20 December 2007

80-20 rules. Intriguing thoughts

I am not going to bore you by explaining what the 80-20 rule is. Rather I was going to point out some intriguing implications of it which makes it somewhat not believable.

If you have an organization of 100 people, 20 of them are doing 80% of the work and the rest 80 are doing the rest of the work. If you do the math, on an average, any individual from the former group is 16X more productive than any individual (on an average) in the second group. (4X units done by an individual group compared to 1/4X units done by an individual in the second group).

16 times more productive???? That seems a little extreme to me. I can understand one or two individuals being very very productive compared to a couple of “bottomers” but 20 people each (on an average) being 16X more productive that 80 other people (on an average)? Sounds a little far fetched.

Carrying on with that example, let’s say you had 200 people in your organization. 40 of them are doing 80%of the work. Apply 80-20 on that 40 people (it is large enough a size). Now you have 8 people doing 64% of the work and the rest 192 doing 36% of the work. This makes your top 8 people – on an individual basis – 43X more productive than the average individual in the rest 192!! That seems even more far fetched to me.

And if you want to play with it a little more, apply 80-20 to the bottom 80% of your 200 people. Now you have 64% of your people doing only 4% of the work. So top 8 people in your 200 people organization is 256X more productive – on an individual basis – than the bottom two-thirds (64%) of your organization. Wow!! That is something.

I think the philosophy still remains the same – people contribute dissimilarly to a goal. And a larger portion of the work is done by a smaller portion of the people. But 80-20 may be extreme when it comes to people and what they produce in a team.

If you say the rule is 60-40, now you have your top players about 2.25X more productive than the rest.

And if I have my math correct, in the last two examples above, your top 16% is 2.95X more productive than the rest and the same group is about 3.375X more productive than the bottom one-third of your organization.

Honestly, intuitively, this seems to be more in line with what I have experienced. Being 4X more productive is a big number. You will do in weeks what the others are taking months to do.

So what is it? 80-20 or 60-40?

Rajib



Posted December 20, 2007 by Rajib Roy in category "Reflections

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