Most businesses can identify with a simple operating rule of thumb: "20% of our customers provide 80% of our profits," or "80% of problems come from 20% of our products," and, of course, "20% of our salespeople bring in 80% of our sales." It is, however, the Kiss of Death.
While the numbers can vary, they underscore a challenge. The 80/20 rule describes a normal curve or random distribution. In other words, if all hiring decisions had been made by the flip of a coin, the business result would be 80/20. What surprises most business people are the statistics on the accuracy of the most common techniques to select employees. As the table below (reporting selection research first done at the University of Michigan) indicates, most business techniques used in hiring the right person are only slightly more accurate than chance. No wonder the 80/20 rule is so common. In strong economic times, being "average" can be good enough, as "a rising sea floats all ships." But, where competition is serious, "average" isn't sufficient.
For example, if your organization has 100 salespeople and $100 million in sales, and the 80/20 rule (or close) applies to you, then your top 20 salespeople bring in $80 million. If you could improve your top performer ratio to 30 (out of 100) instead of just 20, then your increase in sales would be approximately $40 million!
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