Named after Derek J. de Solla Price, a British sociologist/historian in 1965, the Price's law is an important mathematical principle that argues that a small percentage of individuals in any organisation/group are responsible for most of the total output/results.
What is Price's Law?
According to the law, in any group, approximately half the work is done by the square root of the total number of people in the group.
For instance, in a group of 1000 people, the top 35 individuals would be responsible for roughly 50% of the output. This law has been extensively backtested and proven across industries and domains, including research, IT, consulting, etc.
The law provides insight into the nature of productivity and performance of groups, thereby helping us with information useful in identifying top performers, and assessing their contributions. It can also be helpful in decision making processes during resource allocation, project prioritization, and general organizational optimization.
Examples of Price's Law
Scientific Research: A small number of researchers contribute a majority of the findings that are significant. If a domain has 100 researchers, only about 10 of them will be responsible for over 50% of all notable papers or discoveries.
Software/Information Technology: If a company has 200 engineers, it is likely that less than 15 of them of them are responsible for half of the critical code and innovations. The majority of the productive output comes from few individuals.
Sales: In a sales team of 100, about 10 of them will close half of the deals and generate 50% of the revenue for the company. This will help the company define and measure their sales efforts and set incentives.
Academicians: From a university department of 40 professors, around 6 of them will produce 50% of the most cited papers, secure grants and have the highest impact in the field from that department.
Corporate: A small proportion of managers from a group of thousands will be responsible for driving successful initiatives, pivotal projects, innovations, etc. This insight will help leadership ascertain who should move up the corporate ladder.
Conclusion
Research has shown that the law holds good across organisations and domains. For instance, a study of over 3000 software projects found that 20% of the developers were responsible for 80% of the produced code (Read: Pareto Principle).
The importance of Price's law lies in its ability to provide insight into the nature of group performance and productivity that can help companies better allocate resources, pick the right projects to work on and more effectively identify and reward top performers, thereby improving overall productivity.
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