How the 80/20 Rule Ruined Management

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You don’t have to be in the professional world very long before you’ll encounter a reference to the 80/20 rule. It’s one of those business axioms that gets tossed about by those hoping to sound smart or clever in a meeting.

If you’re unfamiliar, the 80/20 rule is a shorthand description of the Pareto Principle. Here’s a primer, courtesy of wikipedia:

The Pareto Principle (also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity) states that, for many events, roughly 80 percent of the effects come from 20 percent of the causes. … Essentially, Pareto showed that approximately 80 percent of the land in Italy was owned by 20 percent of the population; Pareto developed the principle by observing that about 20 percent of the peapods in his garden contained 80 percent of the peas.

There have been analyses done across the years to highlight cases where the 80/20 rule appears in our businesses, communities, and personal lives.

The fundamental lesson of the 80/20 rule is that there is an unequal relationship between inputs and outputs in most processes or systems. Some inputs produce a disproportionately larger output than others.

In business, this is often referenced when talking about the relationship between client accounts and profit. For example, in many businesses, a smaller percentage of clients make up a larger percentage of profitability. The lesson to management in this case is to ensure that these highly profitable few clients are well cared for due to their disproportionate impact on overall success.

In time, this rule began to be misapplied to people management. And, the 80/20 rule started to run amok.

Managers theorized that if 80 percent of outcomes were a result of only 20 percent of inputs, then 80 percent of results must come from only 20 percent of employees. And if that’s the case, then only 20 percent of employees really matter.

This singular idea has led to our obsession with “top talent.” After all, if 80 percent of employees are essentially dead weight, then whoever can most effectively hire that top 20 percent will undoubtedly succeed and dominate the markets.

This 80/20 approach to management is also at the root of why our workplaces are so disengaged. You can see it reflected in traditional management thinking:

  • Only top performers get recognition
  • Top performers get disproportionately rewarded financially
  • Managers only really worry about retaining the best performers.

Rewarding and caring for top performers is important; the problem lies in the ignored 80 percent. The 80/20 rule has led far too many managers to create cultures where a vast majority of employees show up to work every day feeling ignored and taken for granted.

Let’s set the record straight.

  1. 20 percent of your employees are NOT producing 80 percent of the results. Try sending home 80 percent of your workforce for a day or a week and see how that goes.
  2. Ignoring 80 percent of your employees is killing your business. A vast majority of employees show up every day wanting to do a good job and earn their money. They may not be top talent and their results may not be exceptional, but their effort and output is important to the organization's success. They need appreciation and acknowledgement just as much as your top performers.
  3. The 80/20 rule is best applied by an individual to their own work. Help each employee find their 20 percent that matters most and coach them to do it better. This will multiply their results regardless of how exceptional or average they happen to be.

The 80/20 rule is not for people management. If you need a rule of thumb to guide your actions, try the 100 percent rule. Give each person you manage 100 percent of your commitment and make sure 100 percent of your employees feel valued and appreciated each day for the contributions they make.

Let’s leave the 80/20 rule to the economists.

About the author: Jason Lauritsen a keynote speaker, author and consultant. He is an employee engagement and workplace culture expert who will challenge you to think differently. Jason is co-author of the book, Social Gravity: Harnessing the Natural Laws of Relationships. Connect with Jason at www.JasonLauritsen.com.