New Thoughts on an Old Rule
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New thoughts on an old rule

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By David Ewald, CAE, President

Most of us are familiar with the “80/20 Rule,” also known as the Pareto Law. The basic premise of the rule is that a minority of causes, inputs or effort usually leads to a majority of results, outputs or rewards. In our daily life, this may mean that 20% of our effort leads to 80% of the results, that 80% of our profits come from 20% of our customers or that 80% of crime is caused by 20% of all criminals. In his book “The 80/20 Principle,” author Richard Koch identifies these and other phenomena to explain the concept of the imbalance between effort and reward — and why it’s useful.

The main idea behind the principle is that there is a powerful relationship between where we place our attention and the outcomes derived. Steven Covey’s books, “First Things First” or “The Seven Habits of Highly Effective People,” and many other books on personal effectiveness focus on prioritizing how we spend our precious time in order to make the most of our lives. This is just another way of saying that concentrating effort in the fewer but important areas (the 20%) can create the most important (80%) outcomes. The relationship of 80/20 is not meant to be exact. There are an infinite number of relationships that can range from 51/49 to 99/1 — all of which demonstrate the usefulness of placing more of our attention in limited areas in order to achieve better results. Where do your customers or members derive value from the products, programs or services within your organization? Most likely there are a few areas that provide a disproportionate share of the profit and benefit. Maybe it is 80/20 or 70/30. What does this imply for the 70% of your offering that contributes only 30%?

How about your staff? A senior executive at one of the country’s largest retailers told me that there is only one personnel decision that employers ever need to make: whether or not to hire a person. If they make that decision correctly, he said, the rest is easy. That is certainly an oversimplification, but the implications are clear: most likely the majority of the personnel-related issues confronting your organization come from a minority of the employees. Focus on changing that dynamic and reap disproportionate results.

The implications for personal productivity and satisfaction are immense. Covey students are familiar with the grid detailing the differences between important/not important and urgent/not urgent activities. According to Covey, we want to spend most of our time working on the "important but not urgent" activities and avoid busying ourselves with the non-important/non-urgent and non-important/urgent activities. How much more satisfying can we make our existence by focusing on those few areas where we can truly make the biggest impact?

While not infallible, I find rules like this useful in analyzing challenges facing an organization. It’s easy to make the mistake of thinking that all areas are equally important and merit equal attention. This is most often not the case. Take a new look at a problem you are confronting and see if the 80/20 rule helps to provide a course of action. Most likely you will find that concentrating your energy on the areas that can provide disproportionate returns will provide a significant improvement in results.

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