The 80/20 Rule: How to Streamline Decision Making

By Wesley Found – President, Linborough Property Corp.

The Business Advocate, page 15 – March 2024 Edition

Children provide the pleasure of learning from movies that are played on repeat. To quote Grand Pabbie, the Troll King in Frozen 2, “When one can see no future, all one can do is the next right thing.” While a business plan is invaluable, worth is often judged by the next right move. Like the movie, finding this can be transformative.

My previous article in The Business Advocate described how consumers are rarely consistent with their choices and you must set up your offerings to match how decisions are made. Business decisions suffer from the same problem. A lot more is at stake than a wrong purchase. Queue the dreaded decision fatigue.

We are taught to navigate our surroundings with the scientific method. Using a controlled environment to objectively establish facts through testing an experimentation, Business does not have a controlled environment and it rarely knows the what ifs. Businesses trade off between opportunities and their risk rather than objective facts.

This has created a business environment ripe with specialists foretelling a promised land where opportunity can be tested, and risk mitigated. While these skilled folks are needed, the tides are flowing away from the incredible value generalists created in our workplace. A generalist is a “jack of all trades but a master of none.” Sounds a little vague but the other half of the quote is often left out – “though oftentimes better than a master of one.”

The economy is messy and information imperfect. Generalists understand perfection is the enemy of the good. The true value of business leaders is their ability to turn information into knowledge necessary for making quality decisions in an uncertain economy.

The generalists decision toolkit can be taught. After all, we are born generalists who become specialized. A valuable tool in sifting through the imperfect world is the 80/20 rule.

SMALL DECISIONS: Small decisions make up 80 percent of time spent and it should be 20 per cent. Are you 80 per cent sure that a decision will work? If the 20 percent case happens, are you 80 percent sure it will not be detrimental to your business? Then go for it!

BIG DECISIONS: Spend 80 percent on planning and 20 percent on execution. This is often interpreted as spending the bulk of the time gathering information. Instead, 80 percent of the planning should be finding the right question to ask. Without this, gathering information is an impossible task. Think about trying to find information on the internet but having a hard time framing the search query. Rarely are the results fitting.

INVENTORY MANAGEMENT: 20 percent of inventory accounts for 80 percent of the cost. Efficiency triumphs completeness. Track the 20 percent often and the remaining 80 percent less frequently.

EMPLOYEE MANAGEMENT: 20 percent of employees account for 80 percent of productivity. Lean on these employees like the business depends on it because it often does. Reflect this in employee management. Delegate the rest.

SALES MANAGEMENT: 20 percent of offerings or clients produce 80 percent of the revenue. Optimize pricing and employee management accordingly. Same goes with word of mouth. So, 20 percent of offerings or clients may not be the largest or most profitable but are the lion share in referrals.

Think through your business with this rule. There are numerous applications beyond these examples. I would argue 80 percent of productive decisions in business that push society forward are made by the 20 percent who embody this concept. I hope this helps put your business in a place of transformation to do the next right thing.