In the current state of tech-startups, your revenue teams are the linchpins that sell the right outcomes, help customers achieve those outcomes, then use those outcomes continually to drive expansion and renewals.
Having a well-designed employee compensation and leveling process does three huge things:
Attracts and retains top talent
Motivates reps with clear career & pay paths
Keeps compensation strategy consistent and fair
This newsletter might not sound super sexy to you, but this is a process that very few tech-companies build out, and even less roll it out correctly.
So do it right, and you'll be the sexiest tech company to your current and future employees 😅
I'll walk through using Customer Success as an example, but the principles apply to any team and department!
Core Elements To Your Employee Compensation Process
Without a clear structure in place, you risk underpaying valuable team members, overpaying others, and leaving reps feeling confused about advancement opportunities.
An ambiguous process can lead to high turnover and misaligned incentives.
When building your own process, there are a lot of different variables or variations; however, these are the core elements you need to include:
Job Titles, Levels, and Definitions
Base Pay Ranges
Variable Pay and Equity/Stock
Performance Goals and Promotion Paths
Defining the right levels, pay bands, and performance criteria upfront provides transparency and fairness.
Let's go through each one 👇🏻
Job Titles & Level Definitions
From entry-level to principal roles, establish clear job titles that convey responsibilities and scope. Provide detailed definition for what qualifies someone at each level.
Here's an example of what one could look like for your CSMs:
Title | Level | Contribution |
Digital CSM | 1 | Has some skills relevant to role and is keen to learn, but is missing domain expertise, key skills, or knowledge. |
SMB CSM | 2 | Has done this role before at a junior level. Has a basic understanding of the area, and the skills required to get started. |
Mid-Market CSM | 3 | Has experience in this specific role, and can make an impact quickly. Is at a level where they can already start to make some high-level suggestions for product or processes. |
Large Market CSM | 4 | Has experience in this specific role, and can make an impact quickly. Is at a level where they can already start to make quality suggestions for product, processes, and improvements at scale. |
Enterprise CSM | 5 | Can work independently in this role after onboarding and can own their results and area autonomously. Is at a level where they can effectively drive process improvements at scale. |
Principle CSM | 6 | Domain and subject matter expert for clients within book of business, and has necessary network for expertise. Works autonomously and owns results for this role. |
No need to over-complicate this. Keep it simple and to the point of what each role looks like.
Base Pay Ranges
Determine competitive base salary ranges for each job level based on market data, geographic location, and experience required.
This is obviously easier said than done. Working with your HR partners can help determine ideal pay ranges for your company (don't have HR yet? Network with other leaders across the tech-space and get ideas on what they're paying their reps).
That said, having clearly defined base-salary minimums and maximums for each role is SO important. Here is an example of what salary bands could look like for your process:
Title | Base Low | Base Mid | Base High | Promotion Increase |
Digital CSM | $47,000 | $51,500 | $62,000 | $10,000 |
SMB CSM | $63,000 | $66,250 | $72,000 | $12,000 |
Mid-Market CSM | $73,000 | $82,500 | $88,000 | $15,000 |
Large Market CSM | $89,000 | $98,000 | $105,000 | $20,000 |
Enterprise CSM | $105,000 | $118,000 | $125,000 | $20,000 |
Principle CSM | $126,000 | $134,000 | $155,000 | ~ |
Additionally, having a field to show exactly how much a promotion would improve the individuals base-pay key here. (eg using this table as an example, if an SMB CSM is currently at $68k, their promotion to a Mid-Market CSM will put them at $80k base).
You'll want to fill out your own tables with what makes most sense to your company, your industry, location, stage, etc.
Variable Pay and Stock/Equity Grants
Decide what forms of variable comp will be included. If you offer bonuses, commission, or variable pay, document them here and their overall amounts.
If offering equity, document what grant amounts will be provided at each level. This can be a powerful employee retention and motivation tool.
Here's an example of what Variable Pay and Equity grants could look like (obviously change these numbers to what makes most sense for your team and company):
Title | Annual Base Variable | Original Equity Grant | Equity: Promotion Increase |
Digital CSM | $20,000 | 1,000 | 1,000 |
SMB CSM | $25,000 | 2,000 | 3,000 |
Mid-Market CSM | $30,000 | 5,000 | 3,000 |
Large Market CSM | $35,000 | 8,000 | 4,000 |
Enterprise CSM | $45,000 | 12,000 | 4,000 |
Principle CSM | $55,000 | 16,000 | ~ |
When talking about "Bonuses" my favorite CSM pay structure is base + variable pay that is rooted in the rep's ability to retain logos and expand revenue.
This variable pay structure changes depending on what stage your company is at, but starts by measuring rep retention and expansion then moves to the specific behaviors and outcomes associated with retention and expansion.
Performance Goals and Requirements For Each Level
In order to turn this into a process that drives results and motivates your employees, you need to have clearly outlined what opportunities, goals, metrics, certifications, etc. are required and what promotional paths and opportunities exist at each level.
Here are a few key items I like to include in this section:
Account Focus, Knowledge, and Experience:
These give more details into level-specific expectations like what types of accounts they'll be managing (SMB, Vertical, Geography, etc) or what experience and/or knowledge is needed for each role (account management, sales, SaaS, CX, etc).
Since the full table would take up the entire page, The follow examples are what an L2 (SMB CSM) might look like on the table:
Title | Primary Focus | Experience Prior To Role | Industry Knowledge |
SMB CSM | Manage Tech-Touch and SMB Accounts | 1-2 Years account management/ customer service experience (relevant fields accepted - ie. sales) | SAAS and/or Customer service |
Specific Bonus Targets and Performance Metrics:
These should be specific for each level and show what is expected in terms of KPIs and Metrics for this role.
These will also have to be specific to your business and what good performance looks like.
A few that I track on a monthly basis:
Customer/Revenue metrics:
Monthly Cohort Survival
Monthly Logo Retention
Monthly Revenue Expansion
CSM Performance Metrics:
Deployment of specific playbooks across their book of business
Outcome Master Plan %
Executive Outcome Reviews %
Account Multi-thread score (not having a single point of contact)
Customer Success Qualified Leads (CSQLs)
Title | Monthly Bonus Targets | Monthly Performance Metrics |
SMB CSM | • Cohort Survival • 1-month: 97% • 3-month: 84% • Monthly Logo Retention: 92% • Revenue Expansion: $14.6k | • OMP Drafted 100% • OMP Validated 74% • Executive Reviews: 72% |
Promotion Eligibility Criteria
These are critical for each level. They cover the specific requirements and things you're looking for in each role. A few areas to include in your process:
Time Needed In Role
Performance Needed For Promotion Eligibility
Certifications Required for each role (These are internal certifications on products, playbooks, processes, etc)
Specific Promotional Opportunities
Time In Role | Performance Needed To be Eligible for Promotion | Certifications Needed | Next Level |
9-12 Months | • Bonus Obtainment: 80% + • Performance Obtainment: 90% + • Performance Review 3+ | • Product(s) Certified • Outcomes MP • Essential Skills 1-4 • Executive Certified | L3 |
It's important to include where leadership levels become an option. Is there a Team Lead or Manager opportunity for growth? If so, at which level does it start? Make sure to include that in your "Next Level" categories if applicable.
Build Your Own With a Free Template
Now that we've gone through all of the essential elements of building the sheet, download a free template that you can fill out for your department:
All of the datapoints, metrics, and numbers in there are examples to give you a starting point. You'll need to change these for each role and level you create for your department.
Deploying This Throughout Your Team
With the compensation and leveling structure defined, it's time to operationalize it across your department
The more transparency and integration with performance management, the better received and adopted it will be. Empowering clear career paths motivates reps.
Roll It Out Transparently
Don't surprise reps - provide documentation and host meetings to explain the details, rationale, and goals behind the changes. Get their buy-in.
Align With Leadership
Ensure your team and department leaders fully understand and will consistently use the new system for hiring, promotions, compensation decisions, etc.
Migrate Current Employees
Objectively map existing employees to the new levels based on skills and performance against the criteria. Communicate any title, comp, or level changes if needed.
Integrate With Performance Management
Tie the leveling processes directly into performance review cycles. Use defined metrics and expectations as criteria for reviews, raises, bonuses, and promotions.
Continuously Calibrate
Have a feedback mechanism to identify areas for improvement. Conduct annual audits of pay, levels, and processes to make adjustments as needed.
In Summary
Phew, you made it through. Wasn't that bad, right? 😅
Joking aside, building and deploying a compensation and leveling processes isn't a "flip the switch" type of deal. But it is work that is 100% worth doing.
Having a well-designed compensation and leveling process is crucial for attracting, retaining, and motivating top CS talent.
You need to tweak the levels, titles, goals, requirements, etc to fit your needs. The key is defining crystal clear expectations for skills, performance, and pay at each stage, and being transparent with each employee.
Whenever you're ready, there are 3 ways I can help you:
The Renewal Operating System: This is the ultimate set of playbooks for tech-founders and revenue leaders. This system aligns your teams to the outcomes you produce, improves customer retention, fixes your customer handoffs, and doubles your expansion opportunities.
One-on-one coaching: Get one-on-one support and proven expertise around revenue playbooks, professional skills, operating models, rep coaching, and much more. I offer 1x1 and group coaching to help you win.
The Operators Newsletter: Join 2500+ tech leaders every Saturday morning where you'll get one actionable tip to help you build GTM alignment and scale your teams.