“When it is useful to them, men can believe a theory of which they know nothing more than its name.” –Vilfredo Pareto
Business speak is rife with fortune cookie adages we believe to be true but are woefully unquantifiable. Henry Ford’s, “If you always do what you’ve always done, you’ll always get what you’ve always got,” is great advice, but there’s no reasonable way to measure the get versus the got. We love gauged metrics and the 80/20 rule is worthy of examination. Does 20 percent of an organization really do 80 percent of the work, or is that something the workhorses made up to make everyone else step up their game?
The 80/20 rule can be traced back to an 1896 paper by Italian polymath Vilfredo Pareto. His initial claim was that 80 percent of the land in Italy was owned by 20 percent of the population. Pareto expanded his research to other countries and then things got spooky. The distribution of land to population in other countries followed the 80/20 rule. Wealth, as a percentage of GDP, fell into the 80/20 space. On a lark, Pareto found that in his garden 20 percent of his pea pods produced 80 percent of the total peas.
The applications of the 80/20 rule didn’t stop with Pareto. What has now become known as the Pareto Principle states that approximately 80 percent of the effects come from 20 percent of the causes. Failure rates of hard drives, word distribution in books, revenue by clients, standardization of stock prices, sizes of sand grains, and thousands of other correlations all roughly adhere to the 80/20 rule. It seems that the 80/20 rule is embedded in the fabric of the universe. What’s more, the 80/20 rule is “fractal” (look it up). Meaning, the 80/20 can be applied to 80/20. In other words, 64 percent of the effects come from 4 percent of the causes, or 51 percent of the effects come from 1 percent (actually 0.8 percent) of the causes. Now, THAT is a business maxim I can get behind.
The Tao of 80/20: Accelerators
- The Pareto Principle is best used as a principle for prioritization. List all of the things you have to get done within the next week or the next month.
- Identify the 20 percent that will produce 80 percent of the intended results, or the 4 percent that will produce 64 percent of the results, or the 1 percent that will produce 51 percent of the results.
- Reorder your list so that you knock out the 1 percent first, the 4 percent second, the 20 percent third, and the 80 percent last.
Dr. Jeff D. Standridge is the best-selling author of “The Innovator’s Field Guide” and “The Top Performer’s Field Guide.” He serves as Managing Director for the Conductor and Innovation Junkie, and teaches in the College of Business at the University of Central Arkansas. Jeff helps organizations and their leaders generate sustained results in the areas of innovation, strategy, profit growth, organizational effectiveness and leadership. Learn more at InnovationJunkie.com.