How Vilfredo Pareto Might Be Limiting Your Sales Team

Vilfredo Pareto

Somewhere around 1906, economist Vilfredo Pareto observed that 80% of the land in Italy was owned by 20% of its citizens.  Sometime later he noted that 80% of the peas in his garden came from 20% of the pods.   Thus, the well-known 80/20 rule was born.  During his career he studied this as it relates to distribution of wealth and income. As a side note, his work was very controversial during the rise of Fascism

In the 1940s, Management Consultant Joseph Juran applied this principle to business. “80% of our revenue comes from 20% of our customers” and so on.

Today it is primarily a “given” that 80% of the sales come from 20% of the salespeople. A debate crops up from time to time regarding the best use of a sales manager’s efforts.  Should he nurture the top 20%, the middle 60% or the bottom 20%.  Several schools of thought exist as to the best answer.

Here’s the rub.  Many people consider the 80/20 rule as a truth.  It may be a truth but it most assuredly is not an absolute truth.

The best example of truth Vs. absolute truth I have heard is this: 

An airliner will consume less jet fuel when flying at 80,000 feet than it will at 30,000.

This is an absolute truth.  So can we conclude the following as  truth?

Airlines will use less fuel if they have all their flights cruise at 80,000 feet.

Point being that when a scientific or statistical rule proves true  – you must be careful about assigning truth to the downstream conclusions.

Whichever school of thought you subscribe to about where a sales manager should spend his time, if you’re basing your decision on a fundamental interpretation of the “Pareto Principle”  you may be doing it wrong.  Here’s one of the reasons why.  Perato’s words have mutated over the years.

 

Evolution of The Pareto Principle as it Relates To Sales

So, are the top producing sales reps your best sales reps?  Maybe — but the 80/20 rule is not enough to make the determination.

It comes down to how you evaluate your sales reps. As oxymoronic as this might sound – sales results are not the necessarily the best way to measure the value of a sales person.  Smart managers will constantly ask:   WHY is this sales person in the top, middle or bottom of the pack?  It’s not unlike selling itself.  If you don’t ask the right questions, it’s very unlikely that you’ll find the right answer.

If you don’t know why a rep’s results fall where they do in the pack, you cannot make a valid determination if he is worth developing. There are a litany of possible reasons why an individual sales rep achieves the results he does, but that’s another discussion for another day.

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Posted on August 21, 2011, in Sales, Sales Management, Training and tagged , , , , , . Bookmark the permalink. Leave a comment.

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