A New Management Theory? – Actually, a New Flawed Management Theory

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In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that 20% of the people owned 80% of the wealth.

In the late 1940s, Dr. Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto’s Principle. While it may be misnamed, Pareto’s Principle or Pareto’s Law, as it is sometimes called, can be a very effective tool to help us manage efficiently, but it can also be applied to virtually every facet of our lives.

OK, that’s the boring bit over …

The value of the Pareto Principle for a manager is that it reminds us to focus on the 20% that matters. Of the things we do during our day, only 20 percent really matter. Those 20% produce 80% of our results, so we should identify and focus on those things. When our ‘time robbers’ begin to sap our time we need to remind ourselves of the 20% we need to focus on. If something in the schedule has to slip, if something isn’t going to get done, we have to make sure it’s not part of that 20%.

There is a management theory that proposes to interpret Pareto’s Principle in such a way as to produce what is called ‘Top Gun Management’. Those advocating this theory suggest that since 20% of our people produce 80% of our results, we should focus our limited time on managing only that 20% – the so-called “superstars”.

In my opinion the theory is seriously flawed because it overlooks the fact that 80% of our time should be spent doing what is really important, and that includes developing all of our people. Helping the good to become better is much more important than helping the great become terrific.

When we work to develop our subordinates, we should be concentrating on converting what I term the ‘reactive mindset’, because we can certainly apply Pareto’s Principle to reactive versus pro-active. Or to describe these two mindsets in a different way - the “running towards” mindset and the “running away” mindset.

The reality is that our very best performers do not typically need close control and management, but rather they need our support, and this is where the very best managers distinguish themselves by identifying what type of management is needed and when – the “one-size fits all” style of management is hopelessly outdated.

The “hire and fire” mentality of times gone by should remain there – in the annals of history: The costs involved with recruiting, training and developing frontline sales professionals today means it is imperative that we get it right at the front-end – or as right as we possibly can.

It is essential we understand that if one of our team fails, we fail: We selected them in the first place, and it is our absolute duty and responsibility to ensure they achieve their optimum performance levels.

 

News: It’s a big day for serious article writers as we announce last week’s “Top Sales Article of the Week” and this week’s ten lucky nominees. I do have an advantage as I have already seen the list, and I can tell you, it certainly isn’t short on quality. It would appear that the sales space has lost none of its appetite for reading informative, well- written pieces, despite the dramatic decline in available locations.

Our own panel of judges will be retiring very shortly and we will be looking to recruit some new faces, so watch this space.

Here they are poring over this week’s nominees.

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Should all be live by 9am GMT as usual.

 

 

Comments

  1. says

    Very good point well made Jonathan.

    To my eternal shame I cant remember the source and my google skills are letting me down – but there was a study done a while ago – i think by The Conference Board – that looked at the impact of coaching etc. on salesforces. Their data showed what you point out: the superstars don’t need so much focus, they can look after themselves. You can get the biggest increases in overall sales/profit by focusing on the 80% in the middle (the 10% at the bottom are a bit of a lost cause).

    The same applies to 80:20′s of customers too in my experience. The simplistic approach is to focus your efforts on your top 20 customers. But it may well be that they’re your top 20 because they’re already getting the right level of attention. Giving more time to them may not result in any more sales. Whereas focusing some time on high potential customers where you’re punching below you’re weight will give better returns.

    Some colleagues of mine showed this statistically for a client’s pharma sales force a decade ago. A simple redirection of effort away from the bottom 20% to a subset of the middle group (not the biggest buyers who were already being visited enough) resulted in a big uptick in sales.

    That may not always be the case – but don’t apply 80:20 rules simplisticly is the lesson. And this “Top Gun Management” seems like a huge oversimplification.

  2. says

    Thanks Ian,

    Essentially, if a manager is concentrating on his best performers, he/she is “copping out” They are typically the easiest to manage of course. To an extent it is easy to understand this approach, because around 80% (There’s Pareto again!) of sales managers arrive in the position because they were the top performing salesperson when the vacancy arose, and they will be naturally drawn to people like them.

    The sad fact is that today it costs a company anywhere between $150 – $350k when a salesman or woman fails.

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