In “Using Pareto Principle to Improve Personal Finance” post, I demonstrated how we could use the Pareto principal to focus our limited resources on the things that will give us the most benefits. Raymond from Money Blue Book commented:
Interesting concept — so is it suggesting that I would be better of not trying to save money giving up drinking Caribou Coffee and bottled water and instead focus on big ticket items like rent and car payments?
That was a great question! In this post, I want to share another quality improvement concept called Quick Wins (also known as Quick Hits). Pareto is a great way to prioritize factors based on their impact (i.e., potential benefits), but it fails to consider the effort (e.g., time, money, people, technology, etc.) needed to fix or improve the problem.
Quick Wins allow us to pick out the low hanging fruits and do the easy stuff regardless of their benefits level.
The chart above is a Benefit-Effort Matrix. Let’s assume each blue dot is an idea to save money. It’s not too difficult to think about how much effort — i.e., high (H), medium (M), or low (L) — to implement an idea. For example, stop drinking Caribou Coffee would be medium or low effort especially when compared to finding an apartment with lower rent, or changing your car to lower the monthly payments. On the vertical axis is the level of benefits. For example, money saved from not drinking Caribou Coffee would be low compared the other options.
Let’s go through some examples:
Note that the rating is all relative and unique to the individual. It’s possible for me to say that an idea is low benefit/high effort, while you say that it’s medium benefit/low effort. Lastly, the red shaded area on the matrix means the idea requires a lot of effort, but yield very little benefit — these should be avoided.