The Pareto Principle or The 80:20 Rule
I have had lots of enjoyment from the Pareto Principle over the years, explaining to project support office managers and middle managers how their interpretation of it is usually a load of bobbins.
- "What has the distribution of wealth in a medieval central European group of mercantile city states and feudal principalities got to do with modern business operation?"
That's my starter for ten and the response is always "Eh?" to which I counter:
- "If you don't even know what it is, why are you enforcing it on your change managers and/or workforce?"
When they insist it exists and works, I ask for the source. "Oh, everyone knows it!"
- "Do you mean you read it in an article in a trade journal?" "Well, yes."
- "Written by a consultant from a firm that sells their services implementing the principle?" "It might have been. But that means they are experts!" "So are water diviners, astrologers and the priests who read the entrails of goats - why don't we hire some of them?"
Their turn to be on the offensive.
- "But it says 80% of the project is delivered by 20% of the work! We could make huge savings!" "Yes, by not doing the design, testing, documentation or training. They comprise that other 80% of the work. They result in 20% of the deliverables, but without them, the other 80% is useless."
- "You don't understand. It means 20% of what we do we don't need to do!" "You just mixed up the 80% and the 20%. It's you who does not understand it."
My turn again.
- "Your claim is that 20% of the work is all that is required; that by only working on Monday we could get just as much done. I'll start submitting my timesheet on Monday instead of Friday and you can keep paying me for 5 days work." "It's 4 days, actually, it's only 80%." "It's a deal. I'll let the agency know you've agreed to quadruple my daily rate." "No, no, that's not what I meant!"
"I see. So what you meant is that if we drop your salary to 20% of what it is, you'll do 80% of what you are currently paid to do?" "Well, no, obviously."
- "So, you agree this 80:20 business cannot be applied to everything?" "Yes it can! That's the beauty of it!" "In that case, if we apply it to the 80% and the 20%, we could get 64% of the project from 4% of the effort and cost. Or 51.2% from 0.8% of the effort and cost. That is, do half of what we are doing now at a saving of over 99% of costs and effort." "I don't understand that, I'm not very good at percentages."
I'm not making this stuff up. These are actual exchanges I've had.
Their go again.
- "Anyway, you're cheating. You can only apply it once." "So you're saying it cannot be applied where the inefficiency has already been removed?" "That's right." "Then it won't work on our projects since we use professional planning methods and have project reviews so we are confident there is very little waste, and our processes are subject to continuous improvement through Lean methods. So there is no waste to eliminate."
- "But you don't know that until we apply it!" "And how do you propose we apply it?" "Well, there's this firm of consultants that are going to come in and show us!"
This is usually the point where I say something that results in the person I am arguing with taking me to one side and telling me they will see to it my career will be damaged if I continue to be difficult, and I point out I'm a contractor and don't have a career.
Right, I'm off to the kitchen to throw away 20% of the pie we're having for dinner since it contains 80% of the calories, and I'll dish up just one of the five-a-day vegetables since it contains the same nutrients as the other four.
One of my rotating email signatures is a famous quote I picked up back in the 1980s which I extended in the 1990s:
- As a programmer I used to say "Writing the first 90% of a computer program takes the first 90% of the time and the remaining 10% takes the other 90% of the time". Now I am a project manager, I can see I omitted numerous overheads which account for another 90% of the time.
At best, the 80:20 rule only delivers 20% of its promise 80% of the time. More commonly, attempting to use it in some inappropriate way to deliver benefits results in interference, disruption, distraction and waste.
The Pareto principle does not say "some of the work does not need to be done".