Pareto’s Law using the 80/20 rule.

I had thought that the 80/20 rule was a universal concept. At one my leadership team meetings, I used the term and then discovered only part of my team had ever heard about Pareto’s Law. Worse than that, I am certain that this was not the first time that I had referred to it. Assuming, that everyone understands what you are talking about is a dangerous assumption if your intention is to communicate.

Vilfredo Pareto was an Italian engineer who made several important contributions to economics, particularly in the study of income distribution. Where he made observations around the fact that 80% of the land of Italy was owned by about 20% of the population. I was also told that he found the same to be true when he was harvesting his peas from his garden. He found that 80% of his peas came from 20% of the pods. Not certain of the source of the pea story but it adds to the credibility of my story.

Peratos law when applied to business is a method to help managers focus on what is important. With limited resources, businesses need to work on the highest value activities first. Focusing on the 20% of the activities that will result in 80% of the gains.

While reading the book “Traction” by Geno Wickman, I noted that he had referenced the 80/20 rule in relation to the amount of time you should spend on building processes. Being a Lean Six Sigma process person, my preference is to have a process for everything. Somehow his statement did not make a lot of sense to me.

It was not until after one of my team meeting, where we were discussing the need for a process. This is when I understood what Geno was saying in “Traction”. My team had spent the better part of the meeting discussing how to do layoffs. Then we assigned one of the team members to build a process. After the meeting, the team members spent another ten (10) cumulative hours talking and writing this new policy.

We had just spent over 10 hours building a policy for an event that had only occurred once over the last 3 years. Alternatively, we could have had a quick discussion to help my managers understand and then they wound make the decision in 1/10th of the time it took to write the policy. They focused on the obscure rather than the problems at hand. We need to hire Smart Managers who can make decisions for the non typical 20%, this is why we spend so much time screening during our hiring processes.

After wasting 10 hours, I knew we should have been applying Perato’s Law. Writing processes for the 20% of the things that makes up 80% of the business. Writing process for what might happen is pure and simple waste.

 

https://www.linkedin.com/pulse/paretos-law-8020-rule-michel-handfield