Saturday, June 12, 2010

Pareto's Law

Everyone has heard of the 80/20 rule and it was our Italian friend Pareto who put together the first economic installment when, after extensive research observed in 1906 that 80% of the land in Italy was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied.

We casually use the rule when describing our business life referring to all sorts of examples that fit into that paradigm. Useful, profitable, successful, all denoted some way by the 80/20 rule. Yet if we hone in on the 20% for all categories, we could turn our business and personal life around. The biggest hurdle to the above, making the hard decision.

A decision based on your clients, accounts and even colleagues, friends and family. It's all very well to talk about the 20% of clients that make you 80% of your profit but what do you do with the 80% of clients that hardly make you any money?

By all accounts you should get rid of as many of the 80% as possible and concentrate on the 20%. All part of the "Captain Obvious" plan but so often neglected as we strive for numbers, no matter what their return.

Have you really asked yourself the hard questions on how that would affect you? You could be just as successful and have more time for more important things in life. There goes "Captain Obvious" flying by again.

If you concentrate on the 20% sector, you have to ask about the good and the bad issues and then take action from there. The "Most" question could be used across business as well as your personal life to target the areas of, I really need to concentrate on that and I'm cutting cousin Louey from the will.

Ask yourself about -

The most profitable clients and accounts.
The most dependable and trustworthy clients and accounts.
The most stressful and time wasting clients and accounts.
The most negative and soul destroying clients and accounts.
The most inspiring and credible colleagues, friends and family.
The most fashionable and good looking people to hang around. Sorry that just came out of a Who Magazine but it probably describes some people you should be avoiding anyway.

So the above is the easy part. Coming up with the answers can be confronting but actually making the decision to surround yourself with only the best in business and personal life is the toughie.

When was the last time your company or you made a conscious decision to cut a client or account because they fit into the 80% of not producing or providing you with suitable reward or success on the money and integrity side?

When was the last time you decided to not attend a function or meeting because they were of no benefit in the end? Companies today work on acquisition and accumulated numbers to show how powerful they can become and then try and use that bulk to overpower others.

By : Oliver_Tams

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