| How
the 80/20 rule can help you be more effective From
F. John Reh
In
1906, Italian economist Vilfredo Pareto created a mathematical formula
to describe the unequal distribution of wealth in his country, observing
that twenty percent of the people owned eighty percent of the wealth.
In the late 1940s, Dr. Joseph M. Juran inaccurately attributed the 80/20
Rule to Pareto, calling it Pareto's Principle. While it may be misnamed,
Pareto's Principle or Pareto's Law as it is sometimes called, can be a
very effective tool to help you manage effectively.
Where It Came From
After Pareto made his observation and created his formula, many others
observed similar phenomena in their own areas of expertise. Quality Management
pioneer, Dr. Joseph Juran, working in the US in the 1930s and 40s recognized
a universal principle he called the "vital few and trivial many"
and reduced it to writing.
In an early work, a lack of precision on Juran's part
made it appear that he was applying Pareto's observations about economics
to a broader body of work. The name Pareto's Principle stuck, probably
because it sounded better than Juran's Principle.
As a result, Dr. Juran's observation of the "vital few and trivial
many", the principle that 20 percent of something always are responsible
for 80 percent of the results, became known as Pareto's Principle or the
80/20 Rule. You can read his own description of the events in the Juran
Institute article titled Juran's Non-Pareto Principle.
What It Means
The 80/20 Rule means that in anything a few (20 percent) are vital and
many(80 percent) are trivial. In Pareto's case it meant 20 percent of
the people owned 80 percent of the wealth. In Juran's initial work he
identified 20 percent of the defects causing 80 percent of the problems.
Project Managers know that 20 percent of the work (the first 10 percent
and the last 10 percent) consume 80 percent of your time and resources.
You can apply the 80/20 Rule to almost anything, from the science of management
to the physical world.
You know 20 percent of you stock takes up 80 percent of
your warehouse space and that 80 percent of your stock comes from 20 percent
of your suppliers. Also 80 percent of your sales will come from 20 percent
of your sales staff. 20 percent of your staff will cause 80 percent of
your problems, but another 20 percent of your staff will provide 80 percent
of your production. It works both ways.
How It Can Help You
The value of the Pareto Principle for a manager is that it reminds you
to focus on the 20 percent that matters. Of the things you do during your
day, only 20 percent really matter. Those 20 percent produce 80 percent
of your results. Identify and focus on those things. When the fire drills
of the day begin to sap your time, remind yourself of the 20 percent you
need to focus on. If something in the schedule has to slip, if something
isn't going to get done, make sure it's not part of that 20 percent.
There is a management theory floating around at the moment
that proposes to interpret Pareto's Principle in such a way as to produce
what is called Superstar Management. The theory's supporters claim that
since 20 percent of your people produce 80 percent of your results you
should focus your limited time on managing only that 20 percent, the superstars.
The theory is flawed, as we are discussing here because it overlooks the
fact that 80 percent of your time should be spent doing what is really
important. Helping the good become better is a better use of your time
than helping the great become terrific. Apply the Pareto Principle to
all you do, but use it wisely.
Manage This Issue
Pareto's Principle, the 80/20 Rule, should serve as a daily reminder to
focus 80 percent of your time and energy on the 20 percent of you work
that is really important. Don't just "work smart", work smart
on the right things. |
