6 min read
We have heard a lot about Pareto's 80/20 rule that states 80% of the outcome is attributed to 20% of a specific element in business. As an example; in sales, they say 80% of sales come from 20% of customers. Here is a different yet equally powerful rule that may interest you. It’s the 20/60/20 rule of leadership. This rule splits the population into 3 groups with varied behavior. If aligned with employees’ performance, this is how it would look like.
TOP 20% - Strong performers in your organization. You can depend on them, they are like a smooth functioning unit who understand their goals, work hard and have the required skills to deliver the top results. You need to leave them alone as they already know what needs to be delivered. Tinkering with them through over communication or needless coaching might actually create an imbalance.
MIDDLE 60% - Average performers who need some level of hand-holding. Be clear that their average performance may not necessarily be attributed to a lack of potential or competencies. There can be other elements that we need to uncover and work upon. These are your dark-horses who can actually turn the tide around for you with the right coaching and guidance.
BOTTOM 20% - Underperformers who are your weakest links. Their reason to be in this group can be attributed to multiple factors, lack of potential, skill sets, or improper role fitment. I believe these are pretty much like the top 20%. I would not spend too much time on them unless there’s a clear understanding of the areas to focus upon. Any energy spent without this clarity would end up in frustration.
WHY DO YOU NEED THIS ANALYSIS?
If you are in sales operations / commercial excellence, you are in charge of the effectiveness and efficiency of your organization’s sales. You are the strategic element needed to remove impediments and provide insights to run the sales engine. 20/60/20 analysis helps you understand how your salesforce fares and where every individual falls in terms of performance.
Below are 3 different metrics used for 20/60/20 analysis; Attrition, Performance Variation, and Earnings Contribution.
These particular graphs show how my top and bottom performers are faring within their category across two periods
First, we’ll talk about bottom performers. 4 out of my 48 underperforming reps have turned it around and are among the best while 28 have shown improvement as well. A couple of things here
Similarly, 6 out of my 48 top reps have slipped to the bottom and there’s some level of deterioration seen amongst 29 others too.
I think I will need to look at the sales data to understand. Let’s check that out.
This graphic shows “% attainment” & “sales volume” split across the entire salesforce over different periods. Sales across different categories have been pretty much similar with some variation. However, overall sales volume had grown across all quarters if seen in the grid on the right. The key takeaway here is that the measures taken, which may be the most recent IC plan rolled out by the organization is pushing the salesforce which is yielding an increase in sales. Another takeaway here is that my sales reps have been replacing each other across performance buckets. It is, however, not leading to any increase in sales from top & mid-tier performers as the bottom performers’ contribution has fairly been constant. This may mean that the most recent version of the IC plan may not be helping reps across the board. It might be more aligned with bottom performers leaving little to no motivation for top performers to outperform.
Sales analytics is an up and coming area that can help you make data-driven decisions and improve the overall efficiency manifold. Would you like to get a sample analysis for your company? Reach out at email@example.com
Sumeet has 15+ years of experience in incentive compensation management, goal setting, salesforce effectiveness (SFE), and process management with leading sales performance management organizations like Optymyze (formerly Synygy) and others.
What is Incentive Compensation?
Incentive compensation is a strategic tool to align a salesperson’s behaviour with a broader business strategy. The sales incentive plan acts as a catalyst to motivate the salesforce and other support roles to go above and beyond the normal expectation.
Sales Incentive Plan Design: Guiding Principles
Sales Incentive Plan acts as a strategic tool to align sales behaviors with broader business objectives. It can act as a catalyst to motivate the salesforce and identify top sales performers and retain them. This blog covers key principles to consider to design a simple & fair incentive plan.
Key signs your sales commission admin is struggling?
Sales Commissions are a powerful medium of motivating the salesforce and push them to outperform boosting topline revenue. However, administration issues can distract your salesforce from their goals. Here are signs that your sales commission administration is struggling.