When interviewing study subjects, researchers hear many of the same themes and comments repeated, as you can easily imagine. No one liked how cassette tapes snarled, for example, and everyone hates long wait times. The temptation for impatient researchers and study sponsors is to prematurely assume they’ve heard everything there is to say. In hurry – as they almost always are – they draw conclusions from partial evidence. This willingness to stop short of the finish is often justified by claiming they are “following the 80/20 rule.” The implication is they only need to understand 80% of what customers feel, think, and do to be successful. The insidious unintended consequence of this attitude is how quickly employees come to think achieving a standard of 80% is good enough to apply to everything they do. In my experience, the ones who push on to understand 90% of what customers feel, think, and do are the ones who discover valuable insights the others have left on the table. No one has the time or money to attain 100%, but 80% seems like a low bar. When employees apply only 80% efforts toward their own 80% goals, their achievements are limited to the 64% level (.80 x .80 = .64).
The 80/20 rule (the Pareto Principle) is a generalization misunderstood by most.
Sure, it is useful to know how a small number of cases can sometimes be responsible for a large number of effects. In business, as in life, things are not evenly distributed. Peter Philippi, founder of research and consulting firm Strategex, tells this story: “When I’m speaking before a business group, I ask how many have heard of the 80/20 rule. Virtually every hand in the room goes up. Then I ask, ‘How many of you apply the 80/20 rule at your companies?’ Most of the hands stay up. But when I ask a few individuals to define the rule and how they apply it at their own companies, their responses vary widely. The simplicity of Pareto’s comments have led to overly broad or ineffective applications of the principle that ultimately cause more problems than they solve.”
Medium says another problem is when the rule is interpreted literally and companies set the bar too low.
The 80/20 rule needs to be challenged if performance standards are to be raised. Game theorist Presh Talwalker asks a great question: “Why do we need to reference the 80/20 rule at all? If the most important task yields the most results, isn’t it easy enough to just say focus on the most important task?” If no one had ever heard of the 80/20 rule, achievers would still know to work on what produces the best results, no matter what the percentages are.
There are many examples offering “proofs” supporting the Pareto Principle.
Here are three different categories of activities that Forbes mentions:
- 20% of sales reps generate 80% of sales.
- 20% of patients account for 80% of healthcare spending.
- 20% of the most reported software bugs cause 80% of the crashes.
Too many people are sure these are examples of a magic formula, but they’re not. They are just things that make good sense for everyone who stops and thinks for a moment. It is only logical to conclude:
- Sales reps aren’t all superstars.
- The sickest people cost more to treat than the healthiest people.
- The software bugs people take the time to report are quite naturally bigger problems than the ones they don’t.
It doesn’t appear so magical when you strip away the numbers, does it?
The 80/20 rule is conspicuously misapplied by self-described time management experts.
The real oddity is these experts can’t even agree on the direction it is supposed to work. One group tells us the best way is to concentrate on the 80% so we don’t get sidetracked by the 20%. More commonly, it’s the other way around, when experts tell us the best way to do things is to:
- Complete the top 20% of our To Do lists.
- Concentrate on the most relevant 20% of our workloads.
- Analyze the complaints of 20% of our customers.
Let’s take a closer look at those three things.
- To Do list: How was the list compiled? Are the top 20% the things you thought of first? Is the list chronological? Alphabetical? The easiest things to do? Procrastinators learn to put the hard-to-do things at the bottom.
- Workload: Who decides what the most relevant 20% is? What about deadlines? Budgets? How about the tasks that generate the most results? The best results?
- Complaints. This one I don’t get at all, especially when so many of us know that 90% of customers with problems say they don’t bother to complain because it’s too difficult, there is nothing to gain, and it won’t do any good. I have advised every organization I’ve ever worked with to actively investigate the problems that 90% of their customers don’t tell them about.
They all say it’s okay to ignore 80% of what’s going on and what needs to be done. Sorry – no sale.
Another favorite misapplication is the commonly held belief that 20% of your employees do 80% of the work.
There is no evidence to support this belief. Is was dreamed up by managers who took a theory based on observing manufacturing failures and stretched it to conclude that 80 percent of a company’s work must come from only 20 percent of employees. If that’s the case where you work, then these two things are also true:
- Only 20% of your employees really matter.
- Your hiring standards need a gut renovation.
How about effort? Will we use 80% as our standard?
Would you pay full price for a pair of eyeglasses that gave you 20/80 vision? Would you pay full price for a meal that is only 80% edible? Of course not. But when companies don’t insist their employees push through the easy-to-achieve 80% threshold, they get barely better than mediocre outcomes.
What do we get when we give something a 20% effort?
Look back on your years in school. Did the first two or three teach you 80% of everything you know now? In the ten or twelve years of school after that, did you add only 20% to your total knowledge? I hope not. Nothing extraordinary is ever achieved by doing only 20% of the work (or 80% either, for that matter). Maybe 80% of the final grade comes from only 20% of the book, but which 20%?
The 80/20 “rule” has been hijacked to mean all sorts of things.
A hundred years ago economist Vilfredo Pareto examined land ownership in Italy. He found 80% of the land was owned by 20% of the population. Joseph Juran, an engineer and management consultant liked those numbers and generalized Pareto’s very specific observation about land ownership in Italy into his conclusion that 80% of problems are the result of only 20% of activities. He had looked at product failures in factories, concluding 80% of manufacturing defects came from the same few problems. Still later, economists climbed onboard, saying 80% of outputs result from 20% of inputs. More recently, the 80/20 rule got misapplied by the time management people and people saying only 80% of your diet has to be healthy.
How do you explain why there are so many examples?
John Sonmez, life coach for software developers, says it’s a matter of “seeing the world through Pareto-colored glasses: the more you look for examples, the more of them you find.” Start looking for the numbers 80 and 20 in any large data set and you’ll find a lot of them, just like you would find any other two numbers you look for. You’ve noticed this phenomenon yourself after buying a new car. No matter if you bought a Volvo, a Nissan, or a Tesla, you suddenly notice your car’s brothers, sisters, and cousins everywhere you go because now you are devoting attention and effort to picking them out of the crowd. Just because the 80/20 rule applied to land ownership in Italy a hundred years ago, it doesn’t mean you can use it whenever you wish, especially if you have no interest in attaining anything resembling excellence.
Most are unaware that Juran cautioned against ignoring the last 20%.
Above-average results take above-average efforts.Those who disregard the last 20% are saying they think a B is as good a grade as an A. Eighty percent of any effort captures only the low-hanging fruit that is the easiest to grab. If you know even a little about horse racing, you know the one in the lead on the backstretch almost never wins. Most horse races are won in the last 20%, not the first 80%. The racetrack term for it is cheap early speed. And that’s what most businesses display when they’re in a rush to draw conclusions when they should still be asking questions.