(This post is written for alumni of LEAD 365, although all are welcome to read it.)

One of my favorite philosophies for leadership is the Pareto Principle. I don’t think we talked about this principle in class so this may be a new topic to you. I want to explain this important concept in this week’s posting so I can use it to explain how we designed LEAD 365 in next week’s posting.

The Pareto Principle is something I learned about twenty-five years ago when I was an engineer. Those of you who are engineers, especially in the quality world, probably already know the principle. It also goes by another name that I have often found to be misunderstood so I usually call it the Pareto Principle first. The other name is the 80/20 rule. Many have heard of this rule and think they understand it, and often don’t (at least in my experience).

Here is the simple 80/20 rule (or the Pareto Principle): 20% of some aspect of life makes up 80% of the impact that aspect of life may have. Huh? What does that mean? you may be saying. Okay, here are some examples that explain the rule.

  • 20 percent of salespeople produce 80% of the sales for a company
  • 20 percent of products create 80% of a company’s profits
  • 20 percent of customers create 80% of a company’s customer complaints
  • 20 percent of drivers get 80% of traffic tickets

Please don’t take me literally on the numbers. I use them to make the concept simpler. The real rule I like to use is this: There are a vital few items (20%) that make most of the impact (80%). The flip side of this rule is that there are a whole bunch of items (80%) that have a small impact (20%) on the outcome. Joseph Juran, who coined the Pareto Principle, named it after an Italian economist and also coined the terms “the vital few,” and “the trivial many.”

Sidebar: A test you might use to see if you really understand the concept of the 80/20 rule is how you would answer this question: In this 80/20 rule, does the number representing the vital few (the 20%) plus the number representing the trivial many (the 80%) need to add up to 100%? What do you think? I’ll leave this question hanging there for you. We invite you to respond with your thoughts below, and you’re welcome to send me an email with your answer.

As an engineer, I was trained to find perfect answers for every problem. This is why you see engineers regularly debating over minute details. In order to have a 100% perfect outcome, it requires 100% of the effort to produce that perfect outcome. This was good training to have, especially when dealing with objective realities like whether a product will fail or not. When teaching this concept I often refer to designing O-rings for the space shuttle. People who have been around for awhile quickly understand this example, because it was a poorly designed O-ring that caused the Challenger to explode several minutes into its launch in January of 1986.

When you design something as critical as an O-ring for the space shuttle, you’d better be perfect. You’d better put in 100% of the effort needed to get 100% of the best result. The material, the exact size, the finish, basically everything about that O-ring needs to be perfect. Close enough won’t cut it!

The opposite example I use is manufacturing marshmallows. The exact size of a marshmallow doesn’t need to be perfect. In this case, close enough really is close enough. You don’t need to put inspectors on the end of the production line to measure each marshmallow and scrap those that are slightly too small or too big. For a product like this, you can use an 80/20 approach to design and produce the marshmallows. As long as you make sure that the vital few things about the product are done well, you don’t need to worry about the remainder that doesn’t really matter much, like a marshmallow’s exact size.

As an engineer, I often found myself taking a perfectionistic approach to everything. I needed to be 100% perfect about everything, which meant I had to discover and develop 100% of the information needed to make everything perfect. This meant I added WAY too much detail in conversations about marshmallow kinds of topics. This meant nontechnically-minded people might see me coming and take a quick right turn to avoid talking with me.

Over time I’ve learned that some small percentage of topics (maybe around 20%) need to be dealt with using great accuracy and detail, while most topics (maybe around 80%) just need some basic level of accuracy. The key is knowing when to be in a marshmallow frame of mind, and when to be in an O-ring frame of mind.

Many times we can’t know what perfect is. Some topics and situations don’t lend themselves to that level of precision. The answer to a mathematical formula can be exact. The size of an O-ring can also be exact within a tightly defined tolerance. But leadership stuff, like how to best deliver a speech, is more subjective. The way to treat the people who work for you is more subjective. It is especially in these kinds of situations that getting clear about the vital few important things, doing them very well, and maybe not worrying about the trivial many will help you as a leader.

This mindset allows you to handle a lot more work, which it seems all of us are challenged with these days. You will make some mistakes as you get a lot more done. You just need to make sure those mistakes are around marshmallow situations, not O-rings. And you need to make sure to fess up for any mistakes that you make.

I hope this very brief description of the Pareto Principle will be helpful to you. Even though I only shared about 20% of what I could have, I’m hoping you’ll get 80% of the benefit that you could have had I written five times more about it. (Yep, there’s the rule in action again.)

I might add that this philosophy flies in the face of some great people’s belief that “If something is worth doing, it’s worth doing very well.” If you love that expression, I don’t mean to try to change you. It’s a great expression. Maybe someday I’ll write a piece on my belief that great leadership is full of paradox, and these two philosophies combine to form one of those paradoxes.

I believe most people either take a close-enough approach to all things in life or they take a perfectionistic approach to all things in life. Some people are consistently somewhere in between. I am proposing that great leaders grow in their ability to know when to take a close-enough approach and when to take a perfectionistic approach depending on what the situation calls for.

Next week I will write about how the Pareto Principle applies to the way we designed LEAD 365. Until then, I invite you to think about what vital things deserve your full energy this week and what things can be close enough. I hope some new insights present themselves to you as you ponder this.

Have a great week!


Image by CristianAllendesPhotos. Used under CC by 2.0 license.