I am not going to bore you by explaining what the 80-20 rule is. Rather I was going to point out some intriguing implications of it which makes it somewhat not believable.
If you have an organization of 100 people, 20 of them are doing 80% of the work and the rest 80 are doing the rest of the work. If you do the math, on an average, any individual from the former group is 16X more productive than any individual (on an average) in the second group. (4X units done by an individual group compared to 1/4X units done by an individual in the second group).
16 times more productive???? That seems a little extreme to me. I can understand one or two individuals being very very productive compared to a couple of “bottomers” but 20 people each (on an average) being 16X more productive that 80 other people (on an average)? Sounds a little far fetched.
Carrying on with that example, let’s say you had 200 people in your organization. 40 of them are doing 80%of the work. Apply 80-20 on that 40 people (it is large enough a size). Now you have 8 people doing 64% of the work and the rest 192 doing 36% of the work. This makes your top 8 people – on an individual basis – 43X more productive than the average individual in the rest 192!! That seems even more far fetched to me.
And if you want to play with it a little more, apply 80-20 to the bottom 80% of your 200 people. Now you have 64% of your people doing only 4% of the work. So top 8 people in your 200 people organization is 256X more productive – on an individual basis – than the bottom two-thirds (64%) of your organization. Wow!! That is something.
I think the philosophy still remains the same – people contribute dissimilarly to a goal. And a larger portion of the work is done by a smaller portion of the people. But 80-20 may be extreme when it comes to people and what they produce in a team.
If you say the rule is 60-40, now you have your top players about 2.25X more productive than the rest.
And if I have my math correct, in the last two examples above, your top 16% is 2.95X more productive than the rest and the same group is about 3.375X more productive than the bottom one-third of your organization.
Honestly, intuitively, this seems to be more in line with what I have experienced. Being 4X more productive is a big number. You will do in weeks what the others are taking months to do.
So what is it? 80-20 or 60-40?
If you are like me, you probably get about three or four requests to take reference calls every month for somebody you know who is looking to switch jobs. Like me, you probably agree to take the call.
By and large, I have not been able to convince myself yet regarding the big value of the reference calls. A few observations before I get to that, though.
There are different kinds of reference calls that I have seen. Most of them are very perfunctory – either done by recruiting firms or sometimes personnel from the HR department. Usually, they want to ensure that you indeed worked during the time in the stated company as advertised in the resume. More over, this is also more of a “negative check”, I feel. In other words, they have made up their mind to go forward with the candidate – now they are checking if there are any “gotchas” that they should be aware of.
There are occasionally a few reference calls that I really enjoy. First, they ask some very thought provoking questions. One smart person once asked me “If you are so high on the person, how come you have not tried hiring her into your company”. I was impressed 🙂 And then there are some who at the end of the call push to find out more about me and ask if I am interested in looking. I get impressed by them to (not because of their instinct for talent 🙂 ) but by the fact they are always trying to sell their company.
A few questions I find uncomfortable answering are like “Would you think the person will be a good fit in the company” or (recent example) “Would you recommend this person for the position of a Program Manager”? These questions require far more knowledge on my part about the target company (and their definitions) to answer the question. On the last example, I remember asking the lady to explain what does the Program Manager role entail in the company and she struggled to explain that to me. Imagine my struggle to answer that question then.
In any case, if any of you are HR specialists, maybe you can help me understand one point. What do reference calls really achieve? Don’t the candidates anyways pre-select the calls by making sure only those people who give the best reference about them actually get to talk? Does that not give a very much skewed view, anyways?
The only value I see is in finding out what kind of person they have been able to agree to take a reference call on their behalf. If a candidate comes saying the CEO of a large company is one of his references, that probably tells something compared to somebody who puts up a co-worker at a low level as a reference. Beyond that, it beats me.
I would think, by now, with all the professional networking (LinkedIn, Xing etc) and personal networking (Facebook, Orkut etc), we should be able to quickly find out common contacts and make some discreet calls to get a better idea about the candidate.
Anybody has any insights?
Partnership Myths – Part 2
6. Partners usually embark on a simplistic Go To Market: This is probably what I am most passionate about. Great business plans are almost never worth anything once the partnership has been announced. The go-to-markets vary from the banal “I will take you to my account and vice versa” to more lofty “we will integrate our products/services”. Simple integration usually does not lead to too many gains. Part of that comes from the fact that now you have two companies fighting for the same (or nearly the same) budget that the customer has. And inherently, each will try to maximize their share.
7. Making a partnership work takes a lot of hard work: If anything, this is the single most reason why partnerships do not pan out. It is not easy to keep so many divisions of two different companies in constant touch points and ensure are working [part of their time] on common goals. It takes a lot of commitment and trust from each partner. Setting up a Partners division usually does not do anything other than the fact that you at least have somebody who will try to follow up on action items and try to keep the “relationships” live. However, this organization usually has absolutely no authority to get anything executed thru the line managers. Successful partnerships have commitments right from the top who is willing to demonstrate it too.
8. Success from partnership requires patience: This goes with the previous point. My experience has been that C-level executives expect results – in terms of sales dollars – too quickly from partnerships. It takes a few years to get a coherent story to the market that customers find appealing. And this assumes all the backend from sales commission to product integration has been worked out. However, usually, executives start questioning or second guessing within 6 months of announcing a partnership.
9. Successful partnerships take very deep skins in the game: The only kind of “deep skin in the game” I know of is hard money. There are two cases where I have seen partnerships have the rare success. The first is where a company not only announces a partnership but at least one of them takes a stake in the other (sometimes both take stake in each other). This is commitment at the highest level. There is a tangible way of benefiting from each other’s success. In case of vertical partnerships (e.g. one is a software company and the other is a services company), it gives the much sought after “exclusivity”. The second model – which I have seen lesser number of successful cases – is when the sales organization is commissioned on selling the partner’s offerings. The reason it is less successful is pretty obvious – at the end of the day, a company will pay more to a sales person for bringing green dollars to the company.
10. Two and Two has to add to Five: Finally, a partnership, from a customer’s point of view is something interesting (and the whole partnership will eventually come unstuck if customers do not buy) if the sum of the two is truly more than the parts individually. Other than the marketing slides, the customer needs to be convinced that this truly solves their business problems more and at an advantageous rate. Most importantly, the two teams together can do a better job than if the customer has to buy them separately and put them together.
I do want to point out that there are partnerships in software world that have succeeded. I consider the Big-5 partnership with SAP as a big success. From what I saw, I think Accenture with Retek was a good success too. I am told IBM and Dassault had a very successful partnership too. But they are few and far between. If you or your company are thinking of getting into a partnership that is to bring in any meaningful money, think about it carefully and convince yourself that you are willing to put in the money and the effort. For the fun truly starts after the initial euphoria of PRs and handshakes are over…
Most of my commentary here is based on my experience in the software sector. It perhaps can be extended to other sub-sectors in the IT world but probably not any further. However, in the software sector, I have seen the patterns repeat often enough to convince myself these are not accidents.
If you have ever led a software company or even worked in one, you definitely are aware of your Partner/Alliance organization. I have not come across too many companies where this department has been a very effective department. When I was a senior manager, most of the time, these were huge drains of time in attending meetings, making presentations and all that – and very rarely a lot of bottomline revenue to show for it.
Having said that, there are a handful of small companies I am told have made this succeed and I had the pleasure of setting of one very successful partnership myself (but that’s all 😉 )
Here are my Top 10 observations (in 2 parts):
1. Most partnerships are between “unequals” : The basic reason why software/service companies partner is to get access to each other’s customers or technology. Usually, the higher priority need is access to market. Therefore, the smaller partner is more interested in getting the partnership going. The bigger guy has little interest unless access to this technology opens up a large market for them. (which is rarely the case). When the bigger partner is a service company, they have even lesser interest to tie themselves to only one technology vendor. It is in their revenue interest to partner with any number of technology competitors – hoping they can win in either situation. More often than not, the smaller company keeps trying hard and eventually loses interest (not totally though – they need the big partner’s logo on their website J )
2. All partnerships start with a “feel good” factor: Regardless of past experience, all new partnerships start with a lot of expectations and self-deluding visions of conquering the world. For the larger company, the deal maker senses that a great line item has been added to the portfolio for the sales people to sell to everybody. The smaller company, of course is highly elated that finally the doors to the entire world has been opened up with them. While a few do work out that way (in a very restrictive model though), after a few of those “Steering Committee” meetings, reality starts setting in reasonably quickly.
3. In a large number of cases, partnerships start because of a personal relationship at a high level: Big or small, most of the partnerships are put together because somebody high up knew somebody high up in the other company. In general, business runs that way – through networking and personal relationships. In cases of partnerships, this is even more important since the trust and faith factor is taken care of from the word get go. In my experience, some of the more successful relationships have that one common thread. There is a deep personal relationship between the two persons who put it together in the first place.
4. There are enough second guessers on any partnerships: The above point has some unintended consequences. Since two partners often are brought together because of some existing relationships at high level and some truism behind Murphy’s law about “there are as many deeply rooted beliefs as there are possibilities”, there are always other people with different opinions on the partner. Unfortunately, partnerships take a unified line of execution across multiple divisions of a company – marketing has to support with marketing materials, sales has to support by educating sales/presales and pushing the partner, development has to work on integration etc. Unless this is driven right from the top, usually there is enough passive opposition that these get slowed down. Usually a few quick wins at account level helps speed things up
5. Most partnerships are opportunistic: At the end of the day, everybody wants a free ride. An ideal scenario for the companies is “I do not have to spend too much time on you but your sales will bring me to a lot of accounts”. And if that is not happening in the next 2-3 quarters, we need to think about it. I once worked for a reasonably large size company which was known to be a very opportunistic partner. This used to be held against the company. Contrary to what most people think, I do not see why this is a great problem. My view is business is business. Companies partner for a good reason – not because they feel good about each other. As long as there is no unethical or illegal behavior, I personally do not see any problem with partnerships bring put together driven by market opportunism
(to be continued)
I am sure you have encountered the concept of the “internal customer” in your organizations (especially if you are in delivery organizations). This happens when one group or team in an organization believes that they essentially serve to another group/team internally which in its turn, exist to serve to another team and so on till the last team actually serves up the real customer.
This happens when Development thinks Product Management is their customer or when Product Management thinks Sales is the customer and so on. A few weeks back I overheard a variation of the same concept in a meeting “we will completely outsource this to you – let’s agree on the budget and SLAs”.
The theory is if each team performs to its best level in delivering to the next team and the chain continues in that fashion, the real customer will get the best performance.
In reality, this is a very simplistic view at best and delinquency to the real customer at worst. The fallacy of the thought process are many. To name a couple,
• This gives rise to “buffer bloat”. Each team, in its desire to meet the agreed upon SLAs and metrics, will build in its own “safety” buffer. (also known as sandbagging). By the time these buffers are compounded across the chain, it can be scary.
• This also loses the straight line of sight to success. Which means you will find situations where the customer and organizations closer to the customer are not meeting success critieria but other organizations (usually further away from the customer) meeting their numbers and declaring success.
The best culture to grow is recognition that there is only one customer. And that is the person who pays up the money.
Nobody else is the customer. Everbody else is part of a team that delivers to that one customer. To compare with a football (soccer) team, no one player passes the ball to the player ahead of team and declare his/her job is done. Everybody has a position to play – even when they do not have the ball. But they have only one common goal to meet – no interim internal goals.
To mix the metaphor a little, to compare with the American football team, everybody plays on the same game plan. No doubt there is going to be one quarterback (I like to think of that as the sales organization). But there are running backs, tight ends, punters, wide receivers each playing their own position in tandem with each other to meet exactly one goal. But nobody in the team is trying to “satisfy” some other player in the team. Nobody is measured on any other term than the one score that everybody else is measured on.
In summary, dissuade people from thinking they serve some internal teams.
Establish a clear line of sight for each team to the one real customer – one goal.
Align metrics such that no one of the teams can be successful if they whole chain is not successful.
Would like to hear about your experiences…
It has been almost a year and half since I jotted down my learnings. Clearly, my learnings have not stopped. What had stopped was my discipline of putting it to pen and paper after reflecting on them. I also realized that in the meanwhile, Google had changed some of the setups of Blogger – due to which I was not getting notifications for any of the comments. I cleared and published all of them today.
In the last 15 years, I was fortunate enough to have run all the 4 critical functions of a software company – Global Engineering (R&D), Global Consulting (Professional Services), Global Marketing and Global Sales. As you can imagine, there are lots of learnings that I had to go thru. I am sure some of you have gone thru this too. It would be great to hear from you about what you have learnt. I also want to point out that I did not have the pleasure (yet) of running any of the other organizations like HR, Finance, Legal etc. (I sure hope to run HR someday)
Some of my observations:
1. Everybody thinks they have the short end of the stick: R&D always felt that sales sold without understanding what is there in the product and what is not. And now they have to slog it out to meet completely unfair deadlines. In fact R&D’s opinion about sales personnel has not been too different in any of the software organizations that I have seen (worked or was on the board or just had good visibility into).
Consulting, on their part, always thought that they were stuck between the fire and the frying pan. Sales set them up with all sorts of expectations and R&D takes their own sweet time to deliver anything – needless to say it is going to be buggy. And now they have to face the music in front of their customers.
For sales, it was they never got a good healthy qualified lead list and in any case, they never figured out what they heck R&D really does for a living. Sure enough the competitors seem to be developing much better products than us.
Marketing groups were a little more interesting. Most of the complaints I heard revolved around budgets than anything else.
2. I do believe some things are more difficult than others: I am sure you realize that nobody has a cake walk – everybody has a tough job to do given that the market dynamics and customer expectations keep getting tougher and tougher. But allow me not to shy away from speaking my mind – based purely on my experience.
Of all the jobs, I think the sales person has the toughest one. There are two metrics I use to judge the toughness of a job – how measurable is the success of a job and how much can a person control the variables to make the job a success. I absolutely am convinced that sales has the tightest measure – pure dollar numbers – it is totally in black and white. Sure R&D has to deliver to deadlines, Consulting has to deliver to customer sat, marketing has to deliver to pipeline, branding etc but if you think a little more carefully – and I mean this without any disrespect to any profession – it is possible to cut some corners to meet a deadline, it is possible to smooth out some satisfaction issues with personal relationships, it is difficult to nail down exact pipeline quality / branding ROI etc. Not to say there are not established measure for this – but nothing compares to the exactness of the green dollars either being there or not.
As a double bind, sales has the least control over the variables. A salesperson has to do with parameters which are mostly external – prospect’s budget, prospect’s political alignment, prospect’s timeline, sense of urgency etc. etc. The best sales person of course tries to influence these but, at the end of the day, these are external variables. Marketing has a similar issue too (see below).
3. Marketing is something else: Of all the jobs, marketing is the most amorphous. It is very difficult to nail down a straight line of sight from what you do in marketing today and what you actually get. The lead time of doing something in marketing (by the way – this is not true in the consumer side of the world – I am talking about enterprise software only) – be it branding, be it a new message, be it a new segmentation strategy – and actually getting the results from such is so high (typically a year and a half) that most people (notably CEOs) lose patience on it. This makes the marketing job somewhat easy (difficult to pin down what is wrong with one is doing) as well as difficult (you always have to fight your point without results). BTW, somebody once threw me this data that an average CMO lasts for a year and a half. I am not sure how true it is – but if it is, I completely understand why. In short, my respect for sales people is the highest. So much so, that I always return all telemarketing calls and email marketing (not the spams :-)). I tell them that there is no chance of doing business. Having been on the other side, I understand the value of being at least told a polite “No”. Would love to hear from you… Rajib