Will let the rest of 80% sales force to assist 20% of sales force and give good incentives for the 20% of sales force to make them better.

However, Incentives are only paid when that 80% revenue is constantly generated by 20% sales force..

posted November 17, 2007

You have a huge gap on the level of experience between the only two existing groups of your sales force.If their C&B exceeds the 20% sales that they deliver they have to go.Give their territories/accounts to your 20% sales force with some incentive and they will deliver the remaining 20%.

posted November 17, 2007

First of all, the sales VP shoud already know that. Bu my reaction is that it doesn't really matter, as long as the worse seller is making the company incrementally more profitable.

posted November 17, 2007

Hi Sam,

If I truly did not recognize this fact already I would first have to revaluate my own priorities and performance. Second would be to make certain that the 20% who are producing so well were satisfied and with their positions and getting all the support they needed. Third would be to evaluate the reaming 80% and get them the training needed to improve their sales numbers. Finally those unable to improve satisfactorily would be replaced.

Gary

posted November 17, 2007

This should come as no surprise at all - it is merely a standard expression of the well-known Pareto Principle.

This is why it is generally considered wise to pay sales forces based at least partly on commissions, as that will encourage the "supersuccessful" to stay and encourage at least the bottom 20% to leave.

It is OK that this is so - that 80% of the revenues keep the whole company employed. And as long as the other 80% of the sales force are doing their work to "grind out" the other 20%, they too are making a valuable contribution (even if it is less valuable on a per-staff-member basis).

Links:

• http://en.wikipedia.org/wiki/Pareto_principle

posted November 17, 2007

80/20 rule rarely fails!

Links:

• http://thesocialatom.blogspot.com/

posted November 17, 2007

I would only add the phrase profitable sales. In fact it is largely the top management that is responsible for driving the next 20% sales which is for strategic reasons other than purely bottomline driven one - invariably it adds to marketshare, type of customers (elite, rural, emerging markets, niche etc), self promoting interests (CEOs frequented area, club etc).

It is the lack of hard nosing the business analysis that is behind this inefficiency.

Most professionals are not solely business orientated or driven.

posted November 17, 2007

My opinion would be nearer from the Neil and Chris's one but it depends on the organization: indeed, the 80% salesforce may have peculiar territories and/or customers categories.

In this case, you may be induced to leave those territories and/or customers. You must be careful in doing that because it might have disastrous strategic consequences with regard to reputation, competitors, production scale, range scope, profit, market share, business intelligence and so on.

If it is not the case, to be sure, you have better having "good" vendors taking the place of "bad" ones.

Thus, before making any decision, carefully study the situation with clear figures for each parameter by agent, product, territory, customer and don't limit your investigations to the purely commercial side. Study several scenarii showing potential economies and losses.

posted November 17, 2007

I'd know I had some really good people and that was in with the industry norms for decades.

posted November 17, 2007

All organizations, in every function have a 20/70/10 split...20% are your performers (keep them and reward well), 70% are middle of the pack (find a way to motivate them to join the 20 - or find a way to move them along) the 10...lose immediately.

posted November 17, 2007

Sorry but not sure I understand the real heart of the question. How would I react to the outsider? Thank him first and then invite him/her to lunch to see why he argues this to be the case and see what other insights I can wean from them. How would I react to my sales team? That depends. I´d do my homework first and figure out what´s going on as a whole and then individually. Based on the results on some basic inquiries...develop an action plan.

posted November 17, 2007

besides doing the most common thing of allocating resource to maintain 80% business, I would spend reasonable time to get a lot of cues from the rest of 80% whether they don't have potential to come in the list of 20% top customers., It will and in past has given cues not only to improve business from some of the 80%customers , but also to avoid losing the existing top 20% customers future with us.

posted November 17, 2007

Establish production goals for each person on the sales force to shoot for. They should total the overall revenue increase you project for your company. These should include at least a cost of living increase and, possibly, a modest price increase - it is amazing how small increases can boost profitability. Each person would detail and track their daily/weekly activities - calls, letters, emails, presentation, proposals - required to hit those goals. I would tie incentives for meeting/exceeding the new goals.

posted November 17, 2007

I would try my best to understand that 20%

posted November 17, 2007

I agree with Dan Phipps, first check and see what I am not measuring. Find out why before reacting to anything.
If you are a salesperson trying to sell me some product or service presumably designed to help me improve these results... I would suggest that you not tell me anything. Instead, ask me questions that allow me to verbalize these numbers and why I feel it is a problem. Do I have a desire to even change this? If not, I'd suggest asking me to explain why not. Spend more time allowing me to express why this is a frustration to me, what I've already done to try to fix it and the impacts to my company and career for not changing this.

After this, ask simply ‘If we offered something that may help you with this situation, would you be interested in hearing more about how we can help?”

posted November 17, 2007

If I were your VP of Sales, I would already now the fact of 20/80, but let put the questions?

What kind of revenue is 20%: Is the future potetial for growth? What is the margin from this 20% revenue? If there is positive contributon to the company than I woul continue on this 80% sales force.

What is the number of sales people that give you 20%. If I would have just 10 sales people and 2 contribute 80% of revenue, than it could be risky if one leave the company. If I would have 100 Sales people than 20 isn't such risk number if some of them leave.

HEre is also the question what is the goal of the company. IF you want to grow, than probably you would need this 80% of people. If your priority is EBITA than you could let say reduce this 80% sales force to half and decrease your revenue for might just 5% - again in this group the rule of 20/80.

posted November 17, 2007

This is a common hypothesis. Firing the 80% that is involved with the 20% of revenue-customers, would just lead to 20% less revenue. The result statistically is, that again 100% of the sales will produce 100% of the revenue. There would just be a better revenue per head outcome. And I just killed everyone's common target-bonus.

You could of course hire different people, but when they would be better sales, you revenue goes up... and the hypothesis stands as before: again, 80% of the sales will be involved with 20% of the revenue. Just different and more revenue in total. Why would the hypothesis suddenly change?

So if you told me this shocking news as VP of Sales, I would smile and gratefully thank you for your wisdom.

P.S. The answer is not in firing sales, it is in better qualification.

posted November 17, 2007

Hello Sam.

Chris Brown is correct.

I wouldn't react to a known sales fact. Eighty percent of your sales will always come from twenty percent of your sales force. That's the way it always has and always will be.

I always try to team up my 20 % with my 80 % so they can pick up some of their habits and skills.

Regards,

George Feist

posted November 17, 2007

Yes it's there in mostly product which are having high Logistics cost or regional basis, this 80-20 Pareto principle is followed,
Well as an VP i should be knowing this and if outsider tells me this thing it will be an alraming situation for me.
Than also i will go for the 20% employee Variable pay and for remaining 80% training and development to make them reach to this core group of 20%.

posted November 17, 2007

Hi Sam,

1. I would think that my department is doing alright :) If needed, I would refer Pareto’s principles to explain the current situation to my management!

2. I’ll try my best to retain the top 20%. As an experiment, I’ll transfer a few top performers to high potentially geographies / product lines that were catered by low contributors. If they turn around the situation, I would gradually extend the logic to other potential areas as getting new business is more difficult than retaining the business.

3. I would extend better tools, trainings, options and resources to low contributors to mobilize higher contribution. If they don’t show acceptable improvements, I would start firing from the bottom to a cut-off point. I’ll fill-up the vacancy through a recruitment drive.

Thanks,

Vittal

posted November 17, 2007

It will always be 15-20% which will get the 80%. Truth is it will be different 20% which will get this portion every year. So you will still need the rest 80% for next year. Only use of this information is to identify the star performers.

posted November 18, 2007

"Tell me something I don't know." Unless the VP is particularly clueless and got the job by being the nephew of the founder or something, this is not news to most sales professionals. The key challenge being faced by modern sales organizations is to design an incentive structure that balances competition and cooperation among their sales staff, so that the lead sales people keep getting rewarded for outperforming, while at the same time transferring what they can of their knowledge/expertise to under-performing peers. Mentoring programs, communities of practice, moderating competition by careful use of geographic and market-vertical segmentation can all help. But ultimately, I believe the answer lies in an incentive design problem that has not been solved because the right analytics haven't been figured out. If you, as talented salesperson, takes a day off per week to teach me, an underperforming rookie, how to play the game, you lose a day's worth of commissions, and I see a delta in my performance. The right way to compensate you is to do a net-present-value analysis on MY improved performance, and pay you enough of a proportion to make up for YOUR lost sales. The hard part of this is figuring out the difference between what I make with your advice and what I WOULD have made without your guidance. I don't see any good way to solve this domain in even domain-specific ways for particular products I am familiar with, let alone general solutions. If you solve this problem, do let me know, I'll win some brownie points from our sales orgs. if I can help them with this :)

posted November 18, 2007

The traditional technique is to aggressively turn over the 80% in favor of better producers. Improve your hand so to speak.

posted November 18, 2007

Welcome to Pareto.

I would conduct a thorough needs assessment of both groups and determine the appropriate strategies that could lead to actionable plans for improvement for all involved. I would continue to ensure that the 20% understand that they every day presents new challenges and that past success is not a predictor of future results.

I would determine the influence-influencee relationship within the sales teams so as best to assist those defined as influential on a district, regional or national basis with the best opportunities to succeed and to lead appropriately both formally and informally.

If it did not already exist, I would establish a mentoring program.

Lastly, I would certainly incentivize the 20% with some short- and long-term equity and clearly define for the 80% the roadmap they need to follow to be able to achieve success.

posted November 18, 2007

As many people have pointed out this would have got noticed very easily very early on. It is the sales people with most concrete targets and that makes any underperformance very easy to notice. Now this is not an acceptable circumstance (by giving Pareto Principle as an excuse) since it has serious financial and HR repurcussions.

The underperformance of 80% can be because of either wrong hiring of wrong training or probably because the regions assigned to 20% are just too lucrative or a combination of the three. So I would try to understand the exact reasons. Wherever it is wrong hiring I would let these people go. When it is wrong training I would take learnings from 20% top performers and retrain the remaining 80%. If it is because of regional allocation it means I am appointing too many people in regions with less potential & so I will reorganize sales force according to the potential of the region. Some cases can be where a bad salesperson is wasting a lucrative region and reorganizing/re-hiring will cover that aspect too (market size, competitor sales from regions etc. can be good indicators of such a situation).

Another perspective while firing a salesperson is that he is just a variable cost for the company. So the returns expected from a single person can be much less than per person returns expected from the overall salesforce (returns expected from overall salesforce should cover the fixed costs of the company also whereas returns from a single person should cover just his variable cost). So if I reach a conclusion that a particular salesperson is good (or can be improved after retraining) but his region has very less potential, I will retain him till he is giving reasonable returns on the money being spent on him. If possible I will assign him more regions.

posted November 18, 2007

I would see what needs to be done to get the lower performing sales reps tot a more effective level. Train 'em, coach 'em, give them goals and if they can't give you an appropriate ROI in an appropriate amount of time then they need to be replaced. (Make certain that you are comparing apples to apples vis a vis territories, products, maturity of the accts, etc.)

posted November 19, 2007

Would not be surprised as it is the case of many other organisations and business units.

posted November 19, 2007

I would wholeheartedly agree AND make sure that the other 80% of the sales force is making progress so that, at the end of the day, your 80% revenue is not at jeopardy to having your best salesperson walk with the account(s) or have a buffer against having the account own business stall or worse. It's the old "all your eggs in one basket" scenario that most companies are guilty of.

posted November 19, 2007

Hi Sam,

I've read all the answers talking about the typical rule of thumb (80/20) and re-skilling people and so on. Probably as a VP I should have known this fact and maybe my problem is not in the sales force but in the market segment / go to market I am using. I've seen in Corporate and Consumer markets this kind of "behavior" in terms of sales. What I should do is increase my market coverage by entering new segments and pursue new opportunities. With that luckily you'll have 2 x 20% of your sales force doing 80% of the business. Always consider that people have the potential but the market is the real drive.
Hope this helps.
Regards
Pedro

posted November 19, 2007