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80/20 Rule

by Rick Baker
On Aug 24, 2013

The 80/20 Rule... also known as The Pareto Principle

 

The Pareto principle (also known as the 80–20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.[1][2]

Business-management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population; he developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas.[2]

It is a common rule of thumb in business; e.g., "80% of your sales come from 20% of your clients". Mathematically, the 80-20 rule is roughly followed by a power law distribution (also known as a Pareto distribution) for a particular set of parameters, and many natural phenomenon have been shown empirically to exhibit such a distribution.[3]

The Pareto principle is only tangentially related to Pareto efficiency, which was also introduced by the same economist. Pareto developed both concepts in the context of the distribution of income and wealth among the population.

 

Source: Wikipedia

 

See Comments below for 80% Rules linked to 80/20 Rule thinking.

Tags:

80/20 Rule | Master Rules

Link your Goals to Actions...Measure Actions & Build Motivation

by Rick Baker
On Jul 16, 2013

 

 

Leaders succeed when they know how to set clear Goals, describing the Vital Results they desire. In some cases Vital Results could be as narrowly focused on a single thing that drives the business’s economic engine. For most businesses 5 Vital Results is enough.  In no cases are more than 7 Vital Results required. Focus is essential for 2 reasons: (1) to reflect the way the 80/20 Rule applies and (2) to keep it simple.

Leaders succeed when they establish ways to Measure performance of the right things at the right times…like the Vital Signs used in the medical profession to ensure the most-important things are covered.

In business, Vital Signs cover timely measurement of Vital Behaviours, the most-important Actions that bring about achievement of Goals. Like Goals, the number of Vital Behaviours must be minimized. Very few Actions are Vital to the achievement of a Goal. Leaders must hone their focus on the few Actions that determine whether or not a Goal will be achieved. Ideally, the focus can be reduced to one Vital Action for each Goal.

With desired Results and desired Actions clarified, the leader must influence behaviour. The key is leadership influence that sets the framework so people are intrinsically rewarded when they do the desired Actions…so they enjoy doing the Actions. Then people will be self-motivated and both Vital Actions and Vital Results will be maximized.

Tags:

80/20 Rule | Goals - SMARTACRE Goals | Measure & Monitor

Are you updating your business tools?

by Rick Baker
On May 9, 2013

About Tools & Business Improvements


It started with rocks and sticks. In our early days, we used them to do work.

We needed them to perform what our bodies could not do. We used tools to make work easier and less risky. We used rocks to injure prey. We used rocks to scrape the meat off bones. We used rocks to open shells. We burned sticks to keep us warm. We burned sticks to protect ourselves from animals.

We used sticks & stones to make spears for hunting. 

We used sticks to support us when our legs were injured and we used sticks as spears for fishing. 

 

Later we used rocks and slings to hunt prey from a distance. We used sticks to create bows and arrows for protection and hunting.

Tools have played a major role in our lives...in summary, 5 ways:

  1. Making them,
  2. Exchanging them, 
  3. Putting them to good use, 
  4. Maintaining them, &
  5. Upgrading them [as technologies and our bank accounts allow].
 
And now, with really-advanced technologies, tools are creating really-advanced problems for us...call them techno-problems.
 
Techno-Problems: here are a few examples:
 
Yes - our increasing demand for higher-technology and innovative tools has generated techno-problems.
 
We need to fix that.
 
The solution is: seeking simple and one important aspect is simplifying our tools.
 
Some suggestions:
  • Less is better...limit the amount of information you are exposed to. Be information-selective. Employ the 80/20 Rule. These reductions will allow you to focus on what's important. 
  • Use 1-Page Tools: demystify process and help your people get over work-process hurdles
  • Take advantage of proprietary software
  • Remove system & process gaps...those work-flow disconnects that cause duplication of work, unnecessary month-end and project-completion overtime and other things that really annoy your people
 
 

 

 

Do you want your people to be more creative?

by Rick Baker
On Feb 28, 2013

Bosses complain about people not taking initiative, not taking advantage of opportunities, and not nipping problems in the bud. Bosses observe people doing things right, following the procedures but failing to pick up the fact that in certain situations following the right procedures takes you to the wrong outcome. As the saying goes, leaders focus on doing the right things while managers focus on doing things right

And doing things right means following set out procedures. 

However, when doing things right fails to satisfy clients or collect the money or generate new sales or other such things bosses and leaders tend to become frustrated and complain about people not taking initiative, not taking advantage of opportunities, and not nipping problems in the bud. When this happens, bosses and leaders want their people to use their heads and do the right things. In other words, they want their people to use some initiative, be innovative, and be creative.

People get confused:

  • Should I follow the rules & procedures?
  • Should I use my imagination and not follow the rules & procedures?
  • Damned if I do; damned if I don't! [and that's not a good way to be thinking]
People get confused and communication gets bogged down and people get into performance ruts.

If you experience situations like this then it is in your best interest to make some changes for the better.

Here is a simple change you can make: Start telling people when you want them to be creative...I mean, start telling them before the action rather than after the fact. 

First - before getting people to do the work, identify the parts of the work that are routine and systematize those parts...using step-by-step written procedures....using checklists.  

Next - identify situations where creativity is or could be required. For example, you could use the 80/20 Rule: if creativity is required more than 20% of the time when this task/step is performed then flag that task/step as Creativity May Be Required Here. You could use a little orange flag to signal:
 
Creativity May Be Required Here
 
 
When you know a task requires creativity then you can use the words not-Routine Task to make that step stand out from routine tasks...you can use orange to signal creativity. [see orange arrow below]
 
 
Straightforward visual signals/cues will help your people know when they should side-step 'normal' procedures and check for opportunities to be creative & do the right thing. Use these visual signals/cues in your work-process checklists, flowcharts, role descriptions, etc. 
 
 
Here's the picture... 

Tags:

80/20 Rule | Seeking Simple!

Separating Routine & not-Routine Work-Tasks

by Rick Baker
On Feb 2, 2013

 

Leaders need to narrow their focus and dig deep into work-tasks.

For Routine work-tasks we need to establish systems and processes. Many business gurus have taught this…Michael Gerber’s E-Myth series is a good enough what-to-do manual for Routine work.

not-Routine work-tasks require a different type of attention. Few business gurus teach this. I have found Edward de Bono is the best guide…he has written over 70 books on creative thinking and how it can be applied to business.

I have tried to Seek Simple

  

 

In the above picture of Routine work and not-Routine work you see the 80/20 Rule coming into play…at least 80% of our time is spent doing Routine work. That’s the light green part. A much smaller amount of time is spent on not-Routine such as strategizing, idea-storming, and innovating. That’s the dark green part.

Does this visual look a little like PAC-MAN? I hope so. Routine work tends to eat up all of our time. This includes making mistakes and fixing them. This includes fire-fighting the same old types of fires over and over again. Routine work eats up our time and our opportunities for creative thinking.

Here is one example - Leaders need to simplify Routine work to remove communication-confusion…McDonalds provides the best case study. Simple tools like checklists help: checklists stop airplanes from crashing and infections from spreading during major surgeries. If checklists can work such wonders in the airline and medical sectors you can be confident they will do the same thing at your business.

not-Routine work requires a different approach...

  


not-Routine work-tasks require different skills. And, as educators like Dan Pink point out and companies like Google prove, not-Routine work involves a fun-factor.

Creativity happens when people are motivated. People are motivated when they are working in a Strengths Zone.

Creativity can be taught.

Everyone has creativity…many of us have to un-bury it. There are quick-and comfortable ways of doing this.

And, Creativity is an essential ingredient in the magic potion of business success in the 21st Century.

Tags:

80/20 Rule | Leaders' Thoughts | Seeking Simple! | STRENGTHS: People-Focused for Success

Written Goals = More Success...Yes? or No?

by Rick Baker
On May 10, 2012

For many years, self-help and business gurus have cited a Harvard Business School study summarized as follows:

In the 1950's, Harvard interviewed students in the graduating class of its business program. They found 3% had written goals while 97% did not. Harvard followed up about 20 years later to measure the financial success of these students. Harvard found the 3% of students who had written goals were earning as much as the other 97% combined.

Many authors of self-help books and business-help books have cited this study. Sometimes the dates change. Sometimes it is Yale and not Harvard. Always, it's 3% written goals = 97% without written goals.

But...here's an eye opener. 

The fact is, there has been no such study...it is like an urban myth1.

So, with that huge-justification-for-having-written-goals myth busted...

Can we link written goals to greater success?

The simple answer is Yes.

Written goals help people achieve greater success.

We know this from everyday life:

  • we know it when we read a STOP sign
  • we know it when we make a grocery list
  • we know it when we mark a friend's birthday on our calendar
  • we know it when we make a reservation at a restaurant

When it comes to business and job success, we should have no doubt about it:

WRITTEN GOALS HELP PEOPLE ACHIEVE GREATER SUCCESS.

In business, we do not need astonishing 'facts' like 3% delivers 97%. We already have the 80/20 Rule. People can buy into the 80-20 Rule because we can illustrate it to them by digging into the facts of their roles and their businesses. When we make hyperbolic claims, like 3%=97%, people intuitively know we are talking about getting them in over their heads.

We need to be realistic when we talk about Goal setting

For business and job success the Top 2 questions leaders and planners need to ask are:

  1. What Goal Culture do we want? [What form will our written goals take? How much detail do we want in those written goals?, etc]
  2. How do we create and communicate that Goal Culture? [so people buy-in and people feel good about doing the Actions we desire]
 

Footnote:

  1. We know this because my friend, Lois Raats, and I are working on a 'time management' presentation. As part of our preparation work, Lois researched this topic and discovered the frequently-quoted Harvard study never happened.
  2. If you want to learn more about what people have written and placed in their websites about 'The Harvard Study visit Google and search "Harvard 3% success".

Tags:

80/20 Rule | Goals - SMARTACRE Goals | Questions?: The Art of Asking Good Questions

Copyright © 2012. W.F.C (Rick) Baker. All Rights Reserved.