In their HBR article Porter and Nohria document their study of “How CEOs use their time”. This beautifully summarises the multifaceted nature of the CEO role.
The complexity of confronting many tasks. The challenge of visibility when every stakeholder group wants time with you. Strategic planning, participation in Operations, dealing with crisis’s – it is a long list of preoccupations. And to compound this reality every CEO knows that where they choose to participate influences their effectiveness, signals priorities to the full team and ultimately effects company performance.
As an experienced CEO myself, I understand the pressures that you face. Leading a business is complex and challenging. It is also a unique experience. No one else faces your reality: your challenges are unique, shaped by your specific market circumstances, people dynamics, and available resources.
I have found that careful reflection using the straightforward and elegant can achieve amazing results – take ideas, tools and techniques from elsewhere and apply them to the specifics that are in front of you. Using this approach, you can develop a customized action plan that addresses your circumstances, whether it’s optimizing product lines, refining customer segments, or focusing on high-impact operational improvements. It’s all about finding solutions that fit your specific needs.
One of the most powerful tools to stimulate reflection, find clarity and focus is the Pareto Principle, also known as the 80/20 rule. This principle, which suggests that 80% of results often come from 20% of efforts, can serve as a compass to unlock hidden potential in your business by highlighting the areas where your efforts will have the greatest impact.
The Pareto Principle: A Lens for Strategic Focus
The Pareto Principle, named after economist Vilfredo Pareto, is a simple yet profound concept: in many situations, a small percentage of causes lead to a large percentage of effects. In business, this often means that a small portion of your activities, customers, or products is responsible for most of your results, whether in revenue, profitability, or growth.
Using the Pareto Principle as a lens to examine your unique situation can help you identify which factors are driving the most significant outcomes. This understanding allows you to focus your efforts where they will yield the greatest returns, ultimately improving performance and driving growth.
Applying the Pareto Principle to Your Leadership Challenges
Consider the scenario of a CEO of an SME who is working tirelessly to improve the company’s performance. The business has multiple product lines, a diverse customer base, and various operational challenges. Despite the hard work, the results are not matching the effort, leading to frustration and burnout. You as CEO are concerned that the focus is too broad, and the most critical areas are not receiving the attention they need.
The Pareto Principle can provide a structured approach to identifying the key drivers of success. Here’s how you can apply this tool to your specific circumstances:
- Identify the Vital Few: Start by analysing and reflecting on your business activities, products, and customers. Which 20% are contributing to 80% of your results? For the SME CEO, this might involve identifying the top-performing products or the most profitable customers. It could mean pinpointing the core areas of the business that are critical for growth, such as key accounts or strategic initiatives.
- Focus on What Matters Most: Once the vital few areas are identified, consider a shift of focus and resources to these areas. This might mean reallocating time, budget, and personnel to maximize the impact of these critical drivers. This could involve concentrating marketing efforts on high-value products or deepening relationships with top customers. It might mean prioritize strategic goals and streamline operations around the most impactful activities. What would the chosen shift look like? Who would be impacted? How should this shift be communicated?
- Measure and Manage: As the saying goes, what gets measured gets managed. By focusing on the vital few, you can set clear, measurable goals and track your progress. This approach not only drives performance but also provides a clear framework for managing and adjusting your strategy as needed.
Creating a Path to Success
The Pareto Principle is more than just a time-management tool; it’s a strategic compass that can guide you toward better decision-making and greater success. By reflecting on your unique circumstances through the lens of the 80/20 rule, you can think more clearly about where to direct your efforts and resources, understand the true drivers of your business, and create actionable plans that deliver measurable outcomes.
Herald Strategy is committed to helping you achieve targeted, tangible results. Your business is unique, and so are the solutions that will drive its success. By using proven methodologies, we help you create the tailored solutions that unlock your business’s full potential and navigate the challenges that come with leadership. Embrace tools and techniques, like the Pareto Principle, and use them through the lens of your circumstance to drive a more focused, impactful, and successful leadership journey.
