- Sales performance follows a predictable bell curve, where only a few people produce half the results
- It’s time to rethink sales performance management – some A-players are just lucky C-players, while some C-players are unlucky A-players
In this first post of a two-part series, we delve into how sales performance is more complex than many sales leaders believe
You’ve undoubtedly heard of the 80/20 rule: 20 percent of customers generate 80 percent of revenue. The rule is as constant to sales as gravity is to Newton’s apple. The actual name for this rule is the Pareto Principle, named for Vilfredo Pareto, the Italian engineer, sociologist, economist, political scientist and philosopher who discovered it. Pareto’s follower, Derek J. de Solla Price, a 20th-century Englishman made a further discovery proving that in human endeavors (e.g. art, science, literature, music, sales), the square root of the number of participants reliably produce roughly 50 percent of the results.
In developing his theory, Price analyzed classical music composers and their bodies of work. He observed that only a handful of tens of thousands of composers stand out as true superstars. Most of us are at least casually familiar with classical music (thanks mostly to Bugs Bunny and Saturday morning cartoons), and although we can’t always name a song’s composer, we can spot their work. Most of us can recognize pieces by Mozart, Beethoven, Bach, Verdi, Tchaikovsky, Chopin, Vivaldi, Wagner and a few others. Price discovered that these musicians created more than half of the classical music that is still popular today.
In sales, we call these superstars A-players. Few of us question the 80/20 rule. I wanted to check the validity of Price’s law for myself, so in a purely unscientific experiment I started asking SiriusDecisions clients, “How many salespeople do you have on your team?” Someone might respond, “Two hundred and fifty.” I’d say, “I’m guessing 16 of them are generating half of your bookings.” They’d check my estimates and say, astonished, “How did you know?” Granted, it was an unscientific approach, but it told me I was onto something significant.
Price’s Principle and Performance Distribution
After affirming the validity of Price’s Law for myself, I began to question my previously held belief that a company can completely staff a sales organization with A-players. We all know the drill: Develop B-players into A’s. Fire your C’s. Keep doing that until you have a team of all A’s. Yeah, right! Here’s what happens when you try to do that: Some B’s make it. The ones that don’t make it end up quitting or getting fired. All the C’s get fired – and as all this employee churn is happening, who is left to pick up the slack (the other 50 percent of the work that the B’s and C’s were generating)? It’s the A’s, and you guessed it: They’re getting calls from recruiters all day. Employee turnover gets worse and it affects the greatest producers because they feel abused and overworked. It’s too idealistic to believe that endlessly messing with the B’s and C’s is helping the A’s. It’s nonsense. Why? Because it defies basic mathematical distribution!
The obvious question remaining is whether keeping poor performers around demoralizes high performers, and the obvious answer is this – some people (the D’s and the F’s) simply shouldn’t be in sales. Do everyone a favor, and help set them quickly on an alternate path.
There’s one more thing to consider. Quota-setting is an imperfect art, and sales leaders tend to like shaking up account assignments and territories every year. As a result, some salespeople viewed as A-players are just lucky C’s, and some people we think are C’s are unlucky A’s.
Sales performance management is obviously a complicated matter. We’re dealing with human behavior and systems, after all. For some deeper insights into these principles, and some new thinking on how to improve your sales team’s collective productivity, stayed tuned for part II of this blog post series.