Pareto Principle or Long Tail? What should be the focus for HR?

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Should we focus on 20 per cent of the workforce and inspire them to perform even better? Or should we try and derive maximum output from the remaining 80 per cent? 

In the early 1900s, an Italian economist, Vilfredo Pareto, made an observation that 80 per cent of wealth was with 20 per cent of the population. Interestingly, if we were to apply this very 80:20 formula to other aspects of life, the same observation would hold true.

Mathematically, it might not be in the exact ratio, but it implies that a mere handful makes the maximum impact. For instance, a majority of the business would come from a minimum number of customers. Similarly, if we apply the same logic to people management in organisations, we will see that 80 per cent of the output comes from 20 per cent of the employees. In fact, 80 per cent of our own productivity comes from 20 per cent of the time.

Now here is the catch 22 situation. Should we focus on that 20 per cent of the workforce and inspire them to perform even better?

What works best in today’s context? The Pareto Principle or the Long Tail?

If you ask the new age companies— for instance, an online retailer or an online newspaper— they would say that the long tail is equally important or even more important because this is where the profitability comes from, and that becomes a big differentiator. In fact, any Internet business would want the long tail to be even longer.

Does the same logic hold true in human resources or employee management? No doubt, the 20 per cent of employees with 80 per cent of productivity and output are the stars of any organisation.

So what should HR managers do? Should they try and derive maximum output from the remaining 80 per cent? This would imply that even if there is small incremental growth, it could mean a significant increase due to the long tail.

However, there is yet another theory that believes that if efforts on upgrading the potential 20 per cent is less vis-à-vis, the remaining 80 per cent, why should one waste time on the latter as the former is expected to yield better results.

But does this mean that an organisation can only be run by star employees? If we go by the same belief, the rest of the 80 per cent of the employees, with poor output, should be got rid of. Can one actually run an organisation with such a belief? It’s highly debatable.

There is a theory which says that the long tail is important to support the high-potential 20 per cent. In fact, the basic purpose of the long tail is to create a balance. So, when we look at it from a team’s perspective, to maintain the high productivity of the select handful, you need to maintain a long tail of support staff.

For instance, if we compare it with the game of soccer, according to the Pareto Principle, 80 per cent of the goals would be scored by just 20 per cent of the players, that is, the two forwards. But one has to remember that for these forwards to be able to score a goal, the ball needs to reach them from the other end, and that is where the long tail of other players comes into play.

Now, if we apply this formula to the way we manage our own time and productivity— It turns out that that though we may be able to strike a deal or crack an idea in just 30 minutes of our working hours, the rest of the time, may simply be wasted thinking about or preparing ourselves to actually do it!

There will be a section of thought that would say that we have wasted long hours unnecessarily. However, we also need to accept the fact that those long hours of thinking or preparation were necessary. Without them, it would not have been possible to deliver the final output in those 30 minutes.

There is a philosophy that is practised at IBM — to do things right, one also has to ensure that one is doing the right things.

9 COMMENTS

  1. Star Performers(20%) has to be supported by Solid Citizens & Soldiers (80%). Dark horses needs to be groomed or weed out. Hence HR Can align the deliverable to achieve the Business results.

  2. Excellent article. It provided a 360 degree view on productivity. It applies to sales also. 80% of business/revenue comes from 20% of the customers. It does not mean that 80% of customers provide only 20% of revenue. Sometimes, associating with big behemoths itself is enough to draw business from other sources. Partnering with big brands by small start ups is an example.

  3. First of all Prajjal, HR Katha is a very good addition to the HR network for news, mutual sharing of ideas, challenges, learning and collaboration. Well done. In my hands-on experience as a global HR professional, this question is an important one that we do ask to focus the organisation, not just HR. Often, business and HR leaders tend to interchangably use People capability with HR functional capability. The former is essential to build a business while latter is an enabler for effectiveness. When we have 100 people to run a business end to end, there will always be strategists, engine drivers and transactors. All are important to achieve business results. This is where clarity of roles for line managers and HR form. ONce line managers become better people managers, they are able to take over a major portion of HR’s perceived role of “people management”. After this transition, then the focus for HR shifts from transactional to strategic to ask some questions as under : 1. What, how and where should you invest in People practices that deliver sustainable business results? * “People Strategy” do you need that the HR function can help you with, to succeed in an increasingly complex and competitive landscape? And a few more…. that then determines the roadmap for HR for a certain duration. The function’s fundamental role of balancing between its business alignment and its independence is a pendulum that shifts depending upon the stage of capability of the organisation. Besides, HR has a role of organisational alignment and Institution building that cuts across levels. So in my regional or global HR roles, my focus has always been to create a strategic people agenda, people processes and practices that enable all employees to be engaged, enabled and energised to play their roles. And that includes building better people managers with metrics of success, talent management, leadership development and building breadth and depth of talent pools. I am afraid there is no “one size fits all” or one silver bullet that can be standardised. After all we are dealing with human capital capability that differs in each set up.

  4. The article well analysed Pareto principle, Prajjal and it is further well elaborated by Chandru Pingali. The Pareto principle may hold good for wealth possession but not for wealth creation.Though it is the Engine of 20% star performers that pulls the train forward towards its destination, it is the number of wheels that keeps the train moving.Therefore wealth creation in business is a collective effort. but not a coterie effect of 20 % star performers. As HR you need not only to keep the engine but also the many wheels well oiled to be productive.

  5. Actually there is some recent research on measurable performance – in sports and politics – that shows that the 80/20 distribution does not in fact hold good. In these fields there are just a few outliers that are either stars or very poor performers, and the vast majority of people fall into the satisfactory performance category. If the same holds good for organisations – and it may well, then the effort should be put into supporting and developing the performance of the entire team.

  6. It is an excellent platform for HR professionals to express their views. The article is no doubt gives an opportunity to HR professional to be first to treat all the work force irre4spective of his/her position as human being. Involvement of them in all the gamut of HR strategies, you never know who gives what idea that may improve and help in making out your strategy.

  7. simple message from the above article is that performance by 20 percent workforce requires the team effort of remaining 80 percent workforce..for example cricket,hockey,football…star players in the mentioned games might perform,but other members are also very important

  8. Pareto principle is one of the tools to improve quality, which is a dynamic process. We focus on 20 % defects which are responsible for 80 % rejections. If you find solutions for all 20 % defects, its quite likely to reduce substantial level of rejections. The process is repeated on routine basis. The next higher level of quality improvement is to go for Six Sigma In HR context, we can use this analysis in other way i.e. why 80 % of the employees are not performing up to the mark. So, HR can analyze data and find suitable ways to improve the performances of the employees and move to next level i.e. Six Sigma, where defect level is almost zero, or all emplyees are at best of their performances position.

  9. very well written article Prajjal. I read it today and found it very appropriate for our usual day-to-day working. No doubt the focus should be on 20% of employees who are also known as HiPos but we certainly can’t ignore the rest 80%.

    Just see how Amazon has established such a huge empire by applying the principle of Long tail and leveraging the potential customers who are the remaining 80% of customers.

    As HR professionals also we need to keep developing our 80% and try to increase the base of 20% to a higher number.

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