After writing yesterday’s blog on “Know Thy Time, Part 1”, I thought it best to give some background information before continuing with part 2. As you will find, BasicsRedefined process is considerably different than most protocols found in business today. A few years ago I was browsing the bookstore at Belfast International Airport. I happened upon a book entitled The 80/20 Principle by Richard Koch. Like most consultants I was familiar with the Pareto Principle, The 80/20 Principle and The Vital Few and the Trivial Many, but had never studied them to any great depth. Even though the seminal research by Pareto, published in 1906 was enlightening (Pareto discovered that 20% of Italy’s population owned 80% of the land), it was another 35 years before Joseph Moses Juran blew the dust off his research and started using it in his consulting practice and then later writing his seminal Quality Control Handbook. It was Juran who coined the terms, Pareto Principle, the 80/20 Rule and the Law of the Vital Few. Juran confined most of his research to the area of Quality Management, TQM and Quality Circles.
Today knowledgeable executives and companies are exploiting the principle as never before. After reading The 80/20 Principle and studying the Pareto Rule, I started saying in my programs that I felt the principle it contains could be the most important management discovery of the twentieth century.
Let’s take a look at a few examples as to how this principle could help you.
Suppose you are handed a new and troubled department to oversee, in addition to your current duties. The department manager was fired. There is no new manager. You need to clean up the mess. The department which has 100 people appears to be completely dysfunctional. You feel like firing everybody and starting over from scratch. Let’s take a look at how Pareto could be used. 80/20 would say that 20% of the employees are creating 80% of your problems. If you were to carry it another step by doing 80/20 on the 20% you would find that 4 people are creating 64% of your headaches. Try one more step, 20% of the 4% you would find that .8% of the people (one person) is responsible for 51.2% of your problems. So to start turning your new department around, IDENTIFY and extract those five people and you are well on your way to solving your problem. Just a side note for now. The word identity will loom large throughout the blogs.
I often refer to the 80/20 Principle as the Law of Disproportionality. Years ago I did a sales seminar for the Metropolitan Life Insurance Company. There were 20 agents. 16 showed up for the program. 4 were too busy. Interestingly the 16 remaining agents shared the services of 2 secretaries. One agent had 3 secretaries, three agents each had their own secretary. Most sales managers know that 20% of their sales people sell 80% of their products.
As a side note I see over and over again the mistake that upper management makes in laying off people. They cut back on secretaries or administrative assistants, forcing higher valued personnel to perform lower value work. That diminishes productivity to a downward spiraling level. Managers for the most part are not Cracker Jacks at Word, Excel, or Access. Making incompetent secretaries out of highly skilled personnel is misguided management, at best.
We’ve known for a long time that 20% of a manufacturing process accounts for 80% of product defects. Understanding this principle was seminal to six sigma.
This phenomenon continues throughout the organization. It applies to time management, relationship management, problem solving, project management, product management, team management. I encourage you to read The 80/20 Principle, by Richard Koch. If you are of an entrepreneurial mindset take a look at a derivative, The 4 Hour Workweek, by Timothy Ferriss.
The Law of Disproportionality has always been with us. Understanding and utilizing it is one of the most important skill sets that executives, managers and business owners can possess. On a closing note. 80/20 is not exact. It could be 75/25, 90/10. However, it is always disproportional.
