John Langhorne/Tree Full of Owls

In a recent series of seminars with a group of people, most of whom were engineers, we fell into a discussion of axioms in the category of “managing and leading people and organizations.”

An axiom is a statement or idea that people accept as self-evidently true. W. Edwards Deming, the quality guru, called this kind of knowledge “profound wisdom.” Interestingly, most have some empirical or philosophical base of support. Let’s look at a couple and see if we can find the profound truth and relevance.

In the middle of the 18th century, an Italian economist named Alfredi Pareto discovered that 80 percent of the property was owned by 20 percent of the people. Everyone promptly forgot this until World War II when Joseph Juran, one of the early quality gurus, rediscovered it as a powerful tool in quality management. More recently organizational development people have generalized the principle, casually known as the 80-20 rule, to describe a core characteristic of complex systems.

Simply stated: In any complex system a small number of variables, usually fewer the seven, control most of the variance in the system. If you can identify these variables you can exert great influence on the performance of the system. Variance is a statistical term for the total activity in a system. For those of you who are purists, it is the square of the standard deviation in a data set.

This happens to be an amazingly important principle because it essentially means that if we can identity this handful of characteristics we can run any complex system.

Recently, I did a series of strategic assessments for a group of affiliated organizations to help them identify and prioritize their core strategic issues and to enable them to compare and contrast these with their sister companies. We used a very simple and powerful tool I refer to as a MSL, or More, Same, Less. A collaboratively formulated question was introduced to all the key people with an explicit paragraph defining the business context. The question eliciting their input was: “I believe we (insert name of the company) need to do: More, Same, Less.”

The executives then shared this request for information with their key people and asked them to send the responses to a third party. Combining all the data, we carried out an inductive content analysis of these responses and assigned appropriate labels based on the content of the clusters. Rank ordering the clusters by frequency of responses produced what is called a Pareto analysis. This is a clear, explicit analysis of the key priorities of the group. Turning this into a bar chart produced a dramatic picture of the priorities and the level of concern about each. Imagine the discussion the presentation of such information engenders.

For you math guys, this is a looks a lot like a logarithmic decay curve, it starts high in the upper left corner and declines very rapidly in a stepwise fashion with a handful of variables explaining most of what going on in the data set: A-Ha, a Pareto. This analysis shows what the key issues are for each organization, their relative importance and offers multiple suggestions for improvement. This explanation sounds complex, but with a picture is trivially easy to explain.

Another axiom: Occam’s Razor. William of Ockham (c. 1285–1349) formulated this principle in the 14th century and it has enormous importance to anyone engaged in the operation of large systems. He said, “Thou shall not multiply thy entities needlessly,” or more simply, in any pair of explanations one should favor the simpler. This is also called the Law of Parsimony, the philosophical and scientific rule that states that simple explanations should be preferred to more complex ones and that explanations of new phenomena should be based on what is already known.

Thoughtfully combining the Pareto Principle with Occam’s Razor allows leaders and managers with a powerful pair of tools for assessment, analysis and potential action. It permits pairs of comparisons and a criterion for evaluating the efficacy of each. Peter Drucker said, “It takes knowledge to transform data into information.” In a world where we often seem to be struggling with too much data and too little information this pair of axioms provides leaders with a simple and powerful tool to engage people and understand the results.

John Langhorne is with Langhorne Associates. He can be reached at www.langhorneassociates.com. His new book, Beyond Luck: Practical Steps to Navigate the Path from Manager to Leader, is available at www.beyondluck.net.

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