Salesforce productivity, Prices Law & My Gross Margin is dropping what should I do?
19 February 2023 Newsletter
“People are always excited about the games in sports, but it is all the discipline and habits built in practice that drives winning”
Hope you’re Thriving!
It’s been a great week with lot’s happening here. Over the past few weeks, it’s felt that we’ve been getting back into it after the new year break; it now feels like – to use a flying analogy – that we’re back to cruising altitude.
Let’s do it.
There’s no doubt that recent layoffs in the tech industry have been brutal. It seems that when the rivers of free money from investors dry up, companies need to begin running efficient and effective organisations that adhere to the basic fundamentals of business. Who would have thought?
Salesforce is no exception, having laid off 10% of employees in the past month. But what was interesting was the underlying data and assumptions that identified who the layoffs would be. Consider the quote from this Techcrunch article:
“CEO Marc Benioff reportedly telegraphed that the sales group could be targeted, telling employees in a company meeting last month that remote workers weren’t as productive as folks in the office, and that half the sales team accounted for 96% of the revenue, suggesting that the other half accounted for just 4%. It seems likely that department could take a big hit.”
I’m going to repeat that. Half the sales team accounted for 96% of the revenue.
And they knew this all along. And this isn’t some two-bit, no-idea company from the middle of nowhere. This is Salesforce; they make the best sales software in the world and, by many measures, are number 1.
So if the company that makes the best sales software in the world (who should theoretically have an exceptional sales team) has 96% of revenue coming from half the sales team, what does that mean for the rest of us?
What percentage of your sales team creates the bulk of your revenue?
The Salesforce sales team’s performance is an example of Price’s Square Root Law.
For example, if you look into a sales team of 25, about four people are likely bringing in more than half the total sales.
This relation holds true for almost everything in business and originates from academia.
Derek Price, a British physicist, historian of science, and information scientist, discovered something about his academic peers. He noticed that a handful of people always dominated the publications within a subject.
Price found out the following:
50% of the work is done by the square root of the total number of people who participate in the work.
In my example, that means five people (square root of 25) should bring in 50% of the sales.
That’s great to consider when looking at your sales team. But if it is a broader law, how does that make us think about our company or industry? Applying this thinking forces us to ask, are there a small number of players in the industry that gain more than 50% of the industry revenues? Often, there are industry giants that eat up the revenues.
But then, that leads us to one of the three questions that form part of the hedgehog concept from Jim Collins. What can we be the best in the world at? Because if we can’t be the best at our core business, if we can’t create substantial value, then move to a place where we can.
Read this interesting article about Prices Law below for more details.
Price’s Law: Why Only A Few People Generate Half Of The Results
26 signs of Emotional Maturity
I heard it said recently that almost all toxic behaviour stems from immaturity, which I found intriguing. It’s proposing that the person who is a jerk or is unable to engage with you in a positive or healthy way has failed to mature.
As I considered different people I interact with, I began to wonder, has this person just been unable to mature emotionally, which is the root cause of the behaviour I’m observing? How does that impact their workplace and their relationships?
I then came across the article below, which discusses the 26 signs of emotional maturity. But fear not. This isn’t some garbage clickbait article. Instead, it’s written by a group that facilitates teams’ engagement and well-being.
Here are three points I found interesting.
You learn the enormous influence of so-called ‘small’ things on mood: bed-times, blood sugar and alcohol levels, degrees of background stress etc. And as a result, you learn never to bring up an important, contentious issue with a loved one until everyone is well rested, no one is drunk, you’ve had some food, nothing else is alarming you and you aren’t rushing to catch a train.
You learn to see that everyone’s weaknesses of character are linked to counter-balancing strengths. Rather than isolating their weaknesses, you look at the whole picture: yes, someone is rather pedantic, but they’re also beautifully precise and a rock at times of turmoil. Yes someone is a bit messy, but at the same time brilliantly creative and very visionary.
You cease to be so easily triggered by people’s negative behaviour. Before getting furious or riled or upset, you pause to wonder what they might really have meant. You realise that there may be a disjuncture between what someone said and what you immediately assumed they meant.
Check out the complete list via the link below.
A Shrinking Company
This week on The Growth Whisperers Podcast
My Gross Margin is dropping what should I do?
Gross margin is one of the most important numbers in your business.
Gross Margin (percentage) is a good indicator that your business is healthy: Both on the selling/strategy end indicating your customer is willing to pay you well for what you offer, and on the operations end demonstrating that you can efficiently produce what the customer wants.
The trend of this number over time can tell quite the story. When it starts to fade, as it often can, it is a reason for concern.
This week we talk about Gross Margin erosion, why it happens and what you should do if you find yourself in this situation.
Listen to The Growth Whisperers
Or watch it on YouTube
Onboarded: Fast Track New Hires to Success – Live Virtual Masterclass with The Growth Faculty – 22 February 2023
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