It is time to forget about Quiet Quitting and Quiet Firing. Instead, think about the Pareto Principle from physics and microeconomics, commonly known as the 80/20 rule.
Your goal should be to figure out how to expand the 20 percentage of your workforce that drive 80 percent of the organization’s performance. Perhaps to 40 percent or more.
For those new to the Pareto Principle, I will explain it as taught to me at a medical device company. If you have a wide-open window and then change it to only 20 percent open, the same amount of air will pass through but more rapidly. Eighty percent of air mass moves four times faster through the 20 percent open window. This example explains why patients typically don’t have heart attacks until their arteries are 80 percent or more blocked.
Switching to the workforce, the Pareto Principle holds that 20 percent of your workforce contributes 80 percent of the productivity, sales, or innovation through their higher intelligence, talent or by committing more discretionary time to work.
The Pareto Principle is named after Italian civil engineer Vilfredo Pareto (pictured at right) who used this concept in his study of economic efficiency and income distribution. He helped create the field of microeconomics. His concept is best applied when leading the workforce with a new situation. Some employees will gain more income as the company becomes more productive or grows, but no employees will lose. Vilfredo calls this the Pareto Improvement.
In my experience, this principle has caused some executives to hire the smartest and best talent available and give them challenging projects to create major breakthroughs. Sadly, many of these executives were overly dependent on their superstars and did not invest in the efficiencies and processes that would have moved the organization forward more rapidly. Great talent with efficient processes is an awesome duo in an innovative culture. Such cultures are more powerful than superstars alone.
Other executives, however, have long understand the power of innovative and transparent cultures. They have superstars who are assigned complex objectives. But they also call upon the whole workforce to overcome issues by making suggestions and joining teams that determine which idea is best and figure out how to implement it. This approach allows more employees to volunteer their ideas and take initiatives, thereby expanding the top 20 percent to 25, 30, or maybe even 40 percent. This way, more employees can gain income, and no one loses.
These executives capture the attention of “Quiet Quitters” and attract them to contribute their ideas and more discretionary time to solve difficult issues by appealing to their values. It works in an innovative and transparent culture, not a top-down, do-what-I-say-only culture.
In the same manner, these executives discourage “Quiet Firing.” Instead, they encourage their managers to provide ongoing feedback to employees, pointing out their successes, strengths, failures, and development areas — and providing coaching and training when necessary.
By the way, I have never found empirical evidence to suggest the Pareto Principle at 80/20 is successful among the workforce. (If you know of one, please write me!) Yet, it continues like an influential urban legend. The normal distribution of the Bell Curve is used to justify it. Employees on a Bell Curve who are one standard deviation from the mean represent the 20 percent of your high performers. Those employees who are one standard deviation on the other side of the Bell Curve represent the low performers. (Forget for a moment that workers one standard deviation from the norm is 16 percent of the workforce. Please see the chart below).
However, I know of workforce segments where the Pareto Principle applies. One is with salesforces I have worked with, where about 20 percent of the sales force drove 60 percent of the revenue. Not quite 80/20, but close. And even if your best assemblers, accountants, engineers, and researchers are two times more productive than others, which I have found to be true in my experience, that is worth noting. These are the employees you want to retain and reward proportionate to their contributions.
Your performance management system and employee surveys should determine the number of high, average, and low performers in your workforce. You want to retain, empower, and reward your top performers and attract those not giving you their fullest effort to join in – not punish them for doing enough to get by. The adage goes, “You can attract more bees with honey than vinegar.”
Two takeaways from the Pareto Principle.
You can take advantage of two takeaways from the Pareto Principle this week to move from the 80/20 rule to 70/30 or 60/40 and beyond.
1 – Develop your culture to be transparent, inclusive, and innovative
Based on the empirical evidence and consulting practice at InnovationOne, LLC, we have found that these are the seven traits of highly innovative organizations that drive innovation and financial performance.
- Executives embrace innovation, create an innovative vision and strategies, and communicate them relentlessly.
- Employee and external partner creativity is unleashed and learning is encouraged.
- A clear process exists to move ideas forward.
- An innovation knowledge management system is in place.
- Investments in resources, skills, time, advanced technology, digitization, and space are dedicated to supporting innovation.
- Innovation processes and outcomes are measured.
- Performance management systems reward and encourage innovation.
You can learn more here.
2 – Retain and reward your top performers.
Your top performers have better productivity, teamwork, ideas, and commitment than others. You need to reward them accordingly, by offering pay raises, bonuses, promotions, stock awards, and more exciting work. Otherwise, they will leave to work for another employer who will pay them their value on the marketplace.
Some argue for equity in rewards. If you provide equity, you will retain your average employers, but loose those who drive the higher performance.
The Pareto Principle is a good concept to follow even if the science is not crystal clear. It is time to forget about Quiet Quitting and Quiet Firing. Instead, improve your work cultures and reward your best performers. You will love the improvement in performance, innovation, and financial outcomes.
Victor Assad is the CEO of Victor Assad Strategic Human Resources Consulting and managing partner of InnovationOne, LLC. He works with organizations to transform HR and recruiting, implement remote work, and develop extraordinary leaders, teams, and innovation cultures. He is the author of the highly acclaimed book, Hack Recruiting: the Best of Empirical Research, Method and Process, and Digitization. He is quoted business journals such as The Wall Street Journal, Workforce Management, and CEO Magazine. Subscribe to his weekly blogs at www.VictorHRConsultant.com.