Tag Archives: Pareto Principle

At a time when businesses everywhere value continuous improvement, setting goals is now more important than ever. Are your business objectives moving you forward, or are you merely treading water? We’ve put together a list of suggestions for how to set practical goals that actually grow your organization.

Target areas of great potential gain
The Pareto Principle strikes again – by following the time-tested 80/20 rule, business leaders can focus on areas where their companies experience the greatest inefficiency to deliver the most substantial results.

For a quick refresher, the Pareto Principle states about 80 percent of results come from 20 percent of the causes. For example, 20 percent of your customers purchase 80 percent of your wares. While this isn’t a hard-and-fast mathematical certitude, it is an effective foundation for thinking about internal processes. After all, if 80 percent of your cycle time comes from 20 percent of your processes, optimizing that one-fifth will significantly reduce production waste.

“Objectives with low effort and high value make excellent starting points.”

Also, when prioritizing which goals to tackle first, Inc. recommends considering the relationship between the effort expended to accomplish them versus the resulting payoff. Objectives with low effort and high value make excellent starting points for your improvement itinerary.

Always measure, always track
Success isn’t measured in feelings, but absolute figures. Setting goals requires businesses to identify exactly how much on an improvement constitutes a win for the organization, as well as a system by which to quantify those wins. “Better changeover” won’t cut it as an objective, but “a 25 percent reduction in changeover time” will.

Improvements to process, safety, workforce management, financial performance – all of these metrics can and should be monitored if businesses expect to make any headway on goal-setting. Decision-makers should also try to employ the latest operational monitoring technology like low-cost sensors coupled with process management software to get the most accurate results without adding waste elsewhere. Sure, you may have slightly improved your changeover time, but if you achieved it by forcing operators to fill out forms manually, you’re detracting from your gains in the process.

Go beyond the ordinary
These days, businesses avoid risks whenever possible. However, when it comes to setting goals, IndustryWeek contributor and manufacturing expert, Larry Fast, recommends pushing the bar as high as possible:

“Which would you rather have,” Fast writes, “a 25 percent improvement goal that accomplishes 28 percent or a 75 percent improvement goal that ‘only’ yields 67 percent improvement but that jump starts the new way we’re going to manage the business?”

As Fast clarifies, when business leaders only set modest goals, they have a better chance of pulling them off. However, these represent only surface-level improvements accomplished through urgency, not through systemic process changes. When goals challenge organizations to reprogram the ways they’ve approached operations in the past, they undoubtedly invite risks, but they also open up incredible potential for outstanding and sustainable rewards.