Thoughts on the Pareto Rule

Thoughts on the Pareto Rule

Most of us have heard of the Pareto Principle or the Pareto Rule, which states that for many events, roughly 80% of the effects come from 20% of the causes. Look at any general merchandise sale category and the rule stands up, 80% of the sales are done off 20% of the SKU’s. The success of many retailers has been there ability to train there managers to understand this, and to never be out of stock on the 20%.

While the Pareto Principle works well when dealing with sales categories, it doesn’t work, when applied to workforce dynamics, because it’s to simplistic, and here is why.

Gallup has done exhaustive studies analyzing workforce dynamics, they have come up with the following. 28% of the American workforce is engaged, 53% is not engaged and a staggering 19% is actively disengaged.

The 28% of engaged employees are the ones supporting and building the business and creating new customers. In essence doing 80% of the work. Surprisingly, although they are a companies best employees, they get less than 20% of managements attention. Almost like they are taken for granted.

The 53% of not engaged workers are not hostile or disruptive, they are just there, killing time with little or no concern about customers. They are thinking about there next break, lunch, or how soon they can leave for the day. They are essentially checked out. Not so surprising, is that this group, gets very little attention from management as well.

Then there is the 19% of actively disengaged employees who are there to dismantle and destroy the company. They account for a majority of absenteeism and job accidents. They are the cause of a majority of work defects, that contributes to a majority of internal shrinkage. They quit at a higher rate than engaged employees if a better offer presents itself, but are most likely to be very tenacious in holding on to there position, even after repeated coaching and write-ups. This group accounts for 80% of managements time. So we see that a majority of management’s time is spent in coaching the worst employees, while basically ignoring the best.

The Pareto rule holds true within your management ranks also, where 72% of your management staff either resists or refuses to engage in any conflict management of the not engaged employees nor the 19% of actively disengaged employees.

Experts agree that to have an explosion of entrepreneurship that GDP growth requires we need to double the number of engaged employees. Raising the percentage of America’s engaged employees from 28% to 60% would double innovation and double entrepreneurship. It would create the conditions necessary to suddenly overwhelm competing nations because engagement creates new customers.

The increased attention of identifying Strengths, so that employee’s talents and strengths are well-matched to the role they will be asked to play, is evident in the increased number of personality profiles an applicant is asked to take during the hiring process. Once the decision to hire has been made, you must give them a job that fits there innate talents. But all these steps are for naught if an employee has a bad boss.

The real problem according to Gallup, is that nearly one in five U.S. managers are dangerously lousy, and this is a conservative estimate. Experts agree that in order to beat the Chinese workplace of the future we need to fire all lousy managers today. Replace them with good managers. If they are lousy at developing people and leading teams, fire them. Nothing fixes bad managers, not coaching, competency training, incentives, or warnings, nothing works. They will never get better.

Surviving the upcoming global war for jobs requires a new demand of managers. They must be masters at understanding the role human nature plays in all outcomes and at maximizing human potential. Only through an inspired relationship between managers and employees can the number of actively engaged employees be raised. The real potential for growth lies in the workers state of mind.

It’s long been known that behavioral aspects far outweigh compensation, in how engaged an employee is with there company. To find out where your company stands, pass out this simple questionnaire, developed by Gallup. On a scale of 1-5, 5 being strongly agrees and 1 being strongly disagrees. A score of 60-48 is good, 48-36 is average, 36-24 is weak and 24-12 is poor.

  1. I know what is expected of me at work.
  2. I have the materials and equipment I need to do my job right.
  3. At work, I have the opportunity to do what I do best every day.
  4. In the last seven days, I have received recognition or praise for doing good work.
  5. My supervisor, or someone at work, seems to care about me as a person.
  6. There is someone at work who encourages my development.
  7. At work, m opinions seem to count.
  8. The mission or purpose of my organization makes me feel my job is important.
  9. My associates or fellow employees are committed to doing quality work.
  10. I have a best friend at work.
  11. In the last six months, someone has talked to me about my progress
  12. This last year, I have had opportunities at work to learn and grow

The United States must differentiate itself by doubling its number of engaged employees. Disengagement and low energy workplaces ultimately kill jobs. Only 28% of the American workforce is ready to compete and win each day. Doubling that number would change U.S. vs. China outcomes. Doubling it creates more customers, more jobs, and generally doubles the economic energy of the United States. Running a lousy workplace is not only bad business, it is also un-American.

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As always, thanks for visiting. Dave


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