What's the 20/120 rule costing you?

As a business leadership and sales coach, I’m always on the lookout for ways to help my clients improve their bottom line and get their time back.

Enter the late Jack Welch, former CEO of GE, who in the 1980’s and 1990’s controversially advocated firing the bottom 10% of his workforce every year.

While it’s a pretty harsh attitude, there are principles behind the decision that are useful in any business.

I’m sure you’re familiar with the 80/20 rule where:

20% of your products deliver 80% of your revenue.
20% of your services generate 80% of your profit. (BTW, your highest revenue items might NOT be your most profitable!)
20% of your employees produce 80% of your results.

But there’s a less well-known paradigm which is the 20/120 rule which shows:

Your top 20% of products could be generating an impressive 120% of your profit.
Your bottom 20% of products might be losing you 20% of that profit.

In terms of people (and in my case, sales teams)

Your top 20% are your high performers who consistently overachieve. You’ll often find these people doing 120% of quota etc.
Your middle 60% are somewhat mediocre. They have potential but may lack coaching, systems, or accountability.
The bottom 20% often need to be retrained, repositioned, or exited. They might not be the right fit.

In other words, your weakest performers aren't just underperforming; they're actively costing you money and eating into your best results.

Once you've identified the underperforming 20%, you have critical choices to make:

For Products and Services: Can these be redesigned, repackaged, or bundled with successful offerings to lift their performance? Or is it time to cut your losses and redirect resources to what works?
For Employees: Determine if underperformance is due to skills gaps or being in the wrong role. If they have the right attitude, targeted training or repositioning within the company can help them thrive. But if they're fundamentally unsuitable, making the tough decision to let them go may be necessary.

Doing so you'll free up valuable resources, time, money, and headache to invest in areas that truly create a leaner, more efficient, and more profitable organization.

Having said all that, you get what you measure. You need KPIs and accountability (including for yourself as the owner) for this to work. 😊

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Rashid Kotwal
Revealed Resources - Driving Business Success - Helping Business Leaders Achieve Sustainable Growth
Mob: +61 414 913334
E: rashid.kotwal@revealedresources.com
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