Monday, October 19, 2015

The 50/50 Principle vs. the 80/20 Principle

In 1964, Peter Drucker wrote in his classic book, Managing for Results:

"Concentration is the key to economic results. Economic results require that… efforts be concentrated on the few activities that are capable of producing significant results.… A very small number of events at one extreme—the first 10 per cent to 20 per cent at most—account for 90 per cent of all results; no other principle of effectiveness is violated as constantly today as the basic principle of concentration.”1 

Unfortunately, many years after Drucker made his strong case for the adoption of the concentration principle, it has not been widely embraced. In his 2004 book, Changing Minds, Howard Gardner chooses this very principle as an example that still requires a change of mindset: 

 "From early childhood, most of us have operated under the following assumption: When confronted with a task, we should work as hard as we are able and devote approximately equal time to each part of the task. According to this ‘50/50 principle,’…we should spread our effort equally across the various components. …Early in the last century, the Italian economist and sociologist Vilifredo Pareto proposed what has come to be known as the ‘80/20 principle’ or rule. As explained by Richard Koch in a charming book, ‘The 80/20 Principle,’ one can in general accomplish most of what one wants—perhaps up to 80 percent of the target—with only a relatively modest amount of effort—perhaps 20 percent of expected effort." 2

To achieve project success requires prioritization through use of concentration (the 80/20 principle). Don Margolies, who served as project manager for the Advanced Composition Explorer (ACE) at NASA, understood this principle. Margolies tells the following story about establishing clear priorities for the ACE project which carried a $141 million price tag:

"…At the start of ACE, I had the choice of spreading the money among all the players or focusing on the elements that posed the greatest risks on the project. I responded by putting the bulk of the money into trying to identify the key risks in the development of the science instruments and mitigating these to the best extent that we could at the earliest stage possible. To do this, I had to hold back spacecraft development at the Johns Hopkins Applied Physics Laboratory (APL).… In holding APL back by three to six months, I knew I could be shooting myself in the foot if they were not able to recover.… My concerns about APL being able to do the job actually were quite minimal. On the other hand, no one was certain how effectively we could mitigate the risks with those problem instruments.… Once we secured more funding, I told APL to start ramping up on the spacecraft development. As it turned out, they were able to catch up." 3

A large and costly project like ACE was fraught with complexities and uncertainties. The ACE project included nine scientific instruments developed by 20 researchers, based at universities and government labs across the world, including the United States, Switzerland and Germany. Further, several instruments were new, and therefore added to the project’s unknowns. In deciding against “spreading the money among all the players,” and in “focusing on the elements that posed the greatest risks,” Margolies displayed how to forego the 50/50 principle, and practice the 80/20 principle instead.

    1.       P. Drucker. 1964. Managing for Results: Economic Tasks and Risk-taking Decisions. New York, NY: Harper & Row, 9-12.

    2.       H. Gardner. 2004. Changing Minds, The Art and Science of Changing Our Own and Other People’s Minds. Boston, MA: Harvard Business School Press, 7-8.  In his 1998 book, The 80/20 Principle: The Secret of Achieving More with Less, Richard Koch concludes that “the 80/20 principle is still the best-kept business secret.”  R. Koch. 1998.  The 80/20 Principle: The Secret of Achieving More with Less. New York, NY: Doubleday, 50.

3.       “Judgment Calls,” Don Margolies, Goddard Space Flight Center NASA. 2005. In A. Laufer, T. Post, and E.J. Hoffman, Shared Voyage: Learning and Unlearning from Remarkable Projects, 28-9. Washington, DC: The NASA History Series.