Part 1: The Problem of Proliferating KPIs (What is a Keystone Indicator?)
A Multitude of Metrics
Have you ever stopped to think about why it’s difficult to measure the performance of a customer success team, or even an individual CSM (customer success manager)?
At first glance, it should be straightforward. The ultimate goal in SAAS organizations is to ensure customer contract renewals and expansions. The problem is that relying solely on lagging indicators, such as renewals or retention can be insufficient. By the time a contract renews or churns, the opportunity for the Customer Success team to influence the outcome has already passed. Thus, lagging indicators fail to capture the proactive work required to drive customer success, and can misplace emphasis on current quarter renewals without addressing the actual customer needs. This approach can even lead to manipulative practices like unwarranted discounts, consolidation, or sandbagging.
A more effective approach is to use leading indicators—metrics that provide insights into future success or risks. Skilled Customer Operations professionals focus on identifying and enhancing these forward-looking metrics. Examples include customer health scores, customer engagement, executive outreach, CSat and NPS scores, product usage, feature adoption, and customer onboarding and handoff metrics. But with so many metrics to consider, it becomes challenging for CSMs to pay attention to all of them. That’s why it’s difficult to measure the performance of a Customer Success team!
Ideally, we’d like to find a single leading metric that is easily measurable, manageable,, and highly predictive of desired outcomes (revenue retention and long-term customer health.) This metric could easily evaluate the productivity of Customer Success at both individual and team levels.
What is a Keystone?
In architecture, a keystone is a central stone that sits at the apex of an arch, holding the entire structure together. Metaphorically, it represents the central principle or part of a policy or system on which everything else relies.
Similar to its architectural counterpart, a Keystone Performance Indicator is an activity that can be measured but is dependent on other supporting activities. If the Keystone metric is predictive of the business goal, such as customer retention, it becomes the single leading metric that can effectively measure CSM performance. It’s like a KPI (Key Performance Indicator), but broader.
Part 1 Summary
1. Relying solely on lagging indicators such as renewals or retention is insufficient for measuring the performance of a Customer Success team.
2. Leading indicators (such as Customer Health, customer engagement, CSat, NPS scores, and product usage) provide insights into future success or risks. However, they are not in your team’s control.
3. A Keystone Performance Indicator can be easily managed and measured, and it demonstrates accomplishment in areas that are difficult to measure on their own and collectively.
This article on Keystone Performance Indicators is the first of a three part series:
Part 1: The Problem of Proliferating KPIs – Defining what a Keystone Indicator is, and why it works better. Exploring common KPIs used in Customer Success Organizations, and the challenges of managing them.
Part 2: Selecting Your Keystone Performance Indicator for Customer Success – How a single Keystone Performance Indicator can demonstrate achievement in many areas. Using Business Outcome Reviews as an example of capturing operational balance and breadth.
Part 3: Change Management Transitioning to a Keystone Performance Indicator – How to establish a program of foundational activities. Measuring progress through a transitional phase toward Keystone Performance Management.
If this is what you’re working on, please comment, join the discussion, and look for the upcoming chapters!