While there’s been a lot written (and debated on) the topic of how many accounts or how much revenue a Customer Success Manager should own, there’s been relatively little discussion on how many CSMs a Manager of Customer Success should oversee.
Startups grow organically and remain flat as long as they can
Startups struggle to balance the desire to remain a flat organization with the realities of effective management. What’s the appropriate number of direct reports per manager? One study showed that across seniority levels, managers and their direct reports agreed seven was the ideal number of employees for a manager to oversee. That being said, many respondents cautioned that such a “magic number” lacked nuance. What works for one manager within the same org may not work for everyone, especially when you try to draw comparisons across teams and seniority levels. Management roles might include some component of individual contributor work, especially at the lower levels and early in the company’s lifespan. This certainly limits the size of the team you can oversee. As the company grows, you will likely have more experienced and tenured employees who might require less time, or they could require more hands on coaching if you’re providing guidance around their next career move. For this reason, it’s helpful to look at the maturity of the company to provide insight into the appropriate CSM to manager ratio.
Ratios depend on company maturity
Founders have certainly heeded Jason Lemkin’s advice that Customer Success is a single-digit hire. In those early days it’s common to have more senior team members act as leads for smaller 1–2 person teams before bringing on a dedicated manager. Fast forward a few years and those startups that invested early in Customer Success are now growth stage companies with expanded resources across all teams- including Customer Success. At the same time, Customer Success is being adopted by enterprise companies that have larger workforces that require more structure. Due to these two factors, the size of the average Customer Success team has grown- with nearly 55% of Customer Success teams consisting of more than 10 members.
Source: Totango’s State of Customer Success Survey 2019
And this growth appears enduring even in the face of uncertainty- 30% of Customer Success organizations still plan to hire additional CSMs in spite of challenges presented by the COVID-19 pandemic.
With so much growth, it’s safe to assume gaps are opening up in Customer Success leadership roles. Additional research shows the ratio of CSM to manager increases as ARR grows- starting at an average of 2:1 from $0-$5M ARR and peaking at 5:1 from $50M-$100M ARR, before dropping down to 4.2:1 at $100M+. If we assume a flat rate of 5 CSMs for every 1 Manager of Customer Success, and a ratio of 4 Managers for every 1 Director, 31% of companies with Customer Success teams have a need for a mid-level Customer Success leader. The data supports this assessment, with the same study cited above showing companies hire a Director or VP of Customer Success at around $5M in ARR. Is the Customer Success discipline and its leaders mature enough meet this demand and ready to take a seat at the leadership table?
Customer Success investment at the C-level remains rare
Tomasz Tunguz recently released interesting data comparing the stages and prevalence of leaderships titles across startup GTM functions. Across Customer Success, Sales, and Marketing, Sales usually gets the first VP opening at between $1M-5M in ARR. Reaching $5M-20M in ARR, things even out with each team having a dedicated VP. However, the Chief Customer Officer title, remains the rarest of the C-level titles- appearing in less than 10% of companies at $20M in ARR or higher.
While there’s no “magic number” of direct reports a Manager of Customer Success should oversee, 7 is generally considered the maximum, with most teams averaging a ratio of 2–3 CSMs per Manager. This number increases as a company’s ARR grows, and creates opportunities for more senior titles in the Customer Success organization.