Documente Academic
Documente Profesional
Documente Cultură
PARETO RULE TO
MANAGE GROWTH
COMPANIES &
YOURSELFNot Enough $ or Resources?
Are You Too Busy?
White Paper
By THOMAS E MEYER
Temeyer63@gmail.com
www.linkedin.com/in/thomasmeyer63
Contents
Executive Summary .................................................................................................................... 3
Introduction ................................................................................................................................. 4
The Challenge-Too Little Time, Money, or Resources ........................................................ 5
Parkinson's Law ................................................................................................................... 5
Perfect is the enemy of good enough ................................................................................ 6
The Symptoms and Consequences .......................................................................................... 7
The Answer-Pareto & Personal Experience ........................................................................... 8
80/20 Principle....................................................................................................................... 8
School of Hard Knocks- Personal Experiences ............................................................. 10
How to-Applications of 80/20 ................................................................................................. 11
Tom Meyer 80/20 Checklist-Table 1 ...................................................................................... 14
The 80/20 Principle Summarized ........................................................................................... 18
Conclusion ................................................................................................................................. 21
Bibliography.............................................................................................................................. 22
Appendix A : TOM MEYER BIO ..................................................................................... 23
March 2013
Page 2
Section
Executive Summary
Verne Harnish, in his book
to Increase the Value of your Growing Firm, points out that Fast Growth companies
must make four major decisions well to succeed: People, Cash Flow, Strategy, and Execution.
Studies have shown that most firms fail to execute their plans successfully, some indicating as
high as 90+%. Often the defense given by management is that they did not have the necessary
resources to complete the job on time and on budget. Additionally, as individuals, most people
often think they do not have the time, $, or other resources to complete their personal tasks
properly or as well as they would like.
References
1.
2.
March 2013
^ Bunkley, Nick (March 3, 2008), "Joseph Juran, 103, Pioneer in Quality Control, Dies", New York
Times
a b
^
What is 80/20 Rule, Paretos Law, Pareto Principle
Page 3
Section
2
ectio
Introduction
Do you work for or manage a high growth company (growing>15% per year)? If so you are very
fortunate, but I am sure you also are familiar with the sometimes-frantic pace of decision making
that is required, the cost of errors, that follow, and the time stress that you regularly experience
just to run the business like you know how it needs to run.
The purpose of this White Paper is to give some guidelines and practical examples illustrating
how you can get more done in less time by using the Pareto 80/20 principles to manage your
company and your life more effectively and efficiently.
The Problems and Symptoms of too much to do, and too little time to do it are given in Section
3 & 4 respectively followed by the very basic definition of 80/20, in Section 5 along with some real
life examples from the life of the author. The authors Top 5 Applications are in Section 6
followed by a checklist in Section 7 Table 1, for your own personal use of items relating to Time,
Business, and Personal activities. Ten summary guidelines are defined in detail in Section 8 based
upon a summary of the basic principles from Rich Kochs The 80/20 Principle- The Secret to
Achieving More with Less, which is considered by many to be the best written presentation on
80/20.
March 2013
Page 4
Section
Parkinson's law - (Work expands so as to fill the time available for its completion)
explains much of the problem and symptoms of not having enough time, money or resources!
From Wikipedia- It is the adage first articulated by Cyril Northcote Parkinson as part of the first
sentence of a humorous essay published in The Economist in 1955:[1][2]
It was later reprinted together with other essays in the book Parkinson's Law: The Pursuit of
Progress (London, John Murray, 1958). He derived the dictum from his extensive experience in
the British Civil Service. Much of the essay is dedicated to a summary of purportedly scientific
observations supporting his law, such as the increase in the number of employees at the Colonial
Office while Great Britain's overseas empire declined (indeed, he shows that the Colonial Office
had its greatest number of staff at the point when it was folded into the Foreign Office because of
a lack of colonies to administer). He explains this growth by two forces: (1) "An official wants to
multiply subordinates, not rivals" and (2) "Officials make work for each other." He notes in
particular that the total of those employed inside a bureaucracy rose by 5-7% per year
"irrespective of any variation in the amount of work (if any) to be done".
References
1.
2.
March 2013
^ Parkinson, Cyril Northcote (November 19th, 1955). Parkinsons Law. The Economist.
^ Fowler, Elizabeth M (May 5, 1957). It's a 'Law' now: Payrolls grow. The New York
Times.
Page 5
Perfect is the enemy of good enough also explains why people and
organizations too often spend too much time on completing a project or task. From Wikipedia,
It is an aphorism or proverb meaning that insisting on perfection often results in no
improvement at all. The phrase is commonly attributed to Voltaire. Aristotle, Confucius and
other classical philosophers propounded the principle of the golden mean, which counsels
against extremism in general.[2] The Pareto principle or 8020 rule explains this numerically. For
example, it commonly takes 20% of the full time to complete 80% of a task while to complete the
last 20% of a task takes 80% of the effort.[3] Achieving absolute perfection may be impossible and
so, as increasing effort results in diminishing returns, further activity becomes increasingly
inefficient.
References
1.
2.
3.
March 2013
Page 6
Section
Symptoms
Some of the many symptoms of not carefully choosing the right things to work on and doing
them the right way using 80/20 thinking include: complaining and feeling you need more time,
more resources, or more $; not meeting time deadlines; always being Too Busy; to-do lists are
too long; too much partially completed work on the desk or in the briefcase; families are
complaining that you spend too much time working and not enough time with them. You have
your own list of not having enough time or getting enough done!
Consequences
The consequences can be dire. Companies fail to meet their objectives, to remain competitive, or
to grow like they should; some go bankrupt; their products cost too much; they are inefficient,
and employees are unhappy. People are stressed, overworked, unhappy, and dont meet their
personal objectives. For all, they are inefficient and ineffective compared to what they could
accomplish in their businesses and their personal lives.
March 2013
Page 7
Section
March 2013
Page 8
References
1.
2.
3.
4.
5.
6.
7.
8.
9.
March 2013
^ Bunkley, Nick (March 3, 2008), "Joseph Juran, 103, Pioneer in Quality Control, Dies", New York
Times
a b
^
What is 80/20 Rule, Paretos Law, Pareto Principle
(Omitted from Text)
^ Pareto, Vilfredo; Page, Alfred N. (1971), Translation of Manuale di economia politica ("Manual of
political economy"), A.M. Kelley, ISBN 978-0-678-00881-2
^ The Forbes top 100 billionaire rich-list, This is Money
^ Gorostiaga, Xabier (January 27, 1995), "World has become a 'champagne glass' globalisation
will fill it fuller for a wealthy few", National Catholic Reporter
^ United Nations Development Program (1992), 1992 Human Development Report, New York:
Oxford University Press
^ Human Development Report 1992, Chapter 3, retrieved 2007-07-08
^ Living Life the 80/20 Way by Robert Koch
Page 9
March 2013
Page 10
Section
Just say NO
There is nothing so useless as doing efficiently that which should not be done at all. Peter
Drucker, father of modern management theory.
How often do you say, NO? Do you have a set of filters that allow you to easily decide when to
say yes or no? Say NO, when you or your organization do not have the time or the resources to
do something, and use filters that will help you decide whether to accept a new task or
assignment. A filter is a conceptual tool like a funnel that says, Does this meet my or our
objectives and strategy. Ok, so just saying NO, may be a little extreme in some situations!
Recognize that sometimes that is not an option, but consider, putting that request in Backlog to
be done at a future date, when time and resources are available; or request that another party or
organization may be able to do it better or sooner; or at least give or negotiate a date by when
that request can be met, but dont always stop what you are doing and start a new task. Also,
consider regularly doing an exercise of deciding what to stop doing that is of low value, i.e.
Cessation.
Delegate
Next to the word NO, effective delegation to others may be the most underutilized management
skill in many organizations. Too often the attitude is, If I want it done properly, I must do it
myself. And how often do the people reporting to you, delegate upward jobs to you that they
should be doing themselves? Management Time: Whos Got the Monkey? by William
Oncken, Jr. is the most reprinted Harvard Business Review article ever. His basic concept is that
you must get control over the timing and content of what you do, and the first premise is that
you can get some of that by eliminating subordinate-imposed time. This should be mandatory
reading for every member of your management team. See the Bibliography.
March 2013
Page 11
Leverage
We know how to use mechanical levers and gears to multiple the effect and power of our
physical efforts. Figure out how to effectively use leverage to multiply the effects and results of
all of your work, both physical and mental. Use COLs (Cycles of Learning) from other people to
find out how things have been done efficiently rather than re-creating the wheel. Pay others to
do things that you dont know how to do well both personally and by outsourcing the things that
your organization does not do well or are of low value, but necessary. Collect a group of similar
tasks to do all at one time where you can stay focused and get momentum, such as paying your
bills all at one time rather than as they come in the mail. Define processes that are effective, so
that each time something is done, it is done in the most effective and efficient manner; it is not
dependent on who is doing it or supervising it; and the results are consistent.
Time management
Note that there are many time management tools and books that address the issue of how to
prioritize and manage time based on categorizing tasks into a matrix of Urgent/Not Urgent and
Important/Non Important. Below is an excerpt from Steven Coveys Book, First Things First.
You can learn more from this book, some of the references in the Bibliography, or web sites such
as http://www.businessballs.com/timemanagement.htm &
http://www.mindtools.com/pages/article/newHTE_91.htm
March 2013
Page 12
Urgent
Not Urgent
II
(MANAGE)
(FOCUS)
Crisis
Medical emergencies
Pressing problems
Deadline-driven projects
Last-minute preparations for
scheduled activities
Preparation/planning
Prevention
Values clarification
Exercise
Relationship-building
True recreation/relaxation
Quadrant of Necessity
III
IV
(AVOID)
(AVOID)
Quadrant of Deception
March 2013
Page 13
Trivia, busywork
Junk mail
Some phone messages/email
Time wasters
Escape activities
Viewing mindless TV shows
Quadrant of Waste
Section
ITEM
DETAIL
ALL
JUST SAY NO
ALL
ALL
LEVERAGE
Figure out how to Leverage your time and work; use processes
ALL
ALL
TIME
ALL
ALL
Bills-Paying
Use your bank auto bill pay feature or have auto charge to
Credit Card to save time each month
March 2013
Page 14
Reading
Identify the top 3 and start with the most important one.
Consider a 1 hour privacy period to focus on the priorities,
problem solving, and starting on #1 without interruption.
Accountability
Accounts Receivable
Advertising-
Branding
Business Partner
When picking a business partner, figure out not only what are
the good traits, but also their bad ones, and CAN YOU TAKE
THEM AT THEIR WORST.
Never a 50/50 Partnership; somebody must have final word.
50/50 partnerships seldom last permanently.
Cash Flow
Customers
March 2013
Page 15
Execution
Inventory
Focus on control of the 20% that are the high usage and high
$; write off or dispose of excess at least annually. Review
Turnover at least monthly. Insist on great Supply Chain
Management from Vendors and Purchasing
Layoffs 16/1
Using the 80/20 rule for employees, then the top 20% often
produce 4 times as much value as the other 80 %; that is a 16/1
ratio; then remember your top 20% players are as much as 16
times as productive as your other players when doing layoffs.
Meetings
Metrics
Networking
Outsourcing
Jack Welch said drop the bottom 10% annually; at least get
rid of C players that cant be quickly moved to B players;
spend 80% of your time on A & top B players, not C players.
Hire the best and pay them more!
Prospecting
R&D projects
March 2013
Page 16
Relationship building
Relationship management
Make this a key for dealing with your customers and evaluate
your leadership staff & Sales on relationship management.
Staffs
Keep staffs small, lean & mean; Note Warren Buffet runs a
Multi-Billion $ organization with a staff of 24.
Strategy
Friends
Journal or blog
Pay others
Spouses
March 2013
Weekends
Page 17
Section
#2: A minority of causes create a majority of effects. Think of the decisions youve
made over the course of your life. You make hundreds (thousands?) of decisions every day, but
where you find yourself now can be traced back to just a few critical choices that have led to your
present state. The same goes for things like investments most of the returns a portfolio
generates comes from a few critical decisions to purchase or sell certain securities. Most of the
losses a portfolio generates also come from a few small decisions.
#4: There are many names for this common phenomenon: The 80/20
Principle, Paretos Law, Zipfs Principle of Least Effort, Jurans Law of the
Vital Few. The 80/20 Principle has been articulated in all sorts of ways by many different
people, but the central idea is the same: a few things matter a lot, and most things matter very
little. Personally, I prefer to refer to this concept as The Critical Few.
#5: The Critical Few identify and build upon the 20% of efforts that
produce 80% of the results. If you want to improve your effectiveness at anything,
focus only on what matters most. It doesnt matter if youre conducting business, working on a
personal project, trying to get into a competitive position, or finding a romantic partner, or
strengthening a personal relationship. There are a few things that matter a lot, and much that
doesnt matter at all. If you intentionally set out to study what matters most, you can
March 2013
Page 18
tremendously improve your effectiveness. Youll spend less time, less money, and less effort
and get better results at the same time.
#6: Most of what we do is low value eliminate or reduce the 80% of efforts
that produce poor results. The flip-side is also true: in every endeavor, there are many
ways to waste your time and resources. You only have so much energy to use, so it pays to use it
wisely. If something is only marginally useful, delegate or delete it. This advice is sometimes
difficult to put into practice, because it requires what Tim Ferris (author of The 4-Hour
Workweek) calls, the art of letting bad things happen. If its largely a waste of time to answer
every last e-mail or tie up every loose end, that doesnt mean you wont experience repercussions
from skipping them. On the balance, youll come out ahead, but its easy to not feel that way in
the moment.
By making some hard decisions about what to focus on and what to delete, youll free up huge
amounts of productive time and energy to focus on what will really get you where you want to
go. Create a not-to-do list by deciding in advance whats not worth their time and energy, it
becomes much easier to say no to low-value tasks and requests when theyre presented to you.
Cessation is often the best (and easiest) way to improve your performance.
#7: In business, focus on the products and customer that make you the
most money, and minimize or eliminate the rest All people are created equal, but
all customers are not. Some customers will feel like gifts sent from heaven theyll be excited,
considerate, and will enthusiastically purchase everything you offer. Other customers will feel
like they were sent from hell theyll buy what youre selling, but theyll never be happy, theyll
clog you will complaints, and theyll demand special treatment or exceptions to your business
practices. Heres the rule: discover who your best customers are, and focus on doing everything
you can to give them the best experience and service possible. Also discover who your worst
customers are, and fire them they represent a huge Opportunity Cost in terms of time and
effort. By politely inviting bad customers to not do business with you anymore, you free yourself
to focus on customers who will actually help you meet your business goals. (Side note: if anyone
asks you for a refund, dont fight them grant their request immediately, and be happy doing it.
They are not your best customer.)
#8: In life, focus on the activities that produce the majority of life
satisfaction. The 80/20 Principle also extends to your life satisfaction a few things will
contribute the most to your overall happiness and inner peace. Those are the things that you
should build your life around: for me, theyre spending time with family and friends, having
deep conversations with people, sharing what I know with others, doing fun experiments, and
reading everything that piques my interest. If I want to lead a happy life, thats how I should
spend most of my time. A wide body of research indicates that daily experiences contribute far
more to your overall happiness and life satisfaction than possessions do. That means youre
far better off investing in a trip around the world with friends than a huge house or luxury car.
On the flip side, you should ruthlessly eliminate things that dont contribute to your happiness or
life satisfaction. The classic example for most people is commuting: very few people love the
feeling of sitting in a car or train for 1-3 hours every day. If you eliminate your commute by
moving very close to where you work you both eliminate a source of dissatisfaction AND free up
March 2013
Page 19
more time and energy to do things you find far more rewarding. That decision can be a net
positive, even if its more expensive.
#9: A minority of decisions will produce the majority of your results: choice
of work, debts, investments, & relationships. There are a few specific decisions it
pays to take special care before making: what you do for a living, borrowing money, contractual
commitments, and who you spend the most time with particularly the transition from
romantic partner to marriage or civil union. Think of these decisions as inflection points youre
making a commitment thats very difficult (not impossible, but difficult) to reverse or change.
They also effect how you will be spending your time and energy on a very fundamental level,
such that they can drastically alter your income, priorities, and life satisfaction.
Accordingly, it pays to spend a disproportionate amount of time and energy making sure these
decisions are made well, and you put yourself in the best position you can in the process. For
example, purchasing a home is one of the biggest financial decisions people make, so if you want
to buy a house, dont do it quickly or lightly. Do your research, understand the complete
financial picture, create a masterful budget, improve your credit, and negotiate hard with the
bank if youre taking on debt. What can look like small improvements can end up producing
huge results: negotiating 1% off of your interest rate can save you hundreds of thousands of
dollars on a 30-year mortgage, so it pays to push as hard as you can.
#10: More effort does not equal more reward focus only on what is
crucial, and ignore the rest. Heres the ultimate lesson, and its an important
one: YOU ARE NOT REWARDED FOR EFFORT. People ultimately dont care how long you
spend doing something it cares far more about how important and meaningful your work is.
You can spend 50 years digging a pit in the Sahara desert, and no one will care a bit. Spend those
50 years doing something like curing cancer, and EVERYONE will care. Whatever you decide to
do, spend some time at the beginning Deconstructing the goal what appears to be critically
important to master, and what appears to be a waste of time? Youll certainly have an
incomplete list until you actually get started and start learning as you go, but establishing your
focus-on and Not-To-Do lists from the outset can save you huge amounts of time and effort
in the long run.
March 2013
Page 20
Section
Conclusion
Applications of the 80/20 principle can and will make both you and your organization much
more effective, particularly in the use of your time and resources.
Be conscious of the decisions you make daily and that you are using 80/20 thinking and making
choices that give you LEVERAGE; that you are DELEGATING where appropriate; using W3s
for your meetings; managing your TIME effectively, and just saying NO more often. Go thru
the 80/20 checklist in Table 1, and do a Cessation (stop doing) exercise, regularly. Be sure you
read Verne Harnishs Mastering the Rockefeller Habits on how to manage your fast growing
business and the HBR reprint of William Oncken The Care and Feeding of Monkeys. Also,
certainly consider the other items in the Bibliography.
If you do all or most of these applications, you and your organization will be far more effective
and efficient; you will require less resources; you will have more free time and less stress over
time and $; and hopefully will achieve the state of allowing your yourself to be lazy sometimes
and certainly having more FUN!
This White Paper is for informational purposes only. Tom Meyer and Ventom Holdings LLC MAKE NO WARRANTIES,
EXPRESS OR IMPLIED, IN THIS WHITE PAPER.
Copyright 2013 Thomas Meyer. All rights reserved. Reproduction in any manner whatsoever is not permitted without
the express written permission of Thomas Meyer at Ventom Holdings LLC. For more information, contact Thomas at
temeyer63@gmail.com
Information in this document is subject to change without notice.
March 2013
Page 21
Section
10
Bibliography
1) Covey, Stephen. Seven Habits of Highly Effective People New York: Simon and
Schuster 1989 and First Things First New York: Simon & Schuster 1994
2) Harnish, Verne Mastering the Rockefeller Habits New York: Select Books Inc. 2006
3) Koch, Richard The 80/20 Principle-The secret to Achieving More with Less New York:
Doubleday 1998
4) Marquet, David. Turn the Ship Around Austin, TX: Greenleaf Book Group Press 2012
5) Onken, William The care and feeding of Monkeys http://hbr.org/1999/11/managementtime-whos-got-the-monkey/ar/6 Boston, MA: Harvard Business Review Press 1999
OTHER RELEVANT BOOKS NOT REFERRED TO IN WHITE PAPER
1) Delong, Thomas J. Flying without A Net Boston, MA: Harvard Business Review Press
2011
2) Miller, Keith J. Compelled to Control Deerfield Beach, Florida: Heath Communications
Inc. 1997
March 2013
Page 22
Appendices
Appendix A: Bio of Thomas E Meyer
Thomas E Meyer
Business Advisor & Executive Coach
Thomas Meyer is the founding President and Principal of VENTOM & Associates, founded
in 1985. Mr. Meyer has been a business advisor and consultant for over 25 years. He is a
Certified Gazelles International Coach, and has provided management coaching and
mentoring to CEOs, COOs, Admirals, and Senior Level Executives in the US and China. He
is an expert at: coaching CEOs and management teams of fast growing businesses; helping
clients achieve enterprise transformation through process improvement; strategic planning
and implementation; cost and expense reduction; and sales force hiring and training.
His clients have included EDS, Data Products Corp, Olivetti, the US Navy, Clipsal (a major
supplier of electrical products in Hong Kong), Hengan (a large manufacturer of paper
products in China), AMTRAK, and a number of medium size fast growing businesses.
He has extensive experience with managing Naval Enterprise process improvement programs
including Enlisted Recruiting and Training, Naval Aviation Pilot Training (resulting in
significant reductions in time to train Naval Aviators and increases in output), Naval Surface
Ship Maintenance (cost savings of $200 million over 3 years), and Nuclear Submarine
maintenance in public shipyards.
Management experience in the industrial sector includes CEO of an office products company
in a LBO partnership with a major venture capital firm, plus general management, financial
management, and marketing roles with two Fortune 500 companies, Hewlett-Packard and
Harris.
Mr. Meyers Naval career began as a graduate of the US Naval Academy, where he
graduated with honors. Following seven years aboard SSBN and Nuclear Attack
Submarines, he attended and received his MBA from the Harvard University School of
Business with majors in Marketing and Finance.
Mr. Meyer is an Independent Consultant to Booz-Allen Hamilton in the area of Supply Chain
and process change implementation. Past positions include Managing Director of BDO
Seidman Consulting Corporate Advisors, LLC for Dallas, and the Cassidy & Associates
consultant in Texas providing clients with US Government financing and marketing to
government agencies in DFW and Austin.
March 2013
Page 23