Price’s Law for people – the right medicine or snake oil?
Background and thoughts on applying a productivity and people-based mathematical law to the real world of business and organisations
WORK
6/2/20267 min read
Introduction
I was recently introduced to Price’s Law, which immediately sent me down a rabbit hole of websites, articles and blogs. Originally proposed by Derek J de Solla Price in his 1963 book, Little Science, Big Science, the hypothesis suggests that, in any scientific field, half of the published research comes from the square root of the total number of authors in that field. So, for example, if there are 100 research papers written by 25 authors then 5 of them (ie, the square root of 25) will have contributed 50 of those papers (ie, half of the total of 100 published papers). It turns out, from later empirical studies, that the hypothesis wasn’t actually valid, and that the distribution of articles was more accurately described using Lotka’s law.
This hasn’t stopped Price’s Law being extended beyond its original application and used in other fields, including organisational management and productivity, particularly where organisations or businesses scale up. And there’s definitely something attractive and intuitive about it, that a small number of people contribute disproportionately to the outputs or outcomes.
The productivity law
Applying the law to a company of 100 staff means that only 10 of them (ie, the square root of 100 ) will be responsible for half the work, half the productivity, half the output, however you decide to define that. Scale up that company and you start to see how that productivity relationship results in a smaller and smaller proportion of people who are driving a particular business. A 500-person company – that’s about 22 people driving half the output; a 1,000-person company – that’s about 32 people; 10,000-person company – 100 people. In a way, the law is also highlighting how incompetency increases as a company grows – becoming more and more reliant on a smaller proportion of more productive people.
But really?
If Price’s Law is true, then it’s an important metric to understand and address, particularly in a growing business. But is it really right?
Even a cursory consideration of Price’s Law makes you start to think of the complexities of working with it inside an organisation. And if perhaps the variables would be too complex to manage effectively. Just factor in the subjectivity and bias that humans and human systems bring to all businesses, despite the best of intentions – biases that exclude or overlook people from being identified as productive staff or high performers. For instance, those with protected characteristics, such as gender, race, disability, sexuality, etc, can be unseen within an organisation or not valued as they should. Factors like neurodivergence may exclude people, while factors like privilege or entitlement can give people an unfair advantage. And if the composition or management structure of an organisation doesn’t already reflect these characteristics or factors, then how likely is it that it will successfully identify those people that don’t fit the prevailing “unrepresentative norm” of the organisation?
And strangely, even though I’ve been running organisations of different sizes for over 20 years, I hadn’t come across the law in my work or learning, although maybe that’s poor continuing professional development on my part. So, is Price’s Law of value or just some snake oil that an overpaid consultant tries to sell you as a universal panacea to your business woes?
Some aspects of Price’s Law may already filter into our work, for example, talent management, reward systems, training and development programmes, restructuring initiatives, recruitment strategies and so on, where you’re trying to identify, reward and motivate performance.
There are also other similar tools or rules, the most obvious being the Pareto Principle, that approximately 80% of the consequences come from 20% of the causes. I saw this clearly in my early career in trade publishing – 80% of our income was driven by 20% of our titles. If we could have predicted exactly which titles would be successful, then we’d have been able to shift that balance, but in my experience commissioning and publishing of titles was its own form of market research. The ones you thought would “fly” didn’t always do that, and sometimes the title with low expectations outperformed massively. And then there was the fact that the long tail (the 80% of your titles that didn’t generate much income) served other functions, including insight into what worked in your market and what didn’t, or acting as pipeline for developing new authors, or growing new or niche audiences that would help feed your big earners.
Why Price’s Law isn’t used more
There are some sound reasons why Price’s Law is either not known about or not used in practice. For instance:
Leadership and management within an organisation often believe that effective teams are driven by equal contributions from all the team members.
Some organisational cultures have a view that everyone within the organisation has the potential to contribute equally – any model that runs counter to this and acknowledges, prioritises or rewards high performance, would fly in the face of the idealised or meritocratic philosophy upheld by the organisation. I’ve certainly seen strong elements of this approach in some organisations I’ve known over the years, particularly in the public sector, with clear examples of poor or ineffective performance left unchallenged, often accepted or tolerated, and even supported or facilitated.
You need some sort of coherent framework in which to apply it properly – a complex and complicated piece of work in itself.
So, if you did want to develop a sound framework to help you address Price’s Law, there are obviously a number of different factors to consider:
Understanding success measures
Do you and your organisation actually understand your measures of success? That might seem to be a question with an easy answer, but it can be more complicated than you realise and a lot of businesses simply don’t know or don’t have the right data, metrics and insight to assess it properly.
Many forms of work need sophisticated data or metrics to assess them. Take software/IT project management, where the success might be measured more along the lines of problem-solving ability. Or care services or other forms of relationship-based service? How do you measure and provide for success when you have a range of different case-based situations to resolve, including some that will inevitably end negatively? And what are the best or most appropriate measures? It’s likely that you’ll have a range of different success measures for different parts of your organisation, but ideally you should be able to link them all in some way to the core of your business or mission. In the words of Flann O’Brien, “it is a nearly insoluble pancake”.
Identifying high performers
How do you accurately identify staff who are contributing effectively to those success measures? Especially, as they’ll be distributed across the organisation in a range of different roles, functions and disciplines. And there will be aberrations: we’ve all got experiences of organisations where people get lucky and an opportunity lands in their lap, with little or nothing to do with inherent talent. Your staff and teams too will have different views of what matters most or of what constitutes value within your organisation or business. And if they have an input into that, or the assessment of that value, then you risk opening up a whole new can of worms: the tricky issue of people separating or distinguishing personal value from job or function value, the bane of any job evaluation assessment that’s ever been done.
Just look at the analogous task of trying to identify staff in “critical roles” (in order to manage business risk or provide for some form of succession planning) to see how challenging it can be. While sometimes it can be simple to identify those roles – they stick out like a sore thumb, eg, colleagues in single, specialist or technical roles, making them in effect single points of failure – often they are roles that people don’t appreciate as critical. They may be unseen, taken for granted, misunderstood, located in a low-profile part of the business, or staffed by people who don’t fit within the norms of the organisation. What critical roles usually aren’t are the senior roles, the highest paid roles, the sales roles. And if a colleague is telling you that their role is critical to the business, that may well be a strong indicator that it’s not.
Reward systems
Assuming you can identify the right people, you then need the right reward system or motivation framework that will either help retain that cohort or encourage them to improve their performance beyond what they’re already doing. If we buy into Price’s Law, then that system should also be targeting those high performers to support the rest of the organisation to improve its performance too. Yet too often we see examples of companies that use reward or bonus systems that simply don’t motivate or drive behaviour in the way they claim to do.
And, of course, if your reward system is targeted at your high performers, then you need to avoid alienating the majority of your staff who aren’t in that cohort, but are still responsible, albeit possibly inefficiently, for half your business. Do you really want to divide your workforce into achievers and non-achievers, as if you were back at some benighted system of schooling?
In conclusion
So, all in all, applying Price’s Law within an organisation is going to be difficult to pull off and I’m not convinced it would be worth the effort, for the reasons I’ve started to identify above. I can see it working for other forms of distribution in the way the Pareto Principle does. However, using Price’s Law as a tool or a prompt or a challenge for looking at your organisation to see how it really works and to ensure you understand that, then, yes, possibly that would be a good exercise – but only if you’re prepared to dig in deeply to what success really means, how to measure and track it properly, and then to apply that to the subjective, complex and biased people that we all are.
If anyone has examples where they’ve seen it work well within an organisation (or even where it hasn’t worked well, and why), then please get in touch.