Business growth and the 80/20 rule
7 min read
07 August 2012
It's tough to prioritise when you're running a business and being showered with challenges every day. Trevor Ward suggests that the famous 80/20 rule can help.
There’s only two goals for a growing business: fast growth and long-term sustainability. A recent report commissioned by SAP supports this, revealing that 96 per cent of SMEs are looking to grow their businesses in the next year. The report also identifies that some SMEs can become labelled as ‘accelerators’, operating with a bullish aim to grow business ahead of the industry norm.
Even for those of you with a bullish attitude, there can be a tendency to adopt an ‘all day, every day’ mindset, a need to complete every action and address even the finest of detail immediately. There’s no time to prioritise.
This can bring you some initial successes as a start-up, but as the company grows it becomes a hindrance.
In order for you to keep growing, you need to overcome the switch in mindset that comes along with expansion. Whether this is adjusting to unexpected client or team requests, or even staff shortages, a high-growth business must invest in prioritising these challenges.
One way of doing this is the famous 80/20 rule. There are a number of ways to implement this rule, for example, challenges that occur 80 per cent of the time, should be dealt with immediately. Similarly SMEs can optimise their offerings by using the 80/20 rule in reverse, focusing on the key 20 per cent of valuable staff, assets and/or products that create 80 per cent of the company’s profits.
Visibility means prioritisation
Real-time visibility is key when using the 80/20 rule. Without visibility you’re missing the information needed for day-to-day decisions. Blindly you’ll fail to establish business priorities and goals to maximise profits from revenues.
How you deal with unexpected challenges can mean the difference between a project’s success and failure. This is why the start-up mentality can eventually become problematic, with many workers finding that there are not enough hours in the working day to address every inbound request.
Making goals and priorities visible allows managers to help their teams prioritise and manage multiple requirements in a more collaborative way, removing the need for the traditional micro-management mentality.
The 80/20 rule also enables SMEs to reprioritise minor problems that occur 20 per cent of the time. By focusing efforts on addressing problems that occur on a daily basis (or 80 per cent of the time), managers will be able to introduce processes or changes, so that more time can be placed on adding value to the market and dealing with the unexpected.
Technology and tools for visibility
To do a job well, you need the right tools. Providing employees with the right technology and tools that enhance their job role and skills will not only provide teams with constant visibility into activity, but also enable them to realise which problems have to be dealt with urgently.
However, it’s important to be realistic. For example, by centralising inbound requests through a “request” queue. Senior managers have the visibility into all project requests, and are able to help teams prioritise and allocate resource accordingly, optimising the 20 per cent of assets, products or staff that generate the most revenue.
Previously managers would review and identify reoccurring challenges at the end of a project; real-time insight enables problems to be identified and addressed before project completion. Management can also identify inefficient processes and unnecessary admin work, freeing up staff time to identify and jump on any new business opportunities. However, the success of visibility lies in the transparency of the workers, who must be open and honest about any challenges they face.
The unpredictable nature of today’s economic climate is putting a constant pressure on companies (especially SMEs) to produce more with less; both in terms of budget and staff. Senior management will find that a collaborative work management model will enable them to do this. The collaborative work management approach turns the traditional top-down hierarchy on its head by replacing it with more flexibility and autonomy for staff, so that they’re able to better adapt, prioritise and take responsibility for their individual workloads.
Removing hierarchies and encouraging autonomy means individuals are better positioned to evaluate their own priorities and set themselves deadlines without feeling constrained by management.
Once a workforce is motivated, management can take this one step further by identifying which 20 per cent creates 80 per cent of the company’s revenue and rewarding them for their contribution.
People are often driven by a desire to contribute. It’s important to have processes in place to track these contributions so that individual and team successes can be recognised and rewarded. Nobody is happy in an environment where credit is not given where credit is due.
The path of agility that leads to growth
As a new generation of SMEs begins to flourish, those who adopt an ‘all day, every day’ mentality and do not adopt the 80/20 rule risk getting left behind. Those using this rule in conjunction with a collaborative work management model will benefit from a more agile, autonomous and engaged workforce.
Trevor Ward is the general manager of EMEA at AtTask. He has spent more than twenty years in leadership positions at organisations like IntraLinks, Adobe Systems, Microsoft, and Lotus Development, and was most recently Vice President of UK and Ireland for IntraLinks.