Change Your Process Step 3: The 80/20 Rule


Have you ever attempted to map a process, only to get bogged down in the details?  What seemed like a simple flow chart with four or five boxes got really complicated when you started accounting for all of the special case scenarios?  If you’ve experienced this situation, then you’ll certainly appreciate this installment of my blog series about “Changing Your Process.”  To avoid the pitfall of never fully documenting your process, consider the 80/20 Rule (also known as the Pareto principle).  Applied in this context, if a “special case” happens 20% of the time or less, it should not be covered in your baseline process. 

By focusing on the way your process runs 80% of the time, you should be able to map your process pretty quickly.  And you can feel confident that improving the business process that you’ve mapped will result in real results.  Many a well-intentioned process-improver has gone astray by optimizing the special cases while inadvertently slowing down the most common steps.  So my premise for this blog is that your documented business process should cover 80% of cases and the remaining 20% should be handled by intelligent humans who know how to deal with exceptions and how to apply the special cases to get the desired results.

Reengineering the Corporation Book Cover ImageThe sound reasoning behind this logic can be found in Hammer and Champy’s “Reengineering the Corporation.”  A prime example in the book is a banking and credit corporation that had several hundred “specialists” in their loan department.  Most specialists handled only 1 or 2 cases a week, sitting idle most of the time.  What the corporation realized is that over 80% of their loans were “standard” loans and did not require specialists.  So they re-trained most of their staff to handle the general loans.  This sped up the process to the consumer, allowing them to process more loans faster.  They still kept a few specialists on hand for the “20%” cases that would not fit the standard process.

It may not be enough to recognize that you want to document your 80% process instead of your 20% process.  Figuring out how to tell the difference can be a big challenge.  The key is to ask yourself, “does this happen most of the time?”  If the answer is “yes,” include it in your process.  If not, set it aside and come back to it.  After your first pass through the process, review the steps end-to-end.  If you feel that the entire process fits 80% or more of the cases you deal with, you’re done.  If  not, go back and review the steps that you didn’t include but were on the fence about.  You should be able to get to 80% by adding those one-by-one.

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This entry was posted on Friday, December 18th, 2009 at 3:58 pm and is filed under Business Process Improvement. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.