Howdy Partners #38: The 80/20 Rule - Balancing Revenue & Influence
Will and Tom discuss how to apply the 80/20 to your day to day work in partnerships. Will argues against its usefulness as a framework for thinking about partners, saying it confuses people and doesn’t convey enough nuance because it’s such a general rule. Tom makes points to Will’s argument while backing the 80/20 rule.
Tom argues for its use as a guide, specifically for startups. They discuss the benefits of considering partner influence in the ecosystem.
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Full Transcript:
Will Taylor 0:03
Howdy partners, and welcome to another episode of The howdy partners podcast, where we give you tactical insights to help you in your day to day as a partner professional. Today, we're talking about the 8020 rule. So I made a LinkedIn post about this must have been about two weeks ago or so. And it generated a lot of discussion. I'm of the mindset where the 8020 rule is BS, I think we'll get into it, I won't spoil anything. But I think it's, it's something that is one of those good in theories, but not good in practice kind of thing. So today, we're going to be debating it where Tom is going to be for the 8020 rule. And I'm going to be continuing to be against it. Because I don't I try not to fall prey to fundamentals. But Tom, what's what's going through your mind on the 8020? Rule?
Tom Burgess 1:03
Let's start with the start, which is good, the principle itself and why this creeps into organizations? And I guess maybe specifically, like the partnership side, which is, to me, I don't know, like, the the principle itself is like, you could go either way. You know, there's I guess there's some positive some some negatives. But, you know, in my role when I think about it, I don't know, if I've been conditioned to think about, you know, capacity or like, what types of companies would would try and instill the 8020 rule. But you and I were talking before, we think where this kind of creeps in or is more prevalent is, you know, maybe in some of those, like more startup type companies, or like the companies, you know, that are launching in an activating partnerships, or just a partnership ecosystem. And it's like, really hard to ignore, it's hard to not think about, okay, I'm launching this program, we need resources, I need assets, any people more importantly, I could get away with or I could start this program with the 8020 rule. Right? And that's how we're going to run it, versus, well, couldn't I just effectively manage partnerships. Without that, right, like, without? Yeah, I'm gonna focus on the top 20% that are actually generating the other 80%, you know, hopefully, they can access enabling resources, etc. But to me, I, I am going to take the stance of the, I'm for the 8020 rule, which is, you know, in an organization where you don't have a lot of people, like, let's just call the your partnership program, just launch whether your company is a startup or not. Okay, I've got a team. And maybe it's just myself or, you know, myself and someone else, I'm very small team. I think the 8020 rule in that regard, maybe protects you from from the idea around capacity, or more specifically protects you from wearing too many hats, which is kind of contradictory. Because we know in partnerships, you do wear a lot of hats. And that's typically a positive in some regard, because your your professional expertise. But what I mean is, you know, if I'm a partner manager, and I'm now fielding support questions, and having to fueled, you know, sales questions, that in itself, my role is being scratched where I need to consider the 8020 rules that I'm focusing on those partners that are delivered, or produced producing excetera. So, yeah, let's talk about the startup side or new those smaller companies, just in
Will Taylor 3:43
case if anyone doesn't know the 8020 rule, it's the idea that 20% of your partners are going to generate 80% of your total revenue, and 80% of your partners are going to generate 20% of your total revenue. So there's going to be highly activated and engaged partners, and it's going to be this smaller view. And then there's the larger majority, which is going to be the less active, less engaged. And so it's very real. And that's why it's a principle of, you know, the Pareto principle, it appears in, like economics, and politics and society, and yada yada. And so it's a very real thing. And it's interesting that you mentioned that it would be effective to drive efficiency for someone's role, because it may help them focus. I would say for a startup, the 8020 rule happens less frequently. And the reason I say that is because as you have more in the data set, there's more of a likelihood that you're going to have this more standardized split. And so you know, Microsoft and Google they probably experienced the 8020 The role because it's just such a large volume that it's hard to manage at that scale efficiently, because it's just absolute chaos. There's probably like a certain point in, like the volume of partners, where the human mind and even the human mind can, working with other human minds, can't even comprehend, like how to actually handle all that. But for the average startup, it's, you know, maybe it's 30 partners, maybe it's 100 partners, maybe it's 150 partners, even some of the larger ecosystems I've seen be around 150. And that's some of the larger ones. And then that makes me think, well, the average SAS Partnerships Program probably doesn't have that many partners. And so their variance is probably different. It might be 1090, it might be 3070. And so that's where I think it does a potential disservice to think about it, because think about the program through the 8020 lens. Because, yes, it could drive some general efficiencies. But if you're in the 1090 situation, it tells you, you need more partners that are performing and generating revenue, so maybe you need to go get more partners, and then maybe you don't have time to do that. And so that's where I think it starts to break down where the nuance isn't captured in the 8020 rule. And there could also be some unique pieces of the program that actually allows for high engagement with partners that could push it more towards, you know, a 4060. So I would say it causes more confusion and disorientation. Because it's such a general rule.
Tom Burgess 6:52
Let's say you're at a, you know, a SAS organization, you're, you're labeled as a startup, but you're in hyper growth mode, meaning, you know, you can't, you can't hire enough to facilitate your customers, you can't hire enough to facilitate your partners. And and let's, let's add another piece in there. Like, let's say, your partnership program is just organically growing hyper quickly, meaning you, you're getting so many partners, then the more you're you're gaining more partners, then you kind of know what to do with? Well, to me, you're trying to combat like, okay, am I hiring to fulfill the need of of, you know, the partners that are coming on board? Where do you focus your time, so like, in that, in that model, you almost have to be selective, in what I would, I guess, argue is that you can't control your growth, to some degree, like the, the uncontrollable growth of your partnership program, or your company is not something that one person can stop, and nor do you want to, in the same vein, you need to, from a partnership lens, you need to really think about what your next hire is, or you're like your team growth. And so you're going to maybe go through these times with the 8080 20 rule, whether you can focus on it, or whether you want that rule in place or not. And so you've got to be, you've got to be smart about how you do that. And I just think in a hyper growth company, it's really hard to avoid,
Will Taylor 8:24
you're then saying you'll probably hit it at some point. And so if you're planning for it, then you're almost ahead of yourself and planning. Because your perspective is perhaps a bit, you know, more future looking. And if you're 1090 in the split, then okay, maybe I need to focus on enablement a bit more. If it's 3070, maybe that tells me I should focus on generating more volume. And then that would inform the actual, you know, headcount that I need. For, you know, maybe it's a partner development rep who's going and seeking out new partners, or it's an enablement person for partnerships, and that'll bring the, you know, additional 10% up to that 20%. So, you're saying it's kind of like the, the the guide, but not necessarily telling you what to do just the guide for where things should probably sit?
Tom Burgess 9:23
Yeah, and I would say more. So it's, it's an effect of, like, needing to be reactionary, you know, everyone, you want to be as proactive as possible. But the problem is when you're in hyper growth mode, or your your, your team feels like a startup, you don't have the people power, or the resources. You've got to figure out how to calendar and work effectively. And to me that that sounds like if you've got partners that are delivering or partners that are bringing you opportunity, well, regardless of whether my comp or my goals are based on revenue 99.9% of the time They are going to be, well, I'm gonna go where the revenue is. And so if I can help kind of chisel away and and activate some of the partners that are there in delivering? Well, now I'm looking trying to see if there's a multiplier effect. So it's, it's hard to be proactive. And I guess that's like maybe the main statement is that if you get into that model, you start to think about like, Well, my team's not big enough. So what am I going to do with my time? Well, if my time is based on driving revenue, I'm gonna focus with the partners that are driving revenue, and whether that's 20%, whether that's 30%, I do see where your point is coming through, it's, it's, it's breaking down the barrier of an actual percentage, and more. So just focusing on the partners that are bringing you opportunity. And effectively bringing that on or managing that
Will Taylor 10:48
what I'm hung up on is, as a startup, you have the opportunity. And in fact, I would venture to say that you need to leverage the opportunity to really lean into those relationships to get that feedback so that you can scale. So that's where, again, I'm still hung up on like the actual effectiveness of it, because I would say that your program should be 3070 or 4060, even when you're earlier stage, because that means you should be not focusing on on volume, because you don't know what you're doing yet. And you should be enabling, you should be engaging more deeply should be having a closer relationship with the partner so that you can learn more about what the program actually needs, versus going as far and wide as you can. And then not really learning anything, you'll just have like this very surface level feedback if you are getting any feedback. And I don't think that would allow for actual strategic relationships. And instead, it would skew more towards the more transactional relationships because you're not close with them, you're not strategic. And so the engagements are higher level or a little bit more superficial or transactional. And that would, in my opinion, negatively inform the program and where it should go, if you are thinking through that lens. So let's say I have a program right now. And it's a 4060 split. And we're still learning the ins and outs of what is good for our program. If I then say, Oh, I'm just gonna, you know, let go of all those learnings. And, you know, I have this good quality revenue generating lots of value, you know, I know where I should spend my time, and I'm not wasting time on this additional 20%. To make it the 80% is just, you know, maybe the 60% that I'll eventually get to, if I then, you know, just disregarded all of that and said, okay, all the 8020 rules of thing. So I better get more partners, I just completely stop engaging deeply with those partners that I do have that are already engaged, I don't learn and then I go and get some more partners, and then they get on boarded. But I didn't learn. And so that's why I think it creates that vicious cycle.
Tom Burgess 13:11
I think when you go in thinking about any rule, like any percentage of of focusing on certain partnerships versus others, I would say more than likely those partnerships are going to, you're going to focus on the partnerships that are driving revenue, they're driving you value. So think about how, like the snowball effect here isn't just like, it's a boulder like your snowball picks up so much steam. So as you start to think about that, whether it's your own capacity, whether it's focusing on partners that are driving revenue, it's so hard to come back up that hill, and bring that big ass snowball back up to the top. Because everything else is going to be revolving around that you're going to be hiring based on capacity, you know, what you think that is? You are sometimes partnerships are tiered based on just like top performing partners and, and top performing partners get enablement, live enablement, live, you know, Partner Manager, versus the lower tiers get self serve your, you know, learning out of an LMS. So it's kind of broken from the start when you think about it. Now, granted, I still believe that there's going to be some effective percentage that that will happen regardless, I in this is where I agree with, you know, it's it's not necessarily the 8020 It's, it's much more of like, how are you deepening the relationships? Is that 40% of your partnerships? Is it 5050 split? Is it 1090 You're gonna have to find that kind of balance or that that medium and then build everything else around that. And well, I think one point that we want to get to is, let's just think about the people side. So capacity is a real thing. partner managers can effectively carry a certain amount of partners and that that varies based on we'll all be Based on product based on, you know, the organization that you're at, and the way that people think around capacity is, you know, well, Partner Manager can carry 50 partners. And maybe they're, they're really only focusing on 15 or 20 of them. Well, now you're right back to the 8020 rule. On top of that, you know, let's think about an organization that has partner BDR is on the front side. So those partner BD ers all, all they're worried about is hitting their quota like an AE or anyone in sales, and their quota is most likely going going to be around number of partners they bring in. So in general, like as you look down the line of your partner team, if you're BDR, is hypersensitive, to bring in as many partners as possible so they can hit their goals. Well, now, what does that do for your capacity versus like focusing on the quality on the front side of thing is really important.
Will Taylor 15:57
I think that's where the application of the 8020 rule starts to break down. Because we know that if any program is only focused on generating revenue, they're missing out on the total influence that, you know, maybe that 80% of partners that aren't generating revenue directly, they're maybe out there in the ecosystem, talking about your product or referencing you and you know, that has some impact on your brand and the eventual revenue, we just don't have the attribution for it. And so I think it breaks down when we do start thinking about the revenue as the leading, or rather, the only metric, it should be the leading metric. But if it's the only metric that is considered valuable in the partner program, that's when it does break down, maybe you do have partners that just want to talk about your product in the ecosystem and generate value, that still requires some level of enablement, it's not necessarily the one to one conversation, per se. And the other piece that I would say to that is, if partners are not engaged with the rest of the organization to not necessarily offset the workload, but like the, it would offset the the workload to a certain extent where if sellers from my partners company are engaging with sellers for my company, they're going to learn a whole lot, and they're going to get a lot of context, and that's going to reduce the burden on me. But it's also going to be immediately aligned with the values and the incentives of those individuals, as well, as they're working together, you know, gathering intel on accounts, that's going to help them hit their number faster. So it is going to generate revenue, but I don't have to put in the work necessarily for it. And it is harder to attribute. And so that's where, again, I think the 8020 rule does deteriorate when you think of the individual versus the holistic, or, you know, the one to one relationship versus the ecosystem mindset of, well, this partner should be entirely engaged with our company. And obviously, I know, I recognize that that's not going to be every partner as well. But let's say that's the middle percentage of the, you know, from 20% to 40%. Maybe that's the percentage that gets engaged in and is in the ecosystem, talking about your company. If you're telling me that you wouldn't want to focus on that, because it does directly, or rather indirectly generate revenue and has a direct, massive impact on the business, though, it's harder to track that I would say, and this is my gripe with it, it's like that's bad advice. You shouldn't, you know, tell a partner manager not to focus on that, you know, from 20% to 40%, just because I don't know, you don't have a direct relationship with them, like you should still get them engaged in some form. And so, yeah, I would, I would venture to say that in terms of resource constrained perspective, when you focus only on the revenue, that's when, you know, the 8020 rule makes sense to apply. But when there's the thoughts of the actual effectiveness of a partner program, I think it starts to break down because we all know that it's not just direct revenue,
Tom Burgess 19:09
the closest relationships, yeah, should be with the partners, but at the same time, like, isn't it? Isn't it more important to build processes like internally with the sales CX team, because ultimately, what you're doing is you're spreading, if you build a lot of process that reduces friction on capacity a, like IE, you know, I'm, I'm a partner manager, and I'm not, I'm not in charge of demoing or selling the product to a partner's customers. I let the sales team do that because they're the experts in that arena. And to it helps them so now they have strong relationships because they are comped based on you know, revenue pipeline, whatever. And they they welcome partner leads because we know partner leads close that much better. Then, okay, now you're reducing. I think it's really important to think about the actual hats that you wear. In a partner organization, and starting to develop and build efficient processes with the rest of the organization, because that's, that's the easiest way and most, you know, in your face way to help reduce a lot of that capacity, so then the 8020 rule kind of goes out of your head. The other side is partnerships is still a partnership, meaning I'm, I know there's a responsibility on the partners and the partners ghosting you, if they're just not doing it, like during the program, they're just not doing anything, then it's okay, it's okay. It's, it is okay to not focus on them. And this is where I'll come back to like the four is that I'm going to remove the 8020 rule, I'm just going to say there's a percentage of your partners that you should focus with, and those are the ones that are willing and investing their time and adapting their business around your product. And I promise you, the partners that come to your program are coming in for a reason they see a need, they see necessity, and they're gonna feel that they're going to fill that gap in the same in that same motion, a partner manager should be eager and excited to to, to tackle that with them. And and and here's I guess the the, the argument is that the 8020 rule completely goes away, we don't even need to say at 20. Again, it's going to be ingrained in my head, once you think about what it takes to act actually activate a partner. And if you're thinking about that in the lens of okay, they need to know our product, and they need to know how to sell our product, those are two cores to activating a partner, well, then, if I can do that, in two months, if I can do that in three months, and then just kind of see how they do, it removes a lot of the friction around the 8020 rule, because then, you know, if you're doing your job properly, you're helping activate. That's the long term gains, like they're gonna bring the opportunities to you, you're gonna continue to talk to them. But I think in the long run, now, here comes my four. Again, if you can activate all of your partners, 100% of your partners in whatever format, whether that is live with a partner manager, why with partner enablement, via an LMS, you know, certification instructions, then great. Now, my relationship down the road from a partner management perspective, can be more than that 3070 4060 Because I'm focusing on scaling, refining, etc, with the partners that are actually willing to talk to me.
Will Taylor 22:23
That's, that's a fair point. And so what I will accept with all of this is, The Pareto principle is a good North Star. However, it is not the path that is right in front of you to get to that North Star, it's going to be winding and it's going to be 7030, maybe 6040, maybe 1090 At certain points. And so it's, it's okay to maybe try and balance it back. But I would be very cautious in honestly advising anyone who is running a partner program, especially again, like early even mid stage to not be directly focused on those specific numbers, and instead more focused on the actual value and learnings and how integrated is the partner or the partner program into the business across the different functions, I think those are much more important than the Pareto principle. And that's, again, you've raised some valid points, and you've got me thinking, I'm still on the side of, it's just not as useful. Because it's just so general that it's hard to make it practical.
Tom Burgess 23:38
Let me throw one more point, stop focusing on the 8020 rule as like a binding principle where like, I'm going to focus, I'm going to work with 20% of my partners, because they are bringing revenue. Instead, whether it's organizational or your partner team, focus on using the The Pareto principle to help guide your growth, meaning, you know, yeah, and you you just brought up this point, which is, okay, if if I'm like getting a pulse on my team, and I start to see, okay, we're engaging in an actually activating only 20% of our partners. Well, that, to me, is much more of like, the not the panic button, but it's kind of like the health score of our, of what we're doing, and how can I help increase that? Is that through self guided assets? Like, are we looking at it from an asset and resource standpoint? Where do we have enough information out there to help kind of like guide our partners in the right direction is a truly a capacity issue where I need to hire around that? Do I need to rethink how our current rules are, are meant to help serve and specialize to then get the most efficient, efficient program out of our professionals or out of our team? And so instead of using it as a Northstar to you know, be more efficient in driving revenue and only talking to the partners that matter you Use it as a Northstar to say, okay, you know what we went down from 22%. Like, it's very easy to calculate how how many partners you're actually engaged with, what the engagement is, you've got to figure that out. But how can I grow another percentage in the next quarter? How can I grow another percentage and use that as much more of a health score than a guiding principle?
Will Taylor 25:20
Interesting, I will think on that, but we should end it here. Thank you so much for engaging in the debate with us, either online or if you have thoughts, throw them our way. But if not, then listening is just as good. And at the end of the day, if it helps guide you in being more efficient and more focused, then use it. And if you're on my side, which I'm still gonna say is the right side. Then there are other practical tips out there that, you know, others can advise you on. So until next time, the debate is it's still open. We're still it's not over. Yeah, it's not over yet. Awesome. Thanks for a good episode. Thank you.