customer outcomes, which is a different job from just keeping customers from leaving.
What it looks like
The reporting line is the starting point. Here’s how to make it work in practice:
Customer Success reports to the CEO and sits on the leadership team.
The leader is measured on retention and customer outcomes, not bookings.
Keep a running count of every time a customer was let down and review it monthly. If it’s suspiciously empty, be suspicious.
Anyone in Customer Success can take a serious problem to the CEO without asking permission first.
You get on the phone with customers yourself, a few calls a month, and compare what you hear with what you’re being told.
I encourage CEOs to ask these two questions.
How many times did we hear about disappointing a customer?
And would we even hear it when we did?
I filled out a survey I figured nobody read, and somebody did. Would that happen at your company?
This was a great piece, Joel, from detailing your experience to your conclusion and synthesis of it.
Now, if only...