News

Vilfredo Pareto was an Italian economist who was able to establish, factually, that 80% of lands in Italy was owned by just 20% of the population. Even though the Pareto's principle is only an observation, it has proven itself to be valid in the biological world. In management, for example, it has been observed that 80% of the job is done by 20% of the people, as stated by a quality control expert named Joseph Juran with what he called the rule of the “vital few and the trivial many”.

In the consulting world, the Pareto principle is not a business rule but rather a mantra. You could hear things like “We have no time to boil the ocean. I think we should apply the 80-20 rule”. This is not about the way you split the workload in your team (with you taking 80% of it). The Pareto rule is all about thinking smart. The best consultants are the ones who excel in planning their work in a smart way, not necessarily workaholics who spend their Sundays in the office.

Let’s take a real example:

The City country club is a premier golf club in central Aberdeen. After seeing a dramatic drop in the membership figures, the management of the club hired your firm to determine why around 1,500 of its old members are not renewing their membership.

Consultants have can use a few approaches to solving the problem, let’s consider two:

Approach 1:

Call, email or visit all the old members who did not renew their membership. After all, their contact details are already with the management. You can ask them why they are not renewing, build a dataset, analyse the data and reach a conclusion

Approach 2:

Segment the old members based on critical factors (e.g. age, income, location), build some sub-groups and contact only 10-20 old members per sub-group; then analyse the data and reach a conclusion

The second option above would be the more 80/20 one: it is more time efficient, it provides valuable insights and information that the client would be interested in. It is likely to take you to the same result with one tenth of the effort – and it always allows you to proceed to the more granular option 1 if ever needed. Moreover, given the short time frame (all your consulting projects will have a stretched time frame to complete all the analyses needed!) going for option 2 will probably save you a few nights of sleep.

It sounds a bit like a no brainer…However going for the 80-20 approach requires a lot of thinking and planning. When working on a massive project scope under tight deadlines the first thing that comes to your mind is jumping on the dataset and start investigating why members left, i.e. taking the first approach. Solving a problem with the 80-20 approach often requires you to take a step back, a deep breath and think creatively of a time-efficient way of reaching the same result. That way, you’ll reach the same conclusions, enjoy a better lifestyle and learn an uncommon but valuable skill for your career.