Accelerating Business Growth

Saturday, July 22, 2006

“How the 80/20 principle applies to your team!”

One of the questions I’m often asked when speaking at Leadership events, seminars or during consultancy days is:

What’s my take on the amount of time that should be spent with top performers in my team versus the underperformers? Or…

What’s my view on differential performance and how do you manage it?

Both are great questions - questions that we could spend hours debating.

However, I’ll give you my thoughts on this from my own experiences and also the practical experiences from the hundreds, if not thousands of managers and leaders with whom I’ve interacted over the years.

Before I do, here’s a brief overview of where the 80/20 rule came from. If you don’t want the history then you can skip on a few paragraphs to the heading:

How the 80/20 Rule Can Help You…

The History…

In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that twenty percent of the people owned eighty percent of the wealth. In the late 1940s, Dr. Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto's Principle.

Where It Came From…

After Pareto made his observation and created his formula, many others observed similar phenomena in their own areas of expertise. Quality Management pioneer, Dr. Joseph Juran, working in the US in the 1930s and 40s recognized a universal principle he called the "vital few and trivial many" and reduced it to writing. In an early work, a lack of precision on Juran's part made it appear that he was applying Pareto's observations about economics to a broader body of work. The name Pareto's Principle stuck, probably because it sounded better than Juran's Principle.

As a result, Dr. Juran's observation of the "vital few and trivial many", the principle that 20 percent of something always are responsible for 80 percent of the results, became known as Pareto's Principle or the 80/20 Rule.

What It Means…

The 80/20 Rule means that in anything a few (20 percent) are vital and many (80 percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80 percent of the wealth. In Juran's initial work he identified 20 percent of the defects causing 80 percent of the problems. Project Managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world.

You know 20 percent of you stock takes up 80 percent of your warehouse space and that 80 percent of your stock comes from 20 percent of your suppliers. Also 80 percent of your sales will come from 20 percent of your sales staff. 20 percent of your staff will cause 80 percent of your problems, but another 20 percent of your staff will provide 80 percent of your production. It works both ways.

How the 80/20 Rule Can Help You…

So back to the focused questions:

What’s my take on the amount of time that should be spent with top performers in my team versus the underperformers? Or…

What’s my view on differential performance and how do you manage it?

Actually my immediate response to both questions from a Leadership and Management prospective is that the 80/20 principle needs to be broken down further. Managers need to assess their people and separate them into 3 categories in terms of performance.

Let’s imagine you have a team of 10 sales people. This is how I dissect the team based on the 80/20 principle:

It’s more like:
  • 20% are your top performers
  • 70% are the hearts and souls of your team and…
  • 10% are the disruptors
The toughest part for Managers is then acting on the distinctions and adjusting their style accordingly.

I was with a team of Managers just last week we were talking about this very subject. Once I’d run through the above breakdown I posed the following question:

As a Manager where do you spend most of your time?

The responses were mixed – however the majority were unanimous in concluding most of their time and effort was focused on the 10% disruptors or underperformers.

After a heated debate about how HR and the business procedures made it necessary to invest vast quantities of time in this area we stepped back and analysed the 80/20 principle further.

Because actually the 70% can be broken down as follows:
  • 20% are the future top performers
  • 40% are the hearts and souls and…
  • 10% are the potential disruptors
This is how I summarized it for the team.

The top 20%...

The top 20% are probably the team members who year on year deliver consistently. They need little management – you set the goals point them in the right direction and they’re off. They have a great attitude, are self motivated and know precisely what they need to do in order to exceed their targets and goals.
If you need quick wins or to squeeze more results from the team these are the people who’ll rise to the challenge.

Contact with your top 20% is key – not focusing on the specifics of what they are doing – just to communicate with them – keep them updated and informed and most importantly giving them the praise and recognition they desire.
There is no mistaking the stars at a company that differentiates. They are the best and are therefore treated that way.

Next the 70%...

The hearts and souls of your team and enormously valuable to your business. 20% of these have the potential to be your future Superstars. What are you doing to firstly identify them and secondly nurture and develop this talent pool?
40% are the hearts and souls – they will deliver the results. They need managing more closely, training, regular contact, focus and tactful goal setting – but they’ll either hit or get close to their targets.

A word of caution. You need to keep your eye on this group to prevent them from becoming sliders. During the course of the year you might see differential performance in this group as they’re motivation levels fluctuate or external distractions dilute their focus and drive.

Spotting this is the key as a Manager and coach and knowing when you need to invest quality time to make sure you can re focus them and get them back on track.

10% are the potential future disruptors –. The people who do just enough. You question their attitude, commitment and values. Do they really want to be here?

Do they really want to be part of a team?

Managing the 70% is about identifying people with potential to move up, and cultivating them. Everyone in the middle 70% needs to be motivated and made to feel that they truly belong.

The 70% is where the majority of your time and effort should be spent and where you’ll see the greatest returns.

And finally the 10%...

The disruptors – There’s no sugar coating this – most of the time the people who fall into this category are just not right for your business. If you have a business with clear performance expectations and a systematic review process – then the people in the bottom 10% know who they are.

When you tell them, they usually leave before they’re asked. One of the best things about a business where you manage through differentiation is that people in this bottom 10% usually go on to successful careers at other companies. You’re actually doing them a favour!


So, there you have it – the 80/20 principle related to team dynamics and managing through differentiation - a simple model and effective way of thinking about your people.

Do you currently have the right people on your team? Who are the stars? What’s the make up of the 70% - who are the hearts and souls and who are the future stars who need nurturing? And finally who are the current and future disruptors? Be bold and deal with them now. Don’t let it fester. You’ll feel better and will actually be doing them a favour.


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