Is Your Company Losing the Battle Against the 80/20 Rule?
New Management Theory might help your business boost productivity from the other 80% of employees
The 2022 Business Dilemma
Every year, CEOs and business leaders analyze productivity their workforce produces and come to the same conclusion — 80% of our productivity is being produced by 20% of our employees.
It’s called the Pareto Principle, better known as the 80/20 rule.
What is the 80/20 Rule?
The 80/20 rule is based on a psychological theory developed by psychologist Dr. Joseph Juran in the 1940s. He was the one who coined the terminology, the Pareto Principle, when he cited the Italian economist Vilfredo Pareto’s observation back in the late 19th century that 80% of the wealth in Italy at the time was controlled by 20% of the population. (Citation: Olivia Guy-Evans, Simplypsychology.com https://www.simplypsychology.org/pareto-principle.html)
We can apply the 80/20 rule to many aspects of daily life, from time management, to business theory, and even to economics.
The dilemma professors, psychologists, politicians and business leaders all agree on is there doesn’t seem to be anyway to get around the 80/20 rule. No matter what management style you use, or law you pass — the 80/20 rule seems to always prevail.
Experts point to the economic disparity in the United States as proof positive — we cannot beat the Pareto Principle. For decades, our federal government has tried different tax incentives, adjusting the tax rates up and down, as well as giving scholarships and pumping billions of dollars into education. The end result is still the same — 80% of the wealth in America is controlled by 20% of the population.
Can We Beat the 80/20 Rule?
“Critics of the Pareto Principle argue that it might only exist because there are factors that prevent other outcomes to occur.”
When I was Superintendent of a K12 program, I ran into the same leadership dilemma — only 20% of my teaching staff could reach an expert level of teaching. That meant 80% of my students were being taught by low and under performing teachers.
When you understand the inherent problem the 80/20 rule presents, you can see why throwing money at our K12 system will never work — we are doomed to always fall into this principle abyss.
Critics of the Pareto Principle argue that it might only exist because there are factors that prevent other outcomes to occur. Just knowing that the 80/20 rule isn’t an absolute gave me hope to try and beat it in my K12 program.
And what I am suggesting might, in fact, do just that.
The New Theory: The Expert Empowerment Model
“Thus the theory states: The 80/20 rule only exists if you have less than 90% expertise in your organization.”
What if we create the 80/20 rule by our behavior and decisions? If that were true, then it could be hypothesized that if we changed our behavior and decisions, we could avoid the 80/20 rule.
So that’s what I did…
In 2009, I developed and implemented a groundbreaking new teacher training program into my K12 program. Every school district in America uses a professional development model, aka. PD, that offers teachers 10–20 hours of workshops, lectures, and seminars to help them continue to grow and learn as teachers. Some school districts also provide incentives for teachers to take courses at local community colleges or Universities to further their professional studies.
Here’s the problem with PD — it doesn’t overcome the 80/20 rule.
For the last 20 years, there has been a higher emphasis on teacher evaluation and focusing on improving teacher performance. America’s leading educational data expert, Dr. Robert Marzano and his research team have proven that a teacher’s performance is the single biggest factor in student achievement.
Here’s the reality I was facing as Superintendent, all of my students had failed in the public and charter schools within 50-miles of my program. A vast majority of them were below grade level in math and literacy. And a majority of my students were politically marginalized and grew up in some of the lowest socioeconomic neighborhoods in my state.
If I was going to boost student achievement — the 80/20 rule was going to stand in my way. I needed to find a way to beat the Pareto Principle.
I called this new training program “The Teacher Development Program” and what it did was address the biggest issue teachers and schools face — a lack of expertise in the classroom.
Critics and supporters of the K12 system agree there are hundreds of problems facing schools — analyze your own business, could you make a laundry list of problems your company faces?
The reason PD doesn’t work and most company training programs fail to overcome the 80/20 rule is because the programs don’t address the real issue — building expertise.
Imagine if you were the CEO of a company filled with experts. If we look at how some businesses have been able to leapfrog ahead of others — we see one of the key ingredients was hiring as many experts as they could find. Take Apple, Inc for example. When Steve Jobs came back to Apple in the late 1990s, the company was weeks away from bankruptcy. The turnaround of Apple is legendary, but it was only possible because Jobs hired as many tech experts he could find.
When he would hypothesize a new product, his engineers went to work trying to figure out how to make his innovative ideas a reality. If his engineers were not experts — Apple would not be the mega-juggernaut it is today.
Thus the theory states: The 80/20 rule only exists if you have less than 90% expertise in your organization.
Why the Expert Empowerment Model Works
“When 90% of your employees are focused on becoming experts and then competing against other employees to prove their expertise — the 80/20 rule doesn’t stand a chance.”
If you recall, my program was facing a real academic challenge — most of my students had poor grades, were below grade level and suffering psychological damage by failing for years inside the K12 public/charter schools.
If my students received the same education from low performing teachers — it was going to be impossible to change their future trajectories.
Is your business running into the same headwinds?
The only way to overcome the 80/20 rule is to change the math. We need to understand why the 80/20 rule exists inside an organization. If you think about it, it shouldn’t exist. Based on general capitalist theory — the incentive model should beat the 80/20 rule every single time.
Except we know this is not true. Fortune 500 Companies offer incredible employee incentive programs — but they can’t beat the 80/20 rule. Nothing management does alters the math.
That’s what led America’s most respected CEO, the late Jack Welch to proclaim “you should fire the bottom 30% every year.” He knew based on the 80/20 rule that 30% of his workforce would never produce, no matter what G.E. did for them.
But I identified the root problem. The real issue was employee expertise.
And even more than that, creating a culture of expertise.
Here’s why my Teacher Development Program worked, not only did it help each individual teacher raise their classroom performance to an expert level, it created a culture/climate of teaching expertise. The program had changed the mindset of every teacher. Instead of competing for external rewards, ie. teacher pay, vacation time, school privileges, the teachers started to compete on expertise.
Who could write the best lesson plan? Who could raise student achievement? Who could have the classroom with the highest grades?
When 90% of your employees are focused on becoming experts and then competing against other employees to prove their expertise — the 80/20 rule doesn’t stand a chance.
The Hidden Secret of the Teacher Development Program
The reason the Teacher Development Program worked was because it didn’t follow the same model everyone else uses. In addition to being an expert in the field of education, I am also a 21st century skills expert.
And this is a very important point.
In 2020, Georgetown University’s Center for Education and the Workforce published a report that took a comprehensive look at the US Economy and discovered the existence of five basic 21st century skills. The report called “Workplace Basics”, (you can google it), is a true breakthrough in understanding why some people are successful at work and others struggle.
Unfortunately, this report has been kept a hidden secret from the public. If you want to have any shot at beating the 80/20 rule, you need to know what the secret five 21st century skills are:
- Team Building
- Problem Solving
The 6 Objectives of Leadership
The underlying reason PD doesn’t work for teachers and most company training programs don’t work for employees is because it lacks the most important objective of leadership: Vision.
What is VISION Skills?
Vision Skills allow an individual to “see” the path to success. Conventional wisdom leads us to believe that setting goals is the most important objective of leadership — except as you can see from the graphic above, goal-setting comes after Vision.
Here’s why? Does your company set goals every year, ie. sales goals, revenue goals, productivity goals? Does your company automatically meet those goals? The answer is “no.”
But the reason it turns out is because you forgot to set the Vision first.
Schools face this problem every single year — the goal is to boost student achievement, but teachers, principals and superintendents don’t know how they can meet those goals.
Thus the problem isn’t goal-setting — it’s lack of Vision Skills.
Building an Expert Training Program
If we apply the New Theory: Expert Empowerment Model to your business, what should you focus on?
The Teacher Development Program worked because it raised teacher expertise. There is general consensus in the world of education that it takes at least 5 years for a teacher to reach an expert level. The Teacher Development Program I ran for 10 years helped teachers reach a higher level in only two school years.
Each company needs to identify the specific areas of expertise, employees need to have, in order to solve problems and also to innovate new products and services. In addition, management needs to shift their employee incentive programs to promote expertise, ie. employee recognition, pay incentives, and other company privileges and benefits.
Knowing the Pareto Principle, or 80/20 rule will always exist, unless you build expertise, is a daunting realization. It means that schools and businesses that want to thrive in the 21st century need to put in a lot more effort toward raising the capacity of their employees.
If you follow in the footsteps of the late Jack Welch and layoff your bottom 30% every year, your bottom line will suffer in the end.
In order for your business to thrive, not just survive, in the 21st century — it needs 90% of your employees building the business up. That means, 90% of your employees need to boost revenues, generate innovative ideas and fix customer and company problems.
One way to achieve that goal is to hire as many experts as you can find. The problem is there aren’t enough experts to hire. Thus the Expert Empowerment Model helps schools and businesses manufacture experts in-house to build your business from within.
About the Author:
D. Scott Schwartz, M.Ed. is the CEO and Founder of Leaf Academy, which provides expert consulting to schools and businesses that are looking to thrive in the 21st century. He is an expert in the field of education, as well as a 21st century skills expert. For more information, go to the Leaf Academy website (link in bio) and go to the Programs Page for a FREE brochure.