How Can Organizations Ace the 80–20 Rule (aka, the Pareto Principle) to Boost Productivity?6th May 2019
Everyone must have heard about the Pareto principle, popularly known as 80–20 rule. It states that 80% of effects originate from 20% of the cause. While this principle was formulated in the economic context, it holds true for almost everything around us. As simple as, 80% of the useful energy in our body is derived from 20% of what you consume. A clear understanding of Pareto principle can help organizations understand the optimal way to boost their productivity.
Following are the examples of 80–20 rule in action in an organization:
80% of the productive work is done by 20% of the workforce
Most of the managers complaint that not everyone in the team contributes to the project. In fact, if any manager objectively analyses individual contribution in the team, he would realize that almost every time it’s the minority of the workforce which would account for the majority of the work done.
80% of the total productive work happens in 20% of the time
Most of the organizations mandate that each employee clocks in a certain number of hours. The problem here is that time spent by an employee is no measure of his productivity. Infact, actual work happens only in 1/5th of total time spent by an employee. This is more relevant in the creative domain than mechanical work. For the majority of the time, an employee is an unproductive cost center for the firm.
80% of the revenue comes from 20% of the clients/products
While an organization could be dealing with a number of clients or working on a number of products/ services, not all these avenues are equally successful or profit making. As a matter of fact, a few of these would be big hits and would overshadow the rest. The revenue stream of technology companies stands in testimony to the 80–20 principle.
80% of the resources are consumed by 20% of the employees
Whether it be the cost to the company in terms of monetary compensation provided to the employee or benefits availed by employees from ‘mediclaim’ policy, the majority of resources would be consumed by the minority.
80% of the initiatives will be taken by 20% of the employees
While an organization would want everyone to take initiative and lead by examples, everyone is not wired to be a leader. No matter how hard you push, most of the initiatives would be taken by a small fraction of the employees.
80% of the trouble is created by 20% of the employees
Employees do create trouble. In a blue caller job, there are frequent strikes. For example, Uber as a taxi aggregator witnesses driver strikes too often. In a white caller job, an organization might suffer due to unannounced absenteeism. But it’s not the entire workforce which creates the trouble.
How to ace Pareto principle
Conventional thinkers try to ace the Pareto principle using a linear approach,i.e, If out of 100 work hours, an employee productively works for 20 hours, We should increase the work hours to 200 to get 40 hours of productive work. Likewise, if the total employee strength of 100 generates 20 good employees, We should increase the employee strength to 200 to get 40 good employees.
But the problem is that 80–20 rule doesn’t exist in isolation. There are other practical constraints to the linear approach. For example, if the employee working for 100 hours is asked to work for 200 hours, the overall productivity may tank owing to fatigue and burn-out. Similarly, if the majority of the workforce is not contributing productively, even the top 20% of the productive workforce might lose the incentive to work.
Hack to this issue is to leverage 80–20 rule to your advantage. We know that of all the eligible candidates, 20% would be super productive. Could we try and hire from the top 20% bucket? No doubt, that would require rigorous screening. That is the reason why organizations like Google follow a stringent selection process. This ensures that if they can not completely defy the Pareto principle, they can at least tilt it in their favor. Similarly, one knows that employees are productive only 20% of the times spent in the office, it’s worthwhile to identify the factors that influence these times. Productivity follows the law of diminishing returns after a threshold. For me, working beyond 2 hours in a stretch, my productivity is not in tune with the efforts I put in. This is the reason why most of the Fortune 100 organizations provide recreation spaces and avenues for refreshment at work. If employees could take intermittent breaks, they will be able to re-focus and be productive at work.
Hence, to ace the 80–20 rule, one has to focus on quality and not quantity. It would be a destructive move to keep adding to your numbers and let the 80–20 rule run your organization in auto pilot mode.
How Can Organizations Ace the 80–20 Rule (aka, the Pareto Principle) to Boost Productivity? was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.