Is the 80/20 Rule Out of Date?
In a recent blog post, I discussed an approach that sales operations can use to reduce the amount of time sales reps spend on non-core-selling activities by eliminating, offloading, expediting or automating activities. But how do you decide which problems to tackle first? Sales operations leaders often reference the 80/20 rule when prioritizing efficiency improvement efforts.
The 80/20 rule, also known as the Pareto principle, is a common rule of thumb in business and states that 80 percent of the effects come from 20 percent of the cause. For example: Eighty percent of our profits come from 20 percent of our customers, or 20 percent of sales reps produce 80 percent of sales revenue. The implication for sales operations is that efforts should focus on identifying and eliminating the 20 percent of activities that are causing 80 percent of wasted time for sales reps.
Research done over the last decade suggests that we should take a step beyond 80/20 and apply the 4/50 rule, which states that only 4 percent of the business issues cause more than 50 percent of delays, defects, waste, rework and cost. In the case of sales effectiveness, we can dramatically reduce wasted sales time, effort and energy if we can identify and eliminate the 4 percent of activities that consume 50 percent of sales reps’ non-core selling time.
Rather than starting with wall-to-wall, floor-to-ceiling designs and complex, expensive rollout plans, we can achieve results faster, demonstrate success, drive adoption and make course corrections rapidly at lower cost using the 4/50 rule, which leads to an incremental, measurable and manageable approach to improvement projects, which we refer to as small, manageable chunks (SMACs).
Here are a few key principles of the 4/50 rule, also called the “crawl-walk-run” approach:
- Aim for 50 percent reduction in delay, defects or deviation within six months
- Use small focused teams to quickly solve mission- and profit-critical problems
- Use just-in-time training to achieve organizational learning
- Celebrate each successful milestone
- Accelerate broad adoption by demonstrating success with a small group
The last point may appear counterintuitive but has solid grounding in research on group dynamics, which suggests that when 5 percent of a target population adopts a new technique or practice, the change has begun. To the extent that sales reps experience a successful improvement project, they will continue practicing the technique. Once adoption reaches 20 percent, the change is unstoppable.