The Pareto Principle At Work
One of the hallmarks of a successful leader is the ability for big-picture thinking and analysis. In my sessions with executive clients, we are constantly analyzing time management, communication skills and areas of growth. The Pareto Principle is a concept we often find useful.
A Quick History Lesson
In 1906, Italian economist Vilfredo Pareto analyzed property in Italy and discovered that 80% of the land was owned by 20% of the population. An interesting tidbit about wealth distribution, and about four decades later, a renowned management consultant by the name of Joseph M. Juran came across the literature penned by Pareto.
Juran took the 80/20 results and formulated the Pareto Principle, the idea that 80% of results come from 20% of the initiatives. The numbers are not exact in every case, but the idea is a solid one. Sometimes we find that a sizable portion of an outcome stems from a small portion of effort.
The Pareto Principle
The Pareto Principle can come in handy when analyzing our work and effort. For example, the marketing team of a local company I know recently conducted an analysis of their communication strategy (name withheld for privacy). They sent out monthly physical ads as well as digital communications via email and social media. They found that a large majority of their customers purchased products or visited the store as a response to their email campaigns. The director of marketing was then able to realign her team’s efforts and responsibilities according to those findings.
That is not to say that the physical ads or social media accounts were thrown out the window. Not at all, as they still brought in revenue. However, the director had a firmer understanding of where to assign budget and time resources. The company could spend less time and money on physical ads and social media to focus more on its email strategy and how to increase its database of customer emails.
Time Management
The Pareto Principle is a lens through which we can view time management and act accordingly. A human resources (HR) team of a different company—again, name excluded for privacy purposes—conducted an analysis of their hiring strategy for new recruits.
A senior HR representative was the sole person responsible for conducting the case-based interviews, and his workload was massive. For every 10 interviews with a potential recruit, only one candidate was hired. It was a huge expenditure of time and effort, but still, the work had to get done.
After running the numbers, he realized that about 75% of their new hires came from approximately 25% of the universities where the company recruited. After coming to this realization, the team made some changes to the hiring process. First, they decided to train other representatives to share in the workload of this single representative. And though they maintained recruiting efforts in all the university connections available, they reinforced their efforts in the specific universities that had provided the best candidates in the past. By focusing on the 25% of universities that produced 75% of the candidates, they had to go through fewer interviews before finding the right candidate.
What analysis are you running right now? Perhaps the Pareto Principle is a useful lens for you, too.