Improving the productivity of your company

Resources available to businesses are limited. To improve the output achieved from these resources organisations should learn to put more effort on those few activities that generate more. Most successful organisations and individuals have realised that time and resources are not infinite and so they identify activities that bring in more output from minimal effort and put most of their effort there because they will reap good results.

If more organisations learn how to apply this principle they will increase their effectiveness and improve the productivity of their companies with much less effort, time, and resources, simply by identifying and focusing their effort on the few that really counts.  Pareto introduced this principle called the 80/20 principle. The principle has proven to be a very helpful concept in life and effective for good time management and if applied can change the way we set and achieve goals.

In his book The 80/20 Principle -The Secret of Achieving More with Less, Robert Koch said: “The 80/20 Principle asserts that a minority of causes, inputs or effort usually lead to a majority of the results, outputs or rewards. Taken literally, this means that, for example, 80 per cent of what you achieve in your job comes from 20 per cent of the time spent.”

The 80/20 distribution occurs frequently in customers, time management, and workers’ contribution to a company’s performance and in many other business and social activities.  It has been observed that 20% of the input creates 80% of the result, 20% of the workers produce 80% of the result and 20% of the customers create 80% of the revenue. If a company wants to grow its business then it needs to apply this principle in key areas of its business.

The principle helps us in maximising our results by concentrating on a minority of inputs. If 20% of workers contribute 80% of results then the company should focus on rewarding these employees to ensure improved performance and if 20% of customers contribute 80% of revenue then the company should focus on satisfying these customers. The important thing is that you should focus your effort firstly on the 20% input that makes a difference, instead of the 80% that doesn’t add much value. You can look after the 80% after satisfying the 20%.

In marketing the 80/20 rule can be applied to customers. About 20 percent of customers produce 80 percent of the company’s sales. If we know this rule we should then put most of our effort by focussing on this segment.  Unfortunately sales reps tend to waste time trying to please all customers even those who are not adding value instead of the most lucrative 20%. Customers are not all equal. Some bring an amazingly disproportionate amount of revenue while others bring a little amount of money, and still others even waste your time.

So as a business leader your goal should be to concentrate most of your effort on those 20 percent of customers who are critical for the business’ profitability. Ignore the problem customers, and direct your time towards relationships with the hassle-free, big spenders.
The 80/20 principle is also very effective in time management. Entrepreneurs tend to want to do everything even those tasks that can be done by an assistant or a lower level employee.

Instead of a senior manager spending time in doing trivial tasks that earn him $10 an hour it would be more profitable to identify tasks on which the manager can earn $1 000 per hour and concentrate on those tasks. These tasks are the 20% that produce 80% of the results. You should not waste your time on the “trivial many” instead spend time on the “few majors.” As a leader you should spend most of your time working on the parts of the business that improves significantly with your core skills and leave the tasks that are outside your best 20 percent to other of your managers.

When analysing which products or service to pay attention to you can use the 80/20 rule. Identify products or services that generate the 20% income and drop the rest or give minimal attention to the 80 percent that only provide marginal benefits. Your staff should put effort on the 20%.
In this day and age time is a commodity we wish we could have more of. Time keeps on ticking and waits for no man. It’s incumbent upon us to utilise time very carefully. We have goals that have competing priorities so we need to spend time on those goals that bring the most benefits.
Using the 80/20 rule will solve the problem. One needs to identify the few critical goals that will bring the greatest change or impact to your life or business and then concentrate on these.

It is high time organisations and individuals “realise that some resources, but only a small minority, the “vital few”, are super-productive while the majority, the “trivial many” exhibit little productivity or else actually have negative value.  If we did realize the difference between the vital few and the trivial many in all aspects of our lives, and if we did something about it, we could multiply anything that we valued.” Robert Koch.

l Stewart Jakarasi is a business and financial strategist and a lecturer in business strategy (ACCA P3), advanced performance management (P5) and entrepreneurship. H e provides advisory and guidance on leadership, strategy and execution, preparation of business plans and on how to build and sustain high-performing organisations.

For assistance in implementing some of the concepts discussed in these articles please contact him on the following contacts: sjakarasi@gmail.com or WhatsApp +266 62110062.