PRICE WE PAY FOR PRICE LAW
1. We have often quoted Pareto Principle (80/20 Rule) and in most cases when overburdened with work and envious of those without it. A colleague of mine sent me a message explaining the Price Law[1]. It quite made sense or maybe it was the novelty of learning something new that egged me to share my thoughts on this law related to productivity and creative work in the organization. Seems Musk has applied Price Law at Twitter with the mass distribution of pink slips since becoming the big blue bird.
2. Let me start by explaining the Price Law; the square root of the number of people in an organization do 50% of the work. This means that in a section of 10 soldiers, three of them do half the work. The remaining 50% of the work is done by the other seven soldiers. This scales too. When there are 100 soldiers, 10 of them do half the work. The other 90% are doing the other half of the work. As the unit or organization one leads grows, incompetence grows exponentially and competence grows linearly. Price’s Law specifically applies to creative work. Meaning the creation of something “new” like new concepts, ideas, drills, SOP etc. If we extrapolate this to an organization which is say 1 Million, only thousand people are creatively engaged and are in the process of inventing or re-inventing new methods to achieve success.
3. One big take away from this law is, as a leader it is important that you take care of all of you lead but it is equally important to make sure you don’t take for granted your top performers. It so happens too that the performers would know their worth and extricate themselves from an organization which has not recognized their talent, but it is the balance who are more vitriolic, they know they are no good and they wouldn’t find any alternatives if they leave and hence would stay on to drain the life blood out of the organization. It’s a double whammy, the good ones leave and the bad ones don’t, no matter how robust and balanced an organization may be, it wouldn’t be able to sustain this onslaught for too long. Typical adage in our organization is, work begets more work and laziness begets more laziness. The smaller the organization, the more obvious it will be just who is doing half of the work, and the less room there will be to hide. Conversely, the larger the organization, the more room there will be for passengers to strap in and enjoy the ride.
4. As David Rose argues in his book, Why Culture Matters Most, prosperity requires large group cooperation. This requires trust, but as societies grow larger it becomes more difficult to sustain a high trust society. In a company, we know that our unlawful actions might impact ones we are close to and the harm becomes more real and visceral. Conversely, when we’re in a large organization, this disposition withers away, particularly where people had questionable values to begin with. The larger an organization gets, the more likely it is to be characterized by a lack of trust amongst members, multiple layers of approval required to get anything done and countless conferences which decide only on the schedule for next set of conferences, designed to minimize misconduct; usually at the expense of innovation and long-term survival.
5. Price’s Law also explains why, in large organizations, you will find lots of people looking to prove themselves. Unfortunately, it’s not through the quality of their work, but through aligning themselves with the right people, playing politics and creating cabals for survival. As Netflix co-founder, Marc Randolph, puts it in his book, That Will Never Work, “in a place where you’re evaluated solely on the quality of your work, no one really cares about your appearance. In many disciplines, being a smooth talker or snappy dresser can grease your ascent to the executive suite, like in our case it is not important to be fit but to look fit. In reality however, the only thing that really must matter is the quality of work”. The more confident someone is in their abilities, the more likely they are to challenge the status quo, because they’re okay with getting fired, confident in their abilities to get hired and thrive elsewhere.
6. Fortunately for the passengers hitching a ride out there, it is not only easier to hide in a large organization like ours, but it’s also much harder to be shown the door. Rather than raise the ire of hierarchy, risk unfair and malafide complaints, become the object of negative attention and face a dwindling focus on professional work and get involved in infructuous paperwork, it’s far easier to keep tolerating the freedom fighters and under-performers and have the square root of their people cover their losses. Being left only with the best talent also means that it becomes easier to attract talent. Again, Randolph reminds us that “it’s much easier to attract other elite talent to your team when you’ve established a reputation for superstar talent”. Well, we need to reflect on our team and its results, who is contributing most of the value, and who is coasting. We might need to make some hard, but very valuable decisions or worse someone else will take it on our behalf.
[1] Peterson, Jordan B. (2019). 12 Rules for Life: an antidote to chaos. Penguin Books. Pg 8
