Apply the Pareto Principle to your Organization
What is the absolute, best investment you can make in 2022? What single thing could you invest in that will guarantee a significant ROI? Plastics? No, that is so 1967. Pocket calculators? Go back to the 1970s. The compact disc? You’re still living in the 80s. Pagers? Oh my gosh no – they ruined the 90’s for everybody.
You get the idea. All great investments at the time, but they quickly became money pits. “So, you might ask, tell us what’s your great idea for guaranteed RIO for 2022?”
Your people. That’s right, your employees. Invest in them. “What you talking about Willis?” (Sorry, 1980 flashback.) I’ll tell you what I’m talking about. The best way to move you and your business forward is to develop better employees.
Take a look back at the last year or so. Ask yourself, “what were our biggest successes and our biggest failures”? Create your company's “strengths and weaknesses” list.
This isn't to say "identify everything we did wrong. Not at all. If you survived 2021, you obviously did a right of things right. Look at your strengths and of course your short-comings. Identify what it is you did right and double-down. Figure out what you may have stumbled over and determine why it happened and how to avoid it going forward.
How do you choose the right areas for investment? Ask yourself these questions:
1. Can we, realistically, get better at these things we did right?
2. What will be the motivation to get everyone on-board?
3. Is it worth our time, effort, and expense? (i.e., what will be my ROI?)
The Pareto Principle
As explained in Investopedia
, "There is a practical reason for applying the Pareto Principle. Simply, it can give you a window into who to reward or what to fix. For example, if 20% of the design flaws in a car are leading to 80% of the crashes, you can identify and fix those flaws. Similarly, if 20% of your customers are driving 80% of your sales, you may want to focus on those customers and reward them for their loyalty. In this sense, the Pareto Principle becomes a guide for how to allocate resources efficiently".
For a more personal example, take a look at your smart phone. You most likely have 40 or 50 apps, but 80% of the time, you're only using 8 or 10 of them (if that).
"The 80/20 Principle asserts that a minority of causes, inputs, or effort usually lead to a majority of the results, outputs, or rewards. Taken literally, this means that, for example, 80 percent of what you achieve in your job comes from 20 percent of the time spent. Thus for all practical purposes, four-fifths of the effort—a dominant part of it—is largely irrelevant… Every person I have known who has taken the 80/20 Principle seriously has emerged with useful, and in some cases life-changing, insights."
To Koch, it’s simple: Do more of the stuff that works and less of the stuff that doesn’t.
It would be great if you could invest in everyone. All of your employees. However, in most cases this may be impractical and too expensive. Instead, identify the people in your organization who are your key players, the future of your organization. You know who they are. Apply the Pareto 20/80 principle. At its most basic, the Pareto principle, when applied to business, states that 80% of your work (and profits) are generated by 20% of your people. This may seem harsh, but it holds true in almost every organization.
This is where you should focus your investment for the highest rate of return.
If you would like to know more about this subject, or how to identify the best people in your organization and what resources are available to enable you to invest in them, our professionals at ASN would love to talk with you. Give us a call!