Why do salespeople continue to let the Pareto Principle define them?Marek Uliasz/Getty Images/iStockphoto
If you're in sales, you've heard of the Pareto Principle, more commonly known as the 80-20 rule. Simply put, it's the notion that the top 20 per cent of your sales representatives drive 80 per cent of your revenue, or 80 per cent of your reps' time and energy is devoured by the bottom 20 per cent of your customer base.
Back in 2010 I considered this principle from the standpoint of the potential to turn back the dial to 70-30 and the benefits that move would produce. I want to now look at why a group of professionals so familiar with the failings of the Pareto Principle continues to be defined by it.
Let's start with the most basic concept that salespeople are motivated by money and that incentive plans drive behaviour. If these notions were accurate, wouldn't they prompt a salesperson to move from the 80 per cent to the more elite and successful 20 per cent? It's not like the salesperson would be leaving the side short, there are always plenty of posers who can man the 80-per-cent squad.
But there's a bigger factor at play, namely that salespeople, like most people and the markets they serve, are reluctant to change. And change is really the game salespeople are in.
Somewhere between 70 and 80 per cent of the market is in status-quo mode, reluctant to change, even when their current state is clearly and woefully short of optimal. It's not unlike when a rep perpetually fails to make her numbers each month, yet her manager keeps her around. The only way overcome this scenario is to be proactive, focus and work the fringes on a continual basis.
First let's split the team into to more realistic groups: there's the 20 per cent of top guns. They may not deliver 80 per cent of the revenue, but they certainly over-contribute. The remaining 80 per cent is more like a group of say 50 to 55 per cent of the team that does moderately well, delivering somewhere between 75 per cent and quota; and the last group includes 25 to 30 per cent that really shouldn't be there. These C players should be traded out, and monies paid them redeployed in more product or other sound investments.
But working the fringes of the middle 55 per cent will allow you to shrink the C group and grow the A Team. Once you get rid of the Cs, you can begin rotating out the bottom 10 per cent of that group on an annual basis. Make no secret about it: if your sales resps know what's coming and don't do anything to avoid it, what have you lost?
Then focus on helping the top 10 per cent transition to the A team through formal coaching and training. On this front, I continue to be surprised how many managers lack formal annual coaching plans for their individual team members. Without planning and structure and purpose, how can you help them evolve?
Part of that plan needs to be spending time with the A team. Not only can you not do it alone, but there are all kind of benefits to immersion. You want those habits to rub off, almost by osmosis. The upside is that most A team members don't mind this process. For some, it's good preparation for becoming managers.
The process helps you improve the entire team. As the bottom gets higher, the competitive juices of the A team will kick in.
Companies that do this successfully stop thinking in terms of 80-20 and focus on being 100 per cent.
Tibor Shanto is a principal at Renbor Sales Solutions Inc. He can be reached at tibor.shanto@sellbetter.ca. His column appears once a month on the Report on Small Business website.
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