J. Miller and Company Blog

October 29, 2002

Pareto’s Principle

Welcome to the first edition of the Remodel Services web-zine. I have long dreamed of publishing a small magazine dedicated to working with members of the remodeling community to apply standard management techniques to their business. The web now makes it possible.

Any new venture comes complete with attendant risks and rewards. The “law of unintended consequences” inevitably applies here as well as in other venues. So I fully expect that this website will change and, I hope, mature to provide you with an interactive resource for researching and resolving some of the common problems associated with running a high-quality professional remodeling company.

I would also hope that you add to it by e-mailing your comments, by posing questions to me and to other readers, by adding relevant information you’ve discovered which plays to the larger topic: how to run a really great remodeling company.

Initially this column will go deeply into one issue each month which I hope will be relevant to you and to your company. Because I strongly believe that what can’t be measured can’t be controlled, the focus will be on developing various indicators to illustrate the success or failure of different components of company performance.

In determining the focus on any month’s study, I will use the Pareto Principle for guidance. Since Dan Smith, founder and original programmer of Intuit Master Builder software, introduced me to this concept in 1985 it has become the first filter I use in determining value and applicability of any gauge.

The Pareto Principle, often called the 80/20 rule, states that 20% of the effort in any endeavor produces 80% of the results. Time and again this proves true. When applied to remodeling, use the Pareto Principle to determine where to focus your attention to provide the greatest impact.

For example, if your company has 10 employees, the PP says that 2 of them produce 80% of the profits for your company and are, in fact, your most valued employees. A different set of 2 employees produce 80% of the losses for your company and are, in fact, your most problematic employees. Application of the PP to your client base indicates that 20% of them are producing the greatest value to the company. Ditto your job type.

At issue, then, is determining which 20% of any population produces the desired results and what processes, procedures and forms ensure repeat performances. The final issue is that of defining quality and how it is measured.

We will continue this discussion next month. The topic will be “what’s important now?” In the meantime, please send me your questions and comments at jfmiller@remodelservices.com.  

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