The Pareto Principle

It was business management consultant Joseph Juran who suggested the 80/20 principle and named it after Italian economist Vilfredo Pareto – citing that for many events, roughly 80% of the effects come from 20% of the causes. It was 1906 when Pareto observed that 80% of the land in Italy was owned by 20% of the population. He then noted that 80% of the peas in his garden came from 20% of the pea pods. Today, in business, many have observed this “Pareto Principle” across various company operations:

• 80% of your profits come from 20% of your customers
• 80% of your complaints come from 20% of your customers
• 80% of your profits come from 20% of the time you spend
• 80% of your sales come from 20% of your products
• 80% of your sales are made by 20% of your sales staff … and so forth

Impact and Executive Value

In general, does the Pareto Principle suggest that employees can be more productive and effective by recognizing that 80% of their potential value may result from 20% of their initiative? In all likelihood. And it's perhaps helpful in prioritizing employee to-do lists. Yet, what are the implications of this phenomenon applying to the executive suite? As a CEO, are you getting most of the value out of your team from 20% of their efforts? It can’t possibly be that simple or lopsided. Or is it?

After all, Tim Ferriss says we can have our dream lifestyle simply working the “4-hour Work Week.” Right? 

Big Rocks and Frogs

Tapping the core of the “7 Habits of Highly Effective People,” executives can certainly see how to focus and attain the greatest results. Remember the notion of putting big rocks, then pebbles, then sand (then a beer, depending on the version you’re familiar with) into the jar? My wife Cindy is a certified instructor of the “7 Habits” program, and quite often reminds me, “focus on the big rocks first.” It’s great advice.

A similar notion that has gained popularity is the idea of “Eating a Frog” every morning". While this may be more about attacking the ugly, hard tasks, it’s consistent with the theme of accomplishing “big rock” important, even strategic business objectives – every day – that can result in being a high impact executive.

In our practice of providing fractional or part-time marketing executives to mid-sized companies, we’re often asked how 20-30% of a CMO’s time can possibly deliver a substantial impact on business growth. It’s a good question. Our founder and CEO, Art Saxby has been bold is proclaiming that a fractional marketing executive can have even more strategic impact on the business than a full-time executive. Is that possible? Consider that a fractional CMO is 100% focused on the big strategic initiatives, while an in-house full-time executive gets sucked into the day-to-day fire drills, administration and endless meetings. Perhaps by bringing that outside perspective and working from a rigorous, prioritized plan, our CMOs actually get more strategic opportunities implemented and over the goal line.