Dr Denis Boulais* examines the Pareto principle, widely known as the 80/20 rule, to the cleaning industry.
The Pareto principle, widely known as the 80/20 rule, states that on many occasions, 80 per cent of effects come from 20 per cent of causes.
The literature suggests that workers compensation is not an exception to this rule and that this rule may apply to workers compensation in a more exaggerated form. For example, with some self-insured policies it has been identified that 80 per cent of workers compensation claim costs arise from just 5 per cent of claims.
As such, a relatively small number of high cost claims can result in a disproportionate premium payable cost to the employer. Despite this obvious cost relationship such injuries have adverse impacts upon the injured worker, loss of organisational productivity and adverse effects upon morale and workplace culture.
For around 15 years now I have managed workers compensation and injury management within the cleaning industry. I have experienced a number of different workers compensation schemes throughout Australia whereby the most effective way to reduce workers compensation premium is by return to work of injured employees.
I had always wondered how the Pareto rule would apply to the cleaning industry and set upon a study of available incident statistics to establish if any Pereto relationship exists.
With no fault workers compensation provisions in place then one incident could easily occur and result in a high cost claim particularly as research is indicating that 75 per cent of incidents are due to human error.
My own research in this area indicated that 65.5 per cent of incidents in the cleaning industry are due to human error and 51.5 per cent of those incidents are a result of cleaners not looking before moving.
My initial thoughts that 20 per cent of incidents resulted in 80 per cent of workers compensation costs were realised when I calculated that 15.3 per cent of incidents resulted in greater than 80 per cent of claims costs using the cleaning industry data I had available.
Pareto situations in cleaning
Vincent Pareto (1848-1923) made the observation that 20 per cent of people in Italy owned 80 per cent of the country’s wealth and realised this disproportionate concept applied to many different areas.
A main idea behind the Pareto rule is that a disproportionately small group can have a supersized influence over one’s business. If this group can be properly identified and managed (their impacts minimised) then the profitability of the business may dramatically increase. Observing the Pareto may allow one to think outside the square and work smarter by focusing upon the right things.
Let’s examine some Pareto situations that may apply within the cleaning industry.
- 80 per cent of dust is found in 20 per cent of a building (e.g. foyers and meeting rooms)
- 80 per cent of feedback comes from 20 per cent of cleaners
- 80 per cent of workers compensation costs derive from 20 per cent of claims
- 80 per cent of contract revenue is derived from 20 per cent of clients
- 80 per cent of injuries derive from 20 per cent of hazards (e.g. manual handling)
- 80 per cent of complaints come from 20 per cent of clients
- 80 per cent of the traffic involves 20 per cent of the streets (e.g. intersite travels).
- 80 per cent of sales result from 20 per cent of marketing strategies
- 80 per cent of website traffic lands on 20 per cent of website pages
As earlier mentioned I am calculating from my workers compensation data that 15.3 per cent of claims account for greater than 80 per cent of workers compensation premium costs – hence these workers compensation claims follow a rule more dramatic than the 80/20 rule.
*This article first appeared in the February edition of INCLEAN NZ. Click here to continue reading.