Demystifying the Dependency Quotient
EmPower Research
August 21, 2007
By Aparajita Purkayasatha Dutta
Consultant, businessman and author Richard Koch defines the 80/20 principle, as an inherent imbalance between cause and result, input and output, effort and reward etc. The 80/20 principle arose from the wide imbalance in the patterns of wealth and income consolidation during the 19th-century England. However, Richard Koch goes on to showcase how this principle applies not only to our professional life but also to our day-to-day activities, such as 20 percent of your clothes would be worn 80 percent of the time. Does that make you wonder what happened to the balance lying there in your closet? Well, it definitely is applicable to my closet and my husband’s whose ‘only’ black and blue T-shirt gives me the creeps now.
So, where does the ‘Dependency Quotient’ fit here?
Let me try to show how this 80/20 rule applies to our businesses. If we are saying that 20 percent of our people contribute to 80 percent of our work, I would be worried! Now why does that worry me? I mean, isn’t it good that 20 percent of my work force contribute to 80 percent of my output? I just need to identify those and filter out the rest. Well, unfortunately life isn’t that easy! The way business works today, it is not good at all.
Let me explain this to you…
Employees can be segmented into three broad categories
The Smart Alec’ (High dependency): Energetic, enthusiastic, proactive and ambitious. This bunch shows remarkable growth in the company. They are identified as future leaders. But, currently they are the key drivers of the companies output. This segment is the hardest to hold on to.
The Problem Child’ (Medium dependency): These are the ‘problem child’, who definitely has the potential to become the smart Alec type, but believes in taking it easy and does not put in effort to improve.
Low dependency: Do not add any value to the company, have few peaks but mostly troughs – could be considered worthless in a way.
The 80/20 principle reveals that of 10 employees there are two smart Alec’s who are critical to the turnaround of the company. So, is the balance redundant? No, not at all, but they do not have a significant impact on the productivity of the company.
This is where the dependency quotient fits in. Organizations today are highly dependent on these 20 percent. This increases the vulnerability of the company as they are dependent on few people and these few get buried under the ‘high dependency factor’ from the company.
What should organizations do?
Training: Organizations today spend a lot of time and resource on training employees, but unfortunately measuring the efficacy of these training programs is not done. In our organization, we have well defined training schedule drawn out, which is attended by most of the employees, but the efficacy of the program is unsure.
Harsh rules: Reward merit and clearly communicate to those who fall in the other segments that if they do not strive towards a certain goal, there would be dire consequences.
Build a challenging environment, which would encourage and motivate the smart Alec's to work and stick on with the existing company.
Train to create a culture which encourages employees to take on a more positive role towards the work they are doing.
Identify the core interests/skills of the balance 80% and fit them there. They may be performing poorly because they do not have any interest in the kind of job they are doing. Moving them to other areas of work might improve things.
Apart from those mentioned above, organizations should have diversified with a balanced portfolio of 20:80 people. But, what actually concerns me is that segments which actually ‘free rides’. These are difficult to identify at the first glance, true colors are revealed once you get to know them better. I always wonder how much time should be given to prove oneself. I do not have an answer, but what I know is that it is very important to identify the ‘cream’ 20%, but what is also important is to identify is the lowest-of-the-low.
This thought brings out another important point, identification of leaders in a company.
An article in the Business Week emphasized the need to identify ‘leaders early in their career’. For example, Jeffery Immelt, Jack Welch’s successor in GE, was actually identified as a ‘potential’ in 1982, but he finally took over GE in 2001. The need to identify future leaders is primarily driven by the growing complexity of work, early retirement age for CEOs. This makes it important for companies to know who would be leading them century-after-century.
So, how harmful is the dependency factor?
Dependency is not necessarily harmful, if the career path and goals are identified between the employer and the employee then there is no reason why a perfectly cordial and productive relation cannot coexists.
There are many organizations who would try various retention policies to ensure that their smart Alec’s stay with them, though there are others who do not care.
Organizations have to ensure that they identify a potential leader out of the pool of 20 percent key performers. The leader should be exposed to various working environments, this includes managing various kinds of people, working across various geographies, managed key customer and they should know the pulse of the stakeholders.
For the employees it is definitely a lot of stress to have a high dependency attached with him/her. Succession planning and training to build a wider pool of smart Alec’s is important.
Challenges surrounding the dependency on the 20 percent workforce.
High dependency on these 20 percent could be very harmful for the company, especially given the way the industry is working today. High rates of attrition make organizations very vulnerable if they loose the 20 percent cream.
So, the need of the hour is to not only identify key employees, but communicating their career growth plans with them. Also, to ensure that this segment remains with the company and helps the company to grow along with their own growth plans.
Consultant, businessman and author Richard Koch defines the 80/20 principle, as an inherent imbalance between cause and result, input and output, effort and reward etc. The 80/20 principle arose from the wide imbalance in the patterns of wealth and income consolidation during the 19th-century England. However, Richard Koch goes on to showcase how this principle applies not only to our professional life but also to our day-to-day activities, such as 20 percent of your clothes would be worn 80 percent of the time. Does that make you wonder what happened to the balance lying there in your closet? Well, it definitely is applicable to my closet and my husband’s whose ‘only’ black and blue T-shirt gives me the creeps now.
So, where does the ‘Dependency Quotient’ fit here?
Let me try to show how this 80/20 rule applies to our businesses. If we are saying that 20 percent of our people contribute to 80 percent of our work, I would be worried! Now why does that worry me? I mean, isn’t it good that 20 percent of my work force contribute to 80 percent of my output? I just need to identify those and filter out the rest. Well, unfortunately life isn’t that easy! The way business works today, it is not good at all.
Let me explain this to you…
Employees can be segmented into three broad categories
The Smart Alec’ (High dependency): Energetic, enthusiastic, proactive and ambitious. This bunch shows remarkable growth in the company. They are identified as future leaders. But, currently they are the key drivers of the companies output. This segment is the hardest to hold on to.
The Problem Child’ (Medium dependency): These are the ‘problem child’, who definitely has the potential to become the smart Alec type, but believes in taking it easy and does not put in effort to improve.
Low dependency: Do not add any value to the company, have few peaks but mostly troughs – could be considered worthless in a way.
The 80/20 principle reveals that of 10 employees there are two smart Alec’s who are critical to the turnaround of the company. So, is the balance redundant? No, not at all, but they do not have a significant impact on the productivity of the company.
This is where the dependency quotient fits in. Organizations today are highly dependent on these 20 percent. This increases the vulnerability of the company as they are dependent on few people and these few get buried under the ‘high dependency factor’ from the company.
What should organizations do?
Training: Organizations today spend a lot of time and resource on training employees, but unfortunately measuring the efficacy of these training programs is not done. In our organization, we have well defined training schedule drawn out, which is attended by most of the employees, but the efficacy of the program is unsure.
Harsh rules: Reward merit and clearly communicate to those who fall in the other segments that if they do not strive towards a certain goal, there would be dire consequences.
Build a challenging environment, which would encourage and motivate the smart Alec's to work and stick on with the existing company.
Train to create a culture which encourages employees to take on a more positive role towards the work they are doing.
Identify the core interests/skills of the balance 80% and fit them there. They may be performing poorly because they do not have any interest in the kind of job they are doing. Moving them to other areas of work might improve things.
Apart from those mentioned above, organizations should have diversified with a balanced portfolio of 20:80 people. But, what actually concerns me is that segments which actually ‘free rides’. These are difficult to identify at the first glance, true colors are revealed once you get to know them better. I always wonder how much time should be given to prove oneself. I do not have an answer, but what I know is that it is very important to identify the ‘cream’ 20%, but what is also important is to identify is the lowest-of-the-low.
This thought brings out another important point, identification of leaders in a company.
An article in the Business Week emphasized the need to identify ‘leaders early in their career’. For example, Jeffery Immelt, Jack Welch’s successor in GE, was actually identified as a ‘potential’ in 1982, but he finally took over GE in 2001. The need to identify future leaders is primarily driven by the growing complexity of work, early retirement age for CEOs. This makes it important for companies to know who would be leading them century-after-century.
So, how harmful is the dependency factor?
Dependency is not necessarily harmful, if the career path and goals are identified between the employer and the employee then there is no reason why a perfectly cordial and productive relation cannot coexists.
There are many organizations who would try various retention policies to ensure that their smart Alec’s stay with them, though there are others who do not care.
Organizations have to ensure that they identify a potential leader out of the pool of 20 percent key performers. The leader should be exposed to various working environments, this includes managing various kinds of people, working across various geographies, managed key customer and they should know the pulse of the stakeholders.
For the employees it is definitely a lot of stress to have a high dependency attached with him/her. Succession planning and training to build a wider pool of smart Alec’s is important.
Challenges surrounding the dependency on the 20 percent workforce.
High dependency on these 20 percent could be very harmful for the company, especially given the way the industry is working today. High rates of attrition make organizations very vulnerable if they loose the 20 percent cream.
So, the need of the hour is to not only identify key employees, but communicating their career growth plans with them. Also, to ensure that this segment remains with the company and helps the company to grow along with their own growth plans.