Using the 80-20 Rule - Enhancing Your Performance

Dave Ferguson
 


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Have you heard of Vilfredo Pareto? 2006 was the 100th anniversary of his statement that 80% of Italy’s wealth was owned by only 20% of the people. This became Pareto’s Distribution or what we think of now as an 80-20 rule. You’re probably familiar with some rule-of-thumb statements: 80% of the work is done by 20% of the employees, 80% of your revenue is generated by 20% of your customers, 80% of your problems come from 20% of your employees/customers, and so on. We accept these as fact, but we would be hard pressed to prove them. We do, however, know from our experience that they are fairly accurate. If you know it, why not use it?

Let’s assume that 20% of your customers provide 80% of your revenue. That’s the positive side of the business. On the negative side, it’s probably also true that 20% of your customers are responsible for 80% of your unprofitable work and company effort. If this applies to your business, doesn’t it make sense to spend more of your time and effort cultivating the good 20% of your customers and firing the bad 20%? Better yet, send them to your competition and go find more great customers. Increasing your market share is only good when it generates greater profits for you and results in stronger cashflow.

Maybe it’s not 20% of your workforce that does most of the work, but I’m sure you have some who contribute more than others. Remember, your competition is always looking for good employees, so keep yours. What are you doing to reward the producers and weed out the employees who are costing you money instead of generating profits? If they don’t fit in their present position, create one where they do or help them get the skills they need to succeed. Most employees want to do a good job. They appreciate knowing what’s expected of them and getting honest feedback on their performance. When they’re doing a great job, show your appreciation.

The rule applies to you too! 80% of your success is based on 20% of your effort. Many business leaders and managers wind up spinning their wheels working in their business doing tasks that don’t contribute to the bottom line. As a coach, I recommend that business owners spend at least 15 minutes a day working “on” their business instead of “in” their business - thinking about the things that would make their business more successful, more profitable and more fun. One day a week make it a half hour. One day a month make it 2 hours. And, one day a quarter devote the entire day. Go out and ask your customers what you could do better. How much more successful could you be if, instead of working on the things that take up your valuable time and don’t generate results, you focused on the things that could truly make a difference to your business and life?

Dave Ferguson is a coach and the owner of Lake County Business Coaching, Inc. , a coaching firm dedicated to helping people in business become extraordinary, to realize their dreams by achieving their goals. More information is available at http://www.LakeCountyBusinessCoaching.com

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