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The 80/20 rule, also known as the Pareto Principle, is the topic of this newsletter. I’m going to bring an additional item into this conversation – The Peter Principal. In the 1980’s I read this book. It’s not long, about 107 pages. I found the content very intriguing. Yet it awakened something in my psyche that I couldn’t quite identify. As I gained experience in my career, I have since been able to formulate the meaning and understand the relationships not only in business but also in my personal life.
Understanding how each of these principals affects both business and personal life is the key to ultimately providing the ability to capitalize on the insight they offer. I offer these short definitions.
The Peter Principal: Everyone is promoted to their highest level of incompetence.
The 80/20 Rule: 80% of the desired outcome is attributed to 20% of the effort, focus and/or resources.
So, now with these two ideas in mind, let’s follow this path.
Have you ever felt slighted or stifled when you voiced an idea that you believed could make a real difference, only to be shot down by your supervisor time and time again? You’re told that your idea has no merit or has been tried before with unacceptable results? You find yourself wondering why they don’t see what you see. It seems so basic. The Peter Principle is likely at work here.
You see, when an individual is in a position above your current status, you are at the whim of their incompetence. So how does this play into the 80/20 Rule? Imagine if the supervisor had a track record that exhibited outstanding performance. That would mean that the supervisor is now part of the 20 percentile that produces 80% of the desired outcome and goals. Likely your ideas and suggestions would be well received. This is because good leaders realize that it’s the team that produces results, not the individual.
In the above scenario, that’s not the case. Entirely too much effort and resources are being utilized just to maintain the status quo. “Everyone for themselves!” Teamwork is only present when it’s convenient. To the bigger issue, one must ask the question: At what level did the discontent originate?
My suggestion is that a caustic culture within the organization has been allowed to propagate and likely is the source of the problem. The supervisor may well simply be trying to survive in a manner that apparently has at least a partial chance of succeeding. So, how does one leverage the 80/20 rule in this scenario?
Management must make a hard, honest, brutal assessment of not only the culture that exists but also a look at the folks that operate within the caustic methodology. Performance evaluations, as well as the attitude of all employees, must be considered. We must also consider the marketability of the offered products and services, but for now, let’s not discuss these particulars.
At this point, you might be wondering if I’m suggesting that one must completely tear a company apart and rebuild it. That is definitely one method, but most companies wouldn’t survive that level of re-organization. So, let’s look toward a more practical approach.
Let’s use the 80/20 Rule to achieve the desired results. First, take a look at the “High profile” players. This is likely within your sales force. You should expect to discover that about 20% of your sales force is responsible for 80% of sales revenue. With that, the general wisdom is to increase the support of that 20 percentile group and reduce and/or eliminate the 80 percentile group. Before you commit to this, ask the basic question: Who in that 20 percentile group is maxed out and not likely to contribute more, even with an increase in resources? Hint: This person has reached their highest level of incompetence.
So, this individual needs to be culled from the herd – temporarily. Their value is still quite high, and they shouldn’t be relieved of duty (so to speak). Here’s the thing, within the 20 percentile group, there is also a sub-group that also follows the 80/20 rule. Take those 20% and give them the opportunities to grow. The others can be terminated. The 20% that was retained should be paired with your “Star Performers” so they can learn from and assist the high performers.
By removing some of the workload from the “Stars” they can continue to grow within their own right. The greatest gains will be reflected in an even more productive sales force. And guess what – with ~20% of the original sales force!
Now, remember the small group we culled out earlier? They are still performing their tasks, at least at the level we were discussing. Now is the time to provide training in new methods along with new goals. Those that can adapt should be given the opportunity to perform. Those that cannot adapt were probably going to be a problem later on anyway.
In re-evaluating our staff structure, with the right mindset, we can clearly illuminate the 20 and 80 percentile groups. Sometimes it’s simply a matter of recognizing misplaced talent. Maybe an average-performing individual in sales would soar to new heights in marketing. Maybe removing a specific individual within the staff structure removes a huge bottleneck. As I said earlier, it takes a good, hard, and honest review of the current situation to truly see the realities.
I want to finish this article and include some personal life applications. When I look around at others in their work environments, such as a local restaurant, a grocery, or a department store, the workers are interfacing with the clientele directly. I see the interactions between co-workers and supervisors. Their goals are uniquely directed toward me as the consumer, yet through careful observation, I still see the 80/20 principle in action. When we recognize this, we begin to realize that a lot of the principle is driven by the efficiency of our actions, not just job knowledge.
As I head to the laundry room with an armload of dish towels, I stop along the way and collect towels from the 2 bathrooms along the way as opposed to making a separate trip to and from each of the bathrooms. Developing personal habits such as always placing your car keys in the same place can help to prevent you from having to hunt them down every time you decide to leave. Sometimes, it’s following behind my spouse and putting up her car keys for her.
The goals of the products and services we provide here at CodeBright are designed to promote efficiency and clarity. By incorporating the systems, products, and services we offer, we can assist you in discovering how to leverage the 80/20 principle in your daily operations. Your customers will appreciate your attention to the details that make them feel confident in your service to them!