Pareto’s principle and Parkinson’s law— Issue #11
In the second half of the eighteenth century Economist Vilfredo Pareto passed on what would have been lately called “Pareto’s Principle” also known as the “80/20 principle”.
This principle indicates that, on average, when analyzing the 100% of any kind of activity we do, 20% of it is what generates 80% of the results we get.
However, most of the time such is not the case, as the majority of the activity we do literally reverse the concept, with an 80% investment on the activity allowing us to reach nothing but small results — a 20% outcome.
Beyond specific percentages — whether 80/20, 70/30 or 90/10 — this is not the most important aspect to keep an eye upon, for what really is shimmering with attractiveness in this principle is the concept expressed and the fact that more than a century later it is still very rooted deep within our business model — a very welcomed guideline for the new entrepreneurs.
If we think about the customer of any business, most of the time it is a 20% of customers, the best ones, that generate 80% of the outcomes in terms of revenue.
Other more mundane cases? For instance, 80% of the time we wear the usual 20% of the clothes in our wardrobe, or when we do concretely apply a 20% of useful knowledge that is useful to reach the 80% of a good mark at an exam.
How is that, as of today, such method has become so spread among new entrepreneurs?
As stated earlier, the advent of technology is changing many spectra of our communications, marketing and sales.
Above anything else, in the labor market, we have moved from a mentality of doing, which was once rewarded, to a mentality of the result that is today rewarded.
The mentality of doing is rewarded with commitment, that is, you do more and more automatically your work is doing fine and generates results; it derives from the industrial era when the majority of the population was employed in workmanship.
For a factory worker, in fact, working hours were automatically the main means to measure the amount of his work and often also the quality of his work, because a total of work hours corresponded to a certain production standard.
Today, the working world is speedly changing even more than how much it has changed already — in the Western world activity is primarily concept, as a large majority of the population carries out cognitive-intellectual tasks, unlike a few years ago, where manual work employed high numbers of workers.
The relationship between hours worked and productivity is no longer measurable; a worker could work many hours but be less productive while another worker could produce in a short time a result of hours and hours of work — the idea is to reward not the amount of work but the quality results that are determined by the work itslef.
In some countries, especially in the US, this is becoming more and more frequent, and there are more cases of home-made work.
Remote jobs are becoming an important reality in which the number of hours of work is not important: the results are.
By following such statements, a very specific type of employment relationship is indicated, allowing the worker to carry out his activity away from the company headquarters.
Many individual workers, in fact, whether autonomous or not, adopt telework precisely in order to achieve a better balance between work and personal life — many of which declare themselves downshifter or embrace this lifestyle.
Matt Mullenweg is an American entrepreneur famous for having founded and being leading Automattic, the one billion dollars and over company managing WordPress.
For those who do not know Wordpress, it is the most popular content management system on the web and it is estimated that more than 25% of websites present on the network rely on such technology.
In other words, for those who are on the web, more than often it is very likely to land on a WordPress site at least once a day.
Automattic has a team of more than 400 people located in 43 different countries, most of them working from home, in co-working offices, at the park or at a coffee shop, depending on how they prefer.
Mullenweg states that they take the people regardless of where they are located as such a way can attract the best talents from all around the world in a much easier — and less spending — way.
Information disclosure, task subdivision, teamwork: all is managed through WordPress itself through the publication of articles classified by tags.
In Automattic it is not important to work time or working inside a specific workplace, but to complete the tasks and to attain the goals set.
A new character in our story is Cyril Parkinson, he was a British writer and historian, author of many books, including the bestseller Parkinson’s Law, which led him to be considered an important scholar in the field of business organization.
This book, published in 1958, deals with issues related to the organization’s operation in relation to the timing of business activities.
Parkinson’s law states that the perceived importance and complexity of a task increases in relation to the amount of time allocated for its execution; pretty much, when there is a shortage working time, any due task is performed faster thanks to the risk of failing to complete the task itself.
So there are two useful approaches for the organization of one’s own business strategy — each the opposite of the other.
On one hand it is important to try to understand what activities are fundamental while asking ourselves if such activities fall within that 20% that could gain us 80% of the results.
On the other hand, we have set us short deadlines, shortening the working time to go for the essentials only, thus exploiting the magic of the imminent expiration.
By summing up the best solution one resorts to use both of the aforementioned principles, identifying the critical tasks that contribute to most of the revenue to better schedule them while respecting defined deadlines without procrastinating.
Pareto’s principle and the Parkinson’s Act are in fact two key concepts radically binded to professional life and new professional entrepreneurs — both, together with the “Lean approach”, can help anybody to better set up a new business.
Photos by Joanna Kosinska, Maxim Melnikov, Mark Daynes, Vlad Shapochnikov.
