Most of us work five days a week, but in four of those days—we’re only creating 20% of what we do in the week; there’s a single day buried in there when we create 80% of our output for that week. If you’ve studied business or economics, you should be well familiar with the power of the Pareto Principle, also known as the Pareto Principle. The Pareto principle is extremely helpful in bringing swift and easy clarity to complex situations and problems, especially when deciding where to focus effort and resources. Pareto’s 80-20 theory applies particularly to time management at the workplace, in a business, organizational management events and certainly it helps with personal time management outside of work too.
It got its name from the individual that came up with the concept. Vilfredo Federico Damaso Pareto was born in Italy in 1848. He would go on to become an important philosopher and economist. It is not entirely certain how he came up with the principle, but the legend has it that one day he noticed that 20% of the pea plants in his garden generated 80% of the healthy pea pods. This could have been a coincidence, but he thought that the concept is really interesting so he decided to explore this further. Sadly Pareto didn’t live to see the general appreciation and wide adoption of his principle; he seems to not have been particularly effective at explaining and promoting the theory beyond academic circles, and it was left to other experts such as George Zipf and Joseph Juran to develop and refine Pareto’s theories to make them usable and popular in business and management later towards the middle of the 20th century.
Thus, he took more of a pragmatic approach and applied the rationale in different contexts to check its validity. He considered the notion of wealth and after in-depth research, he discovered that 80% of the land in Italy was owned by just 20% of the population. Furthermore, he looked into other industries and surprise, surprise: Pareto found that 80% of the production of many industries usually came from just 20% of the companies. Taking this into consideration he simply concluded the following golden rule: 80% of results will come from just 20% of the action. In other words, you can achieve more by doing less. How great is that!?
The notion quickly began to become popular (especially during recent times) and it was widely recognized as the Pareto principle or the 80/20 rule. While it can be argued that it’s not always an exact ratio of 80/20, this imbalance between the efforts put in and the results obtained can be observed in many examples. Here are some of them:
- 80% of outputs come from only 20% of the inputs.
- 80% of all consequences come from only 20% of causes.
- 80% of your results come from only 20% of your effort and time.
- 80% of your company’s profits come from only 20% of the products and customers.
- 20% of the sales reps generate 80% of total sales.
- 20% of customers account for 80% of total profits.
- 20% of the most reported software bugs cause 80% of software crashes.
- 20% of patients account for 80% of healthcare spending.
On a more personal note, you might be able to relate to this principle and you might not have realized it yet. However, if one manages to grasp the power of this principle then his/her productivity would surely benefit. For example, in the case of a business executive that is surely faced with the constant challenge of limited resources within a company. It’s not just the time of the executive that needs to be maximized, but his/her entire team’s as well. Thus, by applying the Pareto principle, instead of trying to do the impossible, the 80/20 approach can be used to truly understand which projects are most important. What are the most important goals of your organization, or boss, and which specific tasks do you need to focus on to align with those goals? Delegate, prioritize and let go of the rest because they won’t be bringing as many results anyway.
Let’s take another example: For a freelancer, it is important to identify the best and highest-paying clients. You know the saying “you don’t want all your eggs in one basket” and that might be true, but too much diversification will quickly lead to burnout and a freelancer that doesn’t have many resources would quickly find themselves that they cannot manage their workload efficiently. Focusing on the money makers and strengthening those long-term relationships would bring better results than trying to please everyone.
All in all, The Pareto Principle is an extremely useful model or theory with almost endless applications, such as in management, social study and demographics, all types of distribution analysis, business and financial planning and evaluation, and also for organizing someone’s workstream and life in general.
The same principle can apply to an entrepreneur. For someone that is always seeking a new business opportunity, there is always a temptation of trying something new and exciting. And there isn’t necessarily something wrong with that. We can only learn more if we explore more. But think about in terms of growing a business. Would an 80/20 mindset help you to stay focused on your strategic plan and spend less time chasing endless new opportunities? All the research suggests that it would. So maybe it would be worth it to give it a shot.
In most cases, using the Pareto Principle will help someone decide that some objectives offer such minor contributions to your overall goal that you can safely ignore them. More specifically, someone might come to realize that answering emails for four hours a day is wasteful and they could reduce the time spent on that task to half an hour a day and cut back on the length of their responses. While it can be argued that it is necessary to answer emails, it’s definitely not so important that it should take up 50% of the working day. Thus, instead of doing that, a more efficient approach would be to identify and focus the energy on the 20% of activities which can help speed the process of achieving goals and objectives. The Pareto Principle reflects the distinction between efficiency and effectiveness and can help someone prioritize and focus on what really matters and is important.
You should indeed spend a lot of time and work effectively towards a goal, but spending a lot of time on one task doesn’t mean that the effort is misplaced, quite the contrary. We’re strong advocates for perfectionism and hard work if it is applied to the right tasks, and that is those which bring us closer to a specific and important goal. However, according to the 80/20 rule, you should only focus on productive and significant goals.
There is a quote that perfectly explains this: “Workaholics don’t actually accomplish more than nonworkaholics. They may claim to be perfectionists, but that just means they’re wasting time fixating on inconsequential details instead of moving on to the next and more important task.”
In the early 1950s, Joseph Juran, a famous engineer and management consultant, noted that in any group of factors contributing to a common effect, a relative few account for the bulk of the effect. Juran has also coined the terms “vital few” and “useful many” or “trivial many” to refer to those few contributions, which account for the bulk of the effect and to those many others which account for a smaller proportion of the effect.
The sad fact is that most people procrastinate on the top 10 or 20 percent of items that are the most valuable and important, the “vital few,” and busy themselves instead with the least important 80 percent, the “trivial many,” that contribute very little to their success. More than often, we see people who appear to be busy all day long but seem to accomplish very little. This is almost always because they are busy working on tasks that are of low value while they are procrastinating on one or two activities that could make a real difference to their companies and their careers. In simple terms, the Pareto Principles comes down to a very simple action, and that is: the most valuable tasks you can do each day are often the hardest and most complex, but the payoff and rewards for completing them can be tremendous.
No matter what your situation is, it is important to remember that there are only so many minutes in an hour, hours in a day, and days in a week. Having all that money is great, but there is no greater resource than time. Make sure it’s not too late before you realize that. The Pareto principle can help you to see that the most important part of your actions contributes to most of the results; otherwise, you’d be a slave to a never-ending list of things to do and there are only a few hours left in a day.
