How to Get 80/20 to Work for You

Bill Fox: How can we create workplaces where every voice matters, everyone thrives and finds meaning, and change and innovation happen naturally?

Perry Marshall: You do that by being very selective about who you hire. You do that by being willing to fire people that don’t match. I think that people have this idea that it’s their job to give everybody else a job and that is not true. That’s Marxism. It doesn’t work. It’s catastrophic. You should hire slow and fire fast.

People can say anything they want. A lot of times it’s not true. Sometimes because they’re lying. More often it’s not true because they don’t understand themselves, or they don’t know what they’re capable of. Sometimes they’re nervous, or they’re just trying to find a job, or they’re just trying to say what the interviewer thinks they want to hear.

If you wanted a bass player for your band, you would not invite them over to your house and spend two hours talking about Primus and Getty Lee. You would ask them to bring a bass and play. If you were doing a Shakespeare play or any kind of play, you would have them act. You wouldn’t sit there and talk about Shakespeare.

One of the mistakes people make when they hire people is they just get everybody together to talk. They hire the person who’s most fun to talk to. What you should do is devise a task and give it to them to do. You may even hire them for an hour or for a day to do the task. Or you may bring them on as a temporary person and say here, “Do this.” You don’t listen to what they say, you watch what they do. Now, when you do that, then you will get A players. If they’re an A player, then their voice matters. They thrive, and they find meaning. If they’re a B player or a C player – especially if they’re a C player – their voice doesn’t matter because your business is not a charity. Your business is a high-performance team.

Bill:  What does it take to get an employee’s full attention and best performance?

Perry: One of the things that I realized the world needed was a way of testing how people communicate, persuade, market, and sell. We have the Myers Briggs test, which tells you if they’re an introvert, extrovert, sensing or judging. That’s useful. We have the Kolbe test, which lots of entrepreneurs refer to because it tells you how people work. For example, “Are they a quick start?” “Are they high follow through?” and stuff like that. Very useful.

Some people do it with numbers, facts, proof, and spreadsheets. Some people do it by telling stories. Some people do it with graphics. Some people do it by inventing something in the moment. Some people do it by proving how incredibly reliable and trustworthy something is. So, I created something called the Marketing DNA test. It comes as part of the 80/20 Sales and Marketing book, and we also sell it separately. Now I’m talking this test is particularly helpful in customer-facing employees. If they’re an engineer working in the back office, then this particular tool doesn’t really apply. Well, it doesn’t appear to apply, let’s put it that way.

If the person is actually talking to customers, then if they are a writer they should be answering or writing emails. If they’re a video person, then they should be live on webinars or Skype or making videos and be putting them on YouTube — or something like that. There are some people I call a hostage negotiator where you just throw them in a situation. They can maneuver their way through anything. You need to match the person to that test — to that profile.

There are some people who will sit in their cave and craft the perfect sales message in Microsoft Word. It will take three weeks. There are other people where you just give them a microphone and put them on a stage. They’re two completely different kinds of people. All of us know highly articulate people who are very good speakers and negotiators. They always send you these emails with no subject line in two sentences. It’s because their brain runs too fast for their fingers to type on the keyboard. That person should never be selling via text or copywriting.

There’s another kind of person. Their brains run a little of slower. They’re extremely thorough, and they’re very meticulous about their words. They make a great copywriter. That’s a very specific way to get full attention and best performance. Because if they’re communicating with customers through their best method, then they will like their job. They will be effective in their job. They’ll sell well. They’ll be persuasive, so you need to match that up. The bigger the company is, the more different kinds of selling modalities that you need in order to address the full needs of your audience.

Bill: What do people lack and really long for at work?

Perry: There’s just this kind of pervasive attitude in our society that life is sort of meaningless. Life only has the meaning that you assign to it and that we’re just billiard balls banging around in the universe. Allegedly — supposedly — that’s the scientific view. Well, I would submit to you in practice that nobody actually believes that. Nobody acts like they believe that. Perfectly logical rational people who say they believe that will line up around the block with movie tickets to go watch Star Wars. The reason Star Wars is so popular for so many years is because it’s a very well told Hero’s Journey epic story.

So what happens in all these epic stories? We could be talking about Star Wars. We could be talking about Lord of the Rings. We could be talking about the Matrix. Or we could be talking about any of the Disney movies. But in Star Wars, Luke is racing spaceships in the desert on a planet and living in his mother’s basement. He’s just kind of screwing around. Then the hologram from Obi-Wan Kenobi shows up. He says, “Hey, we need you. We have this big giant problem.” He doesn’t want to do this. But well, ok. He tumbles headlong into this adventure.

I think deep down this is what most people want. Maybe you could say all people. It’s certainly what most men want, but they’re also terrified because they know they can go splat — and it will really, really hurt. If you start this business, you saved up $50,000 or more. Typically you racked up $50,000 of credit cards then if the business fails, it’s going to be a big, big giant ouch when you’re standing there left with the bill. Then there’s going to be another ouch when you have to go back and get a job again. You’re taking real risks. But people are actually itching for and longing for that in their work. They want to be part of an adventure. They really want to do something that matters. They also want to do something that measurably makes progress.

But they also want to know that they’re winning. They want to know that the scoreboard says that they’re on the winning team. The score is 21 to 17, and they’re the ones with 21. The losers are the guys with 17. That’s what people want. I think that trumps a lot of the squishy ideological things that people say that they want. This is why a lot of corporate slogans are kind of meaningless because they’re really not speaking to the adventure that everybody wants to be on.

Bill: What is the most important question leaders should ask employees?

Perry: It’s really easy to add and sometimes easy to multiply. The really hard stuff in business is division and subtraction. This is part of 80/20.

There’s an advanced idea in 80/20 that my friend Len Bertain came up with. It’s called the 21/20 rule. It says that 20% of your products or your customers make 120% of your profit. There’s part of what you sell and part of who you sell to that makes a disproportionate amount of profit. Then there’s a loser part of your customers and a loser part of your product line that loses money. It brings your 120% down to the 100% of what you made last year.

In other words, you made more money then you thought you did last year. But some other customers or some other products lost the money because you’re taping dollars bills to every single product that gets shipped out. And by the way, this is almost always true. Rarely is it not true. The truth is, you walk into a grocery store and there’s like 70,000 items in there. If they cut their inventory down to 60,000 items, they would make more money. They would sell less stuff, and they would make more money. They would stock less stuff. There would be less everything, and they would make more money. But they don’t usually know what the 10,000 products are. You’d have to do a really careful cost accounting. And you’d go, “Well, we lose money selling this brand of aspirin, and we lose money selling these potato chips. We lose money having this entire aisle over here.” Well, people sort of instinctively know this is true on some level, but they have to be taught how to look for it. People need to be trained to weed it out.

If you have 100 employees, I guarantee 10 of them are losing you money. You could say, “Let’s just get rid of this product. Let’s just rid of these customers. Let’s just get rid of these employees.” Well, that’s surgery. If you do surgery and you cut an artery, you bleed to death. It’s usually very delicate. Well, we could fire this lady, but she’ll sue us. Or we could fire this lady, but there’s this one account. I know the sales rep is a train wreck, but there’s this one account that she’s in charge of that really makes a lot of money. They really like her. You end up with these little dilemmas, and it can be done. You can make those changes, but you have to be very skillful in how you do it. That’s the art of business right there. If there’s an economic slowdown and your revenue drops 25%, 80/20 says that you could cut 25% of your expenses by reducing only 5% of the things you spend money on. You might actually come out ahead. But it’s going to be a very delicate surgery to make those cutbacks. It’s going to be painful, and nobody’s going to like it. You’re going to have to lay people off. There’s going to be things that you have to do.

Another thing that you should be asking employees is for honest feedback. Now the culture of the company will determine whether you actually get honest feedback or not. People know whether they can be honest. Or whether they have to make up a story their boss will accept. In my company, I think I have a culture where if the emperor has no clothes, my employees will tell me. But that’s not easy. In most companies, you don’t actually have a culture of honesty. The honesty needs to go both ways.

Bill: What is the most important question employees should ask leaders?

Perry: I think employees need to know what’s the scorecard. How are we doing? Employees really respond when they know. We have a meeting every week where the key employees of the company review all of the product lines we’re selling, all of the sales numbers, all of our sales projections — everything.

People want to know whether we’re hitting our targets or not. People want to know whether things are working or not. This thing hit the ball out of the park. This other thing was a dud. People need to know. It’s just part of a healthy culture and a winning team.

Bill: What is the most important question we should be asking ourselves?

Perry: What I think of is in the Beatitudes. Jesus says, “Seek ye first the kingdom of God, and all these things will be added to you.” He talks about not worrying today or about the problems that are going to show up tomorrow. People interpret that as kind of a hippie laissez-faire thing, but that’s not what it is at all. It’s a statement that if you fix your attention on the very highest virtue and the very best that you could possibly achieve and rigorously laser focus on it, then the other stuff will have this funny way of working itself out. It will just flow behind you in your jet stream. I really think that is true. It’s another one of these synchronicity things.

I think most of us get caught up in what I call barnacles, which is work that doesn’t really achieve much. It just happens to be comfortable and easy to react to. I can sit there and hit refresh on my email inbox 57 times a day. I could go check social media. I could go answer this email from this person, but am I really doing the highest and best thing that I could be doing at this moment?

I like to say the reason that you’re checking your email and social media right now is you don’t know what to do. You haven’t figured out what the highest top 1% or 5% activity is that you could possibly be doing. You’re not doing it. You wanted a little brain juice, so you went and got on Twitter. This is how most people actually spend their life. I call it barnacles. It’s work. It may have some value. It may have moderate, marginal value to somebody. It feels like productivity but at the end of a day where that’s all you’ve done, you just feel exhausted and kind of meaningless. That’s not how anyone wants to end their day.

Bill: What is the number one take away you’d like people to get from your book 80/20 Sales and Marketing?

Perry: I want people to look out the window — any window, anywhere. I want to be able to say, “Tell me ten 80/20 relationships you see outside that window?” and they would be able to just rattle them off.

80% of the sap runs through 20% of the branches in that tree. 80% of the activity in that house is in 20% of the rooms. That’s how it actually works. When you can see that, you all of a sudden have this new dimension of problem-solving ability that you didn’t have before. You have an ability to ask questions that most people would never think to ask. This is what the real mavens who love 80/20 Sales and Marketing tell me. They say, “I read that book, and it changed the way I saw the whole entire world. Now I can’t not see it anymore.” I see those inequalities everywhere. I walk into a room full of people, or I listen to a political talk show, or I watch the election results. All of a sudden I can see all of these 80/20’s all over the place that I was never aware of before.

When you have something that’s so fundamental like what could be more fundamental than a new law of cause and effect that is nearly universal? What could be more fundamental than that? It affects your time. It affects how you arrange the files on your hard drive. It affects how you drive to work. It affects how you hire and fire, and everything.

It becomes this very Zen-like thing where how good at a punch can a martial arts person be? How good could you get? Well, there’s a yellow belt level of a punch and a green belt level of a punch. There’s a green belt, a blue belt, a black belt, a third-degree black belt, and a six-degree black belt. I guarantee you a ninth-degree black belt punch is different than a fourth-degree black belt punch. It’s just a punch, right? No, it’s not.

Bill: You say in your book that the primary skill that you master in marketing is thinking backwards. Why is thinking backwards so important and where else might we use it?

Perry: It goes to Stephen Covey’s begin with the end in mind. It speaks to the fact that human beings are intrinsically purposeful creatures. I’m an engineer. In engineering one of the major, major skills that you acquire is I want to know in advance how well the bridge is going to work before I build the bridge and before I drive cars on it. I don’t want the car to fall into the river because the bridge broke when a big heavy truck goes across my bridge.

We design the bridge on paper, and we analyze all the weights and load distributions. We figure that this bridge can hold three times the weight of that truck. This is the weight limit sign that we’re going to put on the bridge, and everybody’s going to be safe. I’ve never been on a bridge that fell in when I drove my car across it.

In marketing, you’re dealing with people, and people are a lot less predictable than bridges. In the context of the book, I said, “Start with traffic, then you convert the traffic, and then you have the economics of the traffic. The whole sequence of marketing is traffic, conversion, economics.” But when you design a product, a sales machine, or when you build a company, you have to think backwards. You have to think economics, conversion, then traffic because you have to figure out what can I sell? Why are people going to buy it? Where are the people who want to buy it?

I remember when I was a brand-new marketer, it really made my brain hurt to imagine I’m not the sales guy, I’m the customer, and I’m not writing this thing. I’m reading it on somebody else’s computer screen. What do I think about that? How do I feel about that? What is my bleeding neck? What are my issues? What problems do I want to solve? Why am I kicking my cat when I go home? It hurt my brain. It was like twisting myself around 180 degrees, and I’m looking at a different computer screen the opposite direction.

But then I learned to do it. It became second nature for me to do it. Now I do it all the time. You start looking at things from all of these different angles. Once you get practiced enough at it, people think this is just like magic. People say, “Oh my goodness, how do you do that? That’s amazing!” In fact, they’ll pay just to watch you do it because it’s so fascinating. I guess that’s what I do for a living now to some degree!

We have coaching groups, and a lot of what people are paying for is they want to watch somebody who can just do that complete 180-degree reversal of thinking. You go forwards, and you go backwards. You go forwards, and you go backwards. All of a sudden you end up with this completely different product idea than everybody imagined before the meeting started. Well, ok, we solved that. Why don’t you do that, and let us know how it works. Everybody has a big smile on their face.

Bill: A key principle you talk about in your book is “rack the shotgun.” What is it and how can we benefit from it?

Perry: Really quickly, the rack the shotgun story is the signature story of the whole book. John Paul Mendocha is a good friend of mine, and he hitch-hiked from Denver to Las Vegas when he was 17. He dropped out of high school and became a professional gambler in Las Vegas. He’s living by his wits and after a few weeks, he’s like this is harder than I thought it was going to be! He meets this guy in a bookstore who runs a gambling ring, and his name is Rob. John asks, “Rob, do you think you could help me do a better job playing poker?” Rob, says, “For a percentage of your winnings I can help you play better poker,” and so they shook hands on it.

When they were done shaking on it Rob says, “Jump in the jeep, John. We’re going for a ride.” They’re in the jeep, and they’re going down the highway when John says, “Alright Rob, how do I win more poker games?” And Rob says, “You have to play people who are going to lose, and those people are called marks.” And John says, “Where do I find marks?” He says, “Here I’ll show you.”

He pulls into the parking lot of a strip club, and he takes John into the club. There are women dancing. There’s booze, bikers and loud music and everything. A lot of distractions. Rob always carried a sawed-off shotgun with him everywhere he went. They sat down at a table, and Rob pulls a sawed-off shotgun out of his jacket. He opens it up under the table and slams it shut. It goes “click-click” with that racking noise, which is called racking the shotgun. There are a few people in that loud noisy club that turn around, “Like, hey! Who did that? Where did that sound come from?”

They’re on high alert. The owner comes over, and he goes, “Hey, what’s going on over here?” Rob says, “Don’t worry about us. Just teaching the lad a lesson. Not going to cause any problems.” Rob says to John, “John, did you see those bikers turn around when they heard that noise?” And John’s like, “Yeah!” And Rob goes, “They’re not marks. Play poker with everybody else but not them.”

Well, that’s racking the shotgun. It’s doing the thing that polarizes everyone. That’s what rack the shotgun is. It’s polarizing – separating the wheat from the chaff. The sheep from the goats. The Democrats from the Republicans. The pro-life from the pro-choice. The buyers from the non-buyers. Whatever the issue is.

All great leaders rack the shotgun — courageously. Even bad leaders do it, but leaders do it. Trump racks the shotgun all the time. Hillary racked the shotgun all the time. Gandhi. Jesus. All of them. People are afraid to do it because it creates who are your friends, and who are your enemies? It wears you out a little bit. It gets tiresome. I know. I get it. It’s what you have to do. Everything you do in marketing is racking the shotgun. Everything you do in leadership is racking the shotgun, so people are afraid to do it. If you’re hiring process is an audition instead of an interview, then that’s a rack the shotgun exercise. Ok, who can put those screw assemblies together in 15 seconds or less? And who can’t? Who can do 600 keystrokes per minute on the adding machine and who can’t? That’s the essence of it. It takes courage. It takes balls, and you just have to do it.