How Can Organizations Ace 80-20 Rule (Pareto principle) to Boost Productivity

Everyone has heard about the Pareto principle, popularly known as 80-20 rule. It states that 80% of effects originate from 20% of the cause. While this principle was formulated in the economic context, it holds true for almost everything around you. As simple as, 80% of the useful energy in your body would be derived from 20% of what you consume. That said, it would be interesting to see how this 80-20 principle can help explain organizational behaviour and how can an organization excel by acing the Pareto principle-

 

Following are the examples of 80-20 rule in action in an organization:

80% of the productive work would be done by 20% of the workforce

Most of the manager complaint that not everyone in the team contributes in the project. In fact, if any manager objectively analyses individual’s contribution in the team, he would realize that almost everytime it’s the minority of the workforce which would account for the majority of the work done.

 

80% of the total productive work would happen in 20% of the time

Most of the organizations mandate that each employee clocks in a certain number of hours. The problem here is that time spent by an employee is no measure of his productivity. Infact actual work happens only in 1/5th of total time spent by an employee. This is more relevant for creative domain than mechanical work. So, for the rest of the time, the employee is more of a cost overhead.

 

80% of the revenue would come from 20% of the clients/products

While an organization could be dealing with a number of clients or working on a number of products/ services, not all these avenues would be equally successful or profit making. As a matter of fact, few of these would be big hits and would overshadow the rest.

80% of the resources would be consumed by 20% of the employees

Whether it be cost to the company in terms of monetary compensation provided to the employee or benefits availed by employees from ‘mediclaim’ policy, majority of resources would be consumed by the minority.

80% of the initiatives will be taken by 20% of the employees

While an organization would want everyone to take initiative and lead by examples, everyone is not wired to be a leader. No matter how hard you push, most of the initiatives would be taken by a small fraction of the employees.

80% of the trouble would be created by 20% of the employees

Employees do create trouble. In a blue caller job, there are frequent strikes. For example, Uber as a taxi aggregator witnesses driver strikes too often. In white caller job, an organization might suffer due to unannounced absenteeism. But it’s not the entire workforce which creates the trouble.

 

How to ace Pareto principle

Linear approach

Conventional thinkers try to ace the Pareto principle using linear approach,i.e,

If out of 100 work hours, an employee productively works for 20 hours,

We should increase the work hours to 200 to get 40 hours of productive work.

Likewise, if total employee strength of 100 generates 20 good employees,

We should increase the employee strength to 200 to get 40 good employees.

But the problem is that 80-20 rule doesn’t exist in isolation. There are other practical constraints to the linear approach. For example, if the employee working for 100 hours is asked to work for 200 hours, the overall productivity may tank owing to fatigue and burn-out. Similarly, if the majority of the workforce is not contributing productively, even the 20% of the productive workforce might lose the incentive to work. Hack to this issue is to leverage 80-20 rule to your advantage. If you know of all the eligible candidates, 20% would be super productive. Could we try and hire from the 20% bucket? No doubt, that would require rigorous screening. That is the reason why the organizations like Google follow stringent selection process. This ensures that if they can not completely defy Pareto principle, they can atleast tilt it in their favour. Similarly, one knows that employees are productive only 20% of the times spent in the office, it’s worthwhile to identify the factors that influence these times. Productivity follows the law of diminishing returns after a threshold. For me, working beyond 2 hours, my productivity is not in tune with the efforts I put in. This is the reason why most of the Fortune 100 organizations provide recreation spaces and avenues for refreshment at work. This helps them boost the productivity.

Hence, to ace the 80-20 rule, one has to focus on quality and not quantity. It would be a destructive move to keep adding to your numbers and let the 80-20 rule run your organization on auto pilot mode.