Using the Pareto Principle in decision-making

Using the Pareto Principle in decision-making

By Nick Jarrett-Kerr

First published in the Edge International Communique January 2012

Law firms often have huge problems with their decision-making processes.  In the first place, lawyers are infamous for the glacial speed of their decision-making.  Analysis can often result in paralysis.  Caution and a tendency for risk aversion can often mean that decisions are delayed further and further until everyone is totally satisfied that there are no further avenues to explore, no more analysis to be done.  Additionally, the lawyer’s desire for perfection leads him or her to seek the perfect solution.  Even when decisions are made, they are often reversed on further reflection or when a vital constituency raises objections

There are a number of tools and methodologies to help with decision-making and I have written a number of articles on the subject – please contact me for further details.  One very simple method which is often effective is to use the Pareto Principle.  Pareto discovered that most wealth and income went to a minority of people and that this pattern of imbalance is repeated throughout society: 80% of what you can achieve comes from 20% of the effort. This can help in cutting back on over-analysis in decision-making.  The principle is that the firm should apply resources where they have the most powerful effect, whether it is time or money.

The 80/20 rule can apply to decision taking and analysis in law firms, by following five golden rules

  • Rule 1 : not many decisions are very important
  • Rule 2: the most important decisions are often made by default.  Stand above your data and ask yourself questions like: in this industry sector what sort of work do we find ourselves providing to clients almost unintentionally? What opportunities are mounting up without us noticing?
  • Rule 3: for important decisions gather 80% of the data and perform 80% of the analyses in the first 20% of the time available, then make a decision 100% of the time and act as if you are 100% confident in the decision.
  • Rule 4: if what you have decided isn’t working, change your mind earlier rather than later.
  • Rule 5: when something is working well, double and redouble your efforts.