Refocus & Prioritize – Pareto Principle

March 24, 2017 9:29 am, Published by

Are you running your training or events business but finding yourself weighed down in administration and time consuming tasks? These tasks consume the time you have available to engage in activities which will grow your business. Having your head down in the day to day running of a business takes your eyes off the horizon of where you could go. This is part one of the Refocus & Prioritise series, in this part we will be examining the Pareto principle and how it can apply to our businesses.

What is the Pareto Principle?

The Pareto Principle is commonly referred to as the 80/20 rule where approximately 80% of effects originate from 20% of causes. This phenomenon was originally identified by Vilfredo Pareto who identified that around 20% of his pea pods produced almost 80% of the total peas from his garden. The same link was then shown in one of his studies that 80% of Italy’s land was owned by 20% of the population. Joseph Juran then took the principle and applied it to defects. (Teich & Faddoul, 2007).

The same link can be said of a lot of tasks which many training and event managers find themselves doing day to day. Generally speaking, 20% of the tasks will produce 80% of the growth for the business. Tasks like manually entering paper registration data into a spreadsheet to later use for communication and payment reconciliation may be required for a business, but taking into account the time it takes and the alternative solutions the effect this has on a business is minuscule. Knowing this, there is serious prioritization needed to ensure that you are spending sufficient time on the 20% of tasks that will create 80% of the effect.

Bruce Lee puts it this way:

“It is not a daily increase, but a daily decrease. Hack away at the inessentials”

How can we use the Pareto Principle to Refocus and Prioritize

A Pareto Chart is a powerful way to identify out of a group of tasks, which have the biggest impact. Lets use an example to understand how it is utilized. Sam runs a first aid training school he has been tasked with reducing the number of complaints the company receives and increasing customer satisfaction. Sam was given 100 bits of feedback from customers. They were grouped broadly in 5 sections:

  1. Paper forms are inconvenient to scan or post to Sam when registering. 44 Complaints
  2. People can’t keep up with Sam’s business because there is no blog. 3 Complaints
  3. People can’t get through on the phone, it always goes to voicemail because Sam is busy. 36 Complaints
  4. People don’t like Sam’s social media profiles because the tweets are infrequent. 5 Complaints
  5. People arrive late because it takes a while to find the physical location of Sam’s business. 10 Complaints
  6. People don’t like the music they hear while they wait for the voicemail to begin. 2 Complaints

Let’s first graph the number of complaints:

Now if we work out the cumulative percentage of the complaints (orange line) for each category and order these from highest to lowest we see Pareto in action:

Paper forms and the phone always going to voicemail make up 80% of the complaints that were received as can be seen above.. The 80:20 or Pareto principle suggests that Sam should focus his attention on these two problems before tackling location and the other issues. One solution which Sam could implement and which many businesses worldwide are implementing, is using Arlo for online registrations. Arlo’s online registration allows you to capture the data you need, store it securely and recall it in seconds. Learn more about Arlo’s online registration here, and also customized registration forms to gather targeted information.

Obviously this is a very simple example, but the theory holds. It is not limited to number of complaints, Sam could look at dollars spent, expected return, hours taken etc. The Pareto Principle should never be used in isolation, it proves to be one way event and training managers can think about prioritization and in turn refocus on the things that will grow their business.

In next week’s issue we will be looking at John Maxwell’s rule of 5!

Here are some more materials on the Pareto Principle:
https://www.youtube.com/watch?v=zPoA6dzKmtg
http://pyovevlibrary.blogspot.co.nz/2009/07/pareto-chart.html
http://www.brighthubpm.com/monitoring-projects/65152-explaining-paretos-8020-rule/