Surface Ripples

80/20 Thinking

How many of us have heard of the ‘Pareto Principle’, the old 80/20 ratio?  Bit of history: it was developed by Italian Vilfredo Pareto at the University of Lausanne in 1896 in his ‘Cours d'Economie Politique’ when he showed that approximately 80% of the land in Italy was owned by 20% of the population.

Since then, innumerable cases of what has now become known as ‘the 80/20 rule’ have been (and continue to be) identified.  The principle (or rule) asserts that, 20% of effort accounts for 80% of results, or that 20% of the faults in a system account for 80% of problems, etc.  

The ‘Pareto Principle’ isn’t set in stone.  We may, for example, experience a 70/30 instead of an 80/20 spread, but the principle (less causes more) still holds.

The conclusion is that if we can successfully identify where the 80/20 rule is at work in our lives and businesses, we can focus our efforts more effectively, earn higher profits, live happier lives, enjoy better relationships. The list is endless and limited only by one’s imagination.

There are objections, ranging from the Chinese philosophy yin and yang to diplomats’ conversations.  Taking the first, it states that, to appreciate (say) the light, one needs an equal amount of darkness (not just 20%).  Swap ‘good and evil’ for ‘light and darkness’ and so on and one can continue the argument.  

In response to this, the answer is that our lives don’t need to reflect a consistent 80/20 balance 100% of the time.  In some areas we need to be unbalanced; where we need to be efficient, then perhaps the 80/20 principle does apply.   Where the concern is being effective, then more time is needed.  It’s the difference between ‘doing things with minimal wastage’ (efficiency) and ‘doing things right’ (effectiveness).  Surgeons concentrate on effectiveness, production lines on efficiency.

In terms of the ‘diplomatic conversation’, when experienced diplomats claim that they gather their best information at the innumerable social and official functions that they attend (and which take up a lot more than 20% of their time), their view is that they learn whose judgement is sound and whose not.  This is true, but once you’ve identified the ‘sound’ and ‘unsound’ people, you would then want to focus more on the ‘sound’ ones and minimise time spent with the rest. 

80% of business may be done on the golf course, but that doesn’t necessarily mean mean we send almost five hours on the golf course (well, some people may!).  Allowing for eating, sleeping and other necessary activities, I suspect the answer is closer to 20%.  If you choose to use 20% of your time on this activity, then people will notice and comment that ‘You spend all your time on the golf course!’.

I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With a wealth of international experience in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management.  I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services.  For strategic questions that you should be asking yourself, follow me at @wkm610.

Labels: Career, Customer Care, Financial, Leadership, Productivity, Strategy, Teamwork

posted by William Martin @ 10:19