Variable pay is both a major financial commitment for the business and a powerful source of motivation for employees. Adding a variable component to Customer Success pay is now standard practice. Antoine Fort, CEO of Qobra, shares his recommendations for building an effective variable pay plan for your CSMs.
How do you build a variable pay plan?
There are five essential steps to putting a variable pay plan in place for Customer Success:
#1. Formalise the CSM's responsibilities
The objectives given to CSMs vary from one company to the next. According to a Skalin study, 58.4% of Customer Success Managers are full-stack. In other words, they cover a wide range of activities, from onboarding and day-to-day account management through to spotting and closing upsell opportunities. Meanwhile, 34.5% of CSMs have an operational role and only 7.1% have a support focus.
These responsibilities have a direct bearing on the variable pay plan. Knowing each person's responsibilities and role lets you set objectives that are consistent and achievable.
#2. Set strategic objectives
Once you are clear on what CSMs are responsible for, the objectives follow naturally.
The hard part is assessing individual performance. Take the example of a full-stack CSM with a varied remit: you need to identify the aspects of the role that contribute most to the company's goals. That means being completely clear about what the company wants to achieve, so you can set objectives that feed directly into that outcome.
We also recommend balancing team and individual objectives according to the organisation's maturity and its ability to track them accurately. Once the company has the right tools and processes in place, it makes sense to consider an individual incentive policy.
#3. Work out the split between fixed and variable pay
Once the objectives are defined, you need to set the fixed and variable portions of salary so that they strike the right balance. Typically, the split is 80% fixed and 20% variable. This ratio can vary with seniority, but also with performance: for example, the more Annual Recurring Revenue (ARR) a CSM generates, the larger the variable portion.
At Qobra, we use this ratio with a specific calculation method: 70% of variable pay is based on Gross Revenue Retention (GRR), and the remaining 30% on upsell rate.
Some companies choose to give more weight to the variable portion to raise the stakes and push employees to go the extra mile.
#4. Choose how often variable pay is paid out
Traditionally, the variable portion is paid quarterly, although some companies opt for monthly payments. Either way, the choice must fit the way the business operates. It depends on contract length, renewal rate and sales velocity.
#5. Define thresholds and any accelerators
My view is that hitting 100% of target should earn 100% of variable pay. But what happens when someone exceeds that target, or falls short? Is pay capped? Is it proportional to performance? Is there a minimum threshold to reach?
At Qobra, we are generally against caps. Take a CSM whose variable pay is tied to upsell. If they generate 300K of upsell in a quarter against a 100K target, but commission is capped at 200%, they have no reason to go any further. They may even be tempted to push part of the upsell back to secure their pay for the following quarter! Instead, we use continuous curves with bonus accelerator logic for Customer Success.
We also advise against a threshold-based approach. With a 50% threshold, for instance, employees sitting at 40% of target and waiting to close deals a few days before quarter end already know those deals will make no difference to their pay. This creates side effects and counterproductive behaviour that undermine the company's strategic objectives.
What are the best practices for setting variable pay?
Beyond choosing the right objectives, you also need sound governance around variable pay. In other words, clear, documented processes to lock in dates, set calculation methods and reassign portfolios. Without them, vague rules quickly breed frustration.
Next, we recommend taking a merit-based approach to the plan. Ask yourself whether your top performers are paid what they are worth, and whether the pay structure is genuinely motivating. That is why you should challenge the plan regularly, at least once a year, so it keeps supporting the company's objectives and stays in line with team performance.
When you review the pay plan, it is essential to take the time to gather feedback. This gives employees a voice, helps them understand the ins and outs, and makes them more likely to buy into the plan.
How do you align Sales and Customer Success objectives?
This is a central issue. Imagine sales reps are paid on closing and CSMs on contract renewal. Under those rules alone, CSMs can lose out financially when churn spikes a few months in because of so-called 'bad fit' customers.
This kind of misalignment can create a lot of friction between teams. You need to make sure CSMs' variable pay is not penalised by factors outside their control, which can feel deeply unfair.
The goal is to minimise churn that originates on the Sales side, and proven strategies can help. HubSpot, for example, cut its monthly churn rate by changing the pay plan of its sales team, not its Customer Success team. If a customer cancelled within the first four months, HubSpot clawed back the commission. That gave sales reps a clear reason to close deals with genuinely engaged, well-qualified customers.
How do you choose KPIs for Customer Success variable pay?
There is no one-size-fits-all answer. Every company has its own input and output KPIs. At Qobra, we believe output metrics are the most relevant ones to build into a variable pay plan, such as Net Revenue Retention (NRR), Time to Value (TTV) or GRR.
Why? Because we work on the principle that fixed salary is there to reward the core of the job, which includes input KPIs such as customer satisfaction (CSAT), Net Promoter Score (NPS) and taking part in Business Reviews.
It is also important to give teams visibility on the metrics, so they stay engaged. Each objective needs its own KPIs, assigned and tracked. For example, if you reward a CSM on onboarding duration, make sure TTV is among the control metrics in the pay plan.
How do you reward commitment beyond variable pay?
To recognise high performers, I recommend giving them more responsibility and a bigger pay package, including a rise in fixed salary, or helping them develop new skills.
Beyond bonuses, we also find that some employees value internal recognition. They are motivated by being personally acknowledged, for example by being showcased across the company through cross-functional projects.
Further reading:
