Pareto's Law : The 80/20 Principle - Does It Work? 

Pareto's Law

The famous principle, which is sometimes called Pareto’s Law, originated from the famous Italian Economist, Vilfredo Pareto in 1906. 

The principle has been analysed extensively by all manner of businesses and economists over the years and has been found to be very effective. The percentages may vary but the principle remains the same.

The 80/20 Principle

Pareto stated:-

• 20% of the public own 80% of the wealth.
• 80% of the land is owned by 20% of the public.

 And so on – hundreds of examples……………..

In Business the rule states:-

• 80% of your income comes from 20% of your customer accounts.
• 80% of your orders come from 20% of your customers.
• 80% of your productivity from 20% of your staff.
• 80% of your problems come from 20% of your staff.
• 80% of your queries come from 20% of your customers.

80/20 Customer Service and Sales

• Why not have your key 20% of staff supported by outsourced staff?
• Have your key 20% Customer Sales and Customer Service staff members document and outsource their entire "non-key” repetitive tasks.
• Then they can give their full attention to the “critical key tasks” and therefore make themselves more effective to your organisation.
• Sales 80/20 Outsource In the Business Process.
• The 20% of your turnover will be from the 80% of customer’s.
• Automate some of the Processing and Customer Service this with :- (1) Answers to standard answers (2) System Quotes from the system (3) Order Processing (4) Order Tracking (5) Artwork

Concentrate on Your Top Customers

Outsource the above leaves your key staff with time to pay full attention to the 20% of your Top Customers yielding the 80% of your profits.

Measurable

Having removed the repetitive tasks from their remit, their performance will become more measurable.

80/20 Accounting Example

Supplier Invoice Input: Many companies are paying a qualified accountant or book keeper £25-£30,000 per year to input suppler invoices against PO’s, I used to do this myself. 

Outsource this as it is a repetitive task, but be sure to have a query procedure in place to flag non-conforming suppler invoices. Let your key 20% of accounting staff concentrate on the critical key areas of your accounting needs.

Accounting 30 and 60 Day Chasers: Have outsourced staff run one simple report to see accounts 30 days and 60 days past due and send them a pre-scripted email with a statement chasing for payment the first day of each month.

Conclusion

Define the 20% Key Crucial Tasks in each department and put in place a plan to outsource the other 80% of tasks to outsourced offshore workers.

Click here for more information on outsourcing: 

http://www.allveronservices.com/outsourcingexamples.aspx