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The 80:20 Rule

How are you reviewing and assessing your business and life?

How often are you checking in to understand what is yielding your best results and what is draining you?

Results are key to analysing what is working and what is not so ensuring that your business is run on KPIs and insights from your POS will allow you to make informed decisions based on truth. This is important as too many businesses are driven by emotion and feelings which forces you to live in a short-term state that will ensure you overspend through rash decision-making. This is a definite way to kill cashflow and enthusiasm!

Consider using the 80:20 rule as a beginning to amending your strategy while being fully aware that long-term goal setting and planning are critical to steering a ship towards sustainable long-term success and away from unnecessary danger! Reviewing the data is critical and that is where the 80:20 rule is of great value. And remember it can be 30:70 and so on, but understanding what has gone on can help shape how you move forwards in all areas of your life.

This article is absolutely brilliant so happy reading:

"Pareto Principle (The 80-20 Rule): Examples & More

By Olivia Guy Evans Updated on February 9, 2023 Reviewed by Saul Mcleod, PhD

Key Takeaways

  • The Pareto Principle, also known as the “80/20” rule, states that for many events, roughly 80% of effects come from 20% of the causes.

  • The Pareto Principle can be applied to a variety of situations, including business, economics, and quality control.

  • The Pareto principle is named after economist Vilfredo Pareto, who discovered this pattern in his studies of wealth distribution in societies.

  • The Pareto Principle is often touted as a powerful tool for productivity and business management; however, it has received a great amount of criticism for likely being more the result of statistical manipulation than a “universal law.”

  • If not used correctly, the Pareto Principle can lead to an excessive focus on short-term gains over long-term planning and stability.

  • When used correctly, the Pareto Principle can help prioritize tasks, optimize resources, and improve overall efficiency. It provides a useful framework for understanding complex systems and identifying key areas for improvement. What Is The Pareto Principle? The Pareto Principle, also known as the 80-20 rule, is a concept that many have adopted for their life and time management. It is the idea that 20% of the effort, or input, leads to 80% of the results or output. The point of this principle is to recognize that most things in life are not distributed evenly. The key to the Pareto Principle is to identify that around 20% of one’s actions on the most productive tasks lead to the most success. This principle requires and enables us to spot the few important things that are happening and ignore the mass of unimportant things. Essentially, if we spend a short amount of time on what is really important, this will yield greater results than focusing on as many things as possible. The Pareto Principle is a concept that has shown to be powerful when applied to many areas of life, including business, relationships, learning, and marketing, to name a few. For example, in any retail organisation, the Pareto Principle states that 80% of the sales will be accounted for by 20% of the customers. What Is The Idea Behind The Pareto Principle? The Pareto Principle was named after Italian economist Vilfredo Pareto who, in the late 19th Century observed that 80% of the wealth in Italy was owned by 20% of the people. When testing this principle, he also found that 80% of the wealth and land in almost all countries was controlled by 20% of the people (Pareto, 1906). He also found this to be true when he observed his garden, finding that 20% of the pea pods yielded 80% of the peas. In the early 1950s, psychologist Joseph Juran expanded on this idea, arguing that it could also be applied to management and even as a “universal principle”. He believed that 80% of a company’s revenue would come from 20% of its customers and that 80% of production problems would be caused by only 20% of all possible sources of error. Juran (2005) also coined the terms “vital few” and “useful many” or “trivial many” to refer to those few contributions that result in the bulk of the effect, and the many that have only a small impact. The term Pareto Principle was not coined by Pareto, but by Dr Joseph Juran in the 1940s. Juran found that through applying Pareto’s observations to his field of operations management, he could help businesses improve their production by noticing that 80% of the production problems were caused by 20% of the production methods. Through this observation, Juran could focus on reducing the 20% of problems to increase production quality. This strategy he named the Pareto Principle while also noting that one should focus on the ‘vital few’ and ignore the ‘trivial many’ to have the greatest success. Over time, many other organizations and individuals have further developed and refined this principle, leading to its widespread use today in fields from business to agriculture to healthcare. While there is still some debate over exactly how the Pareto Principle should be applied in different situations, it remains a popular and powerful tool for understanding complex systems. Whether someone is trying to understand why their sales numbers are not meeting their targets or trying to optimize an agricultural system for maximum yield, understanding and applying the Pareto Principle can often help them identify key areas for improvement. Some examples of the Pareto Principle could involve:

  • 80% of profits come from 20 % of the products or services a company sells.

  • Fixing the top 20 % of the most reported bugs in a software program also eliminates 80 % of related errors and crashes.

  • Wearing 20 % of one’s clothes 80 % of the time

Examples Time management Time management is the most common use of the Pareto Principle. Many people tend to thinly spread out their time instead of focusing on the most important task. Likewise, there is the idea that people must work excessively long hours to produce good outcomes. This type of thinking can create an unequal work-life balance, resulting in burnout and overall decreased productivity. With the Pareto Principle, you can save time on work tasks and get more done in a shorter span of time. For instance, you could spend some time at the start of the week planning out what you are going to focus on during the workdays, usually the most important tasks. While this may feel like a waste of time, in the long run it can help you to focus and cut down work time. You may find that you have more time to devote to other activities outside of work such as personal development, relaxation, mental health, and building relationships. Relationships With relationships, many people may want to have as many friends as possible, but they find they become overwhelmed with trying to maintain these relationships or find they don’t have high-quality friendships with anyone. Using the Pareto Principle, you can look at the friends you have and work out how much time you spend with each of them compared to the amount of value they give you. Through this analysis, determine which 20% of your relationships are valuable and supportive of you. According to the Pareto Principle, if you spend 80% of your time socializing with this 20%, your personal gains will be greater. In a relationship with a partner, it may be helpful to consider that 80% of the problems faced in the relationship are likely caused by 20% of the couple’s actions or behaviors. The Pareto Principle can be used to identify the root causes of your conflicts with your partner, communicate about them, and focus on improving them together. Goal setting Often, people have never-ending to-do lists or they end up doing the least important tasks on their lists first, then find they are not motivated to complete the more important tasks. A way to use the Pareto Principle is to write down all your goals you want to complete on a given day. Ask yourself, if you could only accomplish one of the goals on that list today, which one would have the greatest positive impact on your life? It may be helpful to think of the consequences that can come as a result of not completing that task today. Next, pick the second most important goal, and so on. What you will find is that you will have determined the most important 20% of your goals that will help you the most. You can then ensure you focus on completing this 20% before moving onto any other goals. Problem-solving The Pareto Principle can be used to help you make the best decision in problem-solving circumstances. To help to prioritize solutions, you can follow the below steps:

  1. Identify the problems that you are trying to find a solution to.

  2. Identify what the causes of these problems are.

  3. Categorise your problems into similar groups based on which ones have similar root causes. This can help you decide if one solution can resolve multiple problems.

  4. Assign a value to each of the problems based on their impact if they were or were not resolved. You could rate them between 1-10 if this helps.

  5. Develop a plan to focus on the top 20% of the problems that will result in 80% of the results.

Social Interactions The Pareto Principle can also be seen in everyday situations, such as work meetings. , imagine that a work meeting has 10 attendees. It is likely that only a few people will do most of the talking, while the rest will listen or say very little. In this case, the 80:20 rule applies, with 80% of the talking being done by 20% of the people in the room. Similarly, this principle can also be applied to decision-making. In any group decision-making situation, it is often true that 80% of the decisions are made by 20% of the people involved. This is because some people are naturally more vocal and opinionated than others, and their opinions tend to hold more sway. Education The Pareto Principle is often used as a way to help students focus on their studying. The idea is that if a student can identify the 20% of material that will be on the test, they can focus their studying on that 20% and still get a good grade. This principle can be applied in a number of ways. For example, a student might look at their past tests and quizzes to see which topics were covered most often. They could also ask their teacher or classmates what they think will be on the upcoming test. Once the student has a list of topics, they can start to focus their studying on those areas. The Pareto Principle can also be applied to individual questions on a test. For example, if a multiple choice question has four possible answers, it might be worth spending more time studying that question if you have identified that one of the answers is correct 80% of the time. Overall, the key to implementing the Pareto Principle successfully involves taking an analytical approach and focusing on those topics or questions that are most likely to matter. This can help students study more efficiently and improve their performance as a result. The effectiveness of this principle has been widely studied, and there is some evidence that it can be quite effective in helping students prepare for tests. For example, a 2014 study found that when students used a computer program based on the Pareto Principle to choose which material they would study, they performed better on a test compared to students who did not use the program. Given these results, it seems likely that the Pareto Principle can help students improve their performance in school by helping them focus their studying on key areas of the curriculum. By identifying and understanding the material that is most important to learn, students can spend less time reviewing concepts they already know and more time on those that need improvement (Dunnford, Su, & Tamang, 2014). Income Inequality Pareto’s initial 1906 observation that 80% of Italy’s land was controlled by 20% of people mirrors today’s estimate that 20% of the world’s population controls 82.7% of the wealth. This phenomenon, known as income inequality, is a major concern for policymakers and social scientists around the world. One potential explanation for this disparity is that the wealthy 20% are better able to take advantage of opportunities and resources than their less fortunate counterparts. For example, they may have greater access to education or better job prospects due to family connections or networks of influence. In addition, those in the top quintile may be more likely to engage in tax avoidance strategies and other financial maneuvers that help them accrue even more wealth (Bommier & Zuber, 2012). Another possible factor influencing income inequality is structural changes in the economy over time. For example, technological advances such as automation and artificial intelligence have led to an increased demand for highly-skilled workers who can operate these new technologies, while displacing low-skilled workers who are unable to keep up with the pace of change. As a result, those with higher education levels and skills tend to enjoy higher wages and greater economic stability than those without. As this gap widens, those in the top quintile accumulate a greater and greater percentage of the world’s net wealth (Bommier & Zuber, 2012). Implementing The Pareto Principle There are many ways in which you can apply the Pareto Principle to any situation. Success can be found in many aspects of life if you plan and apply the 80-20 rule. It often begins with having a goal and living with feeling limited. To live without limits, try applying the three Cs: clarity, competence, and concentration, to any situation. Clarity Having clarity means that you have a clear idea of who you are, what you want, and where you are going. You ensure you write down your goals and make plans to achieve them, the more progress made, the greater confidence you will gain. Having this clarity can help you to remain focused on your goals. Competence Many people try to become competent at many things at once but because they are spreading themselves so thinly, they may never become highly skilled at any one thing. Applying competence means that you can become skillful in the key areas of your choice by applying the Pareto Principle to a few select skills. You can become outstanding in the 20% of tasks that contribute to 80% of your results.

Concentration This entails having the self-discipline to stay focused on one task until completion. Persevering, without distraction, towards accomplishing your goals can help to live a life without limitations. You can help to concentrate by abandoning the activities that are taking up too much of your time and are not valuable. As you focus on doing what you are passionate about and become skilled in those areas, you can make a big difference in your life. You begin to think in terms of possibilities rather than impossibilities. Understand your constraints With any goal that you have, there is always likely to be a constraint that has the potential to stop you from being productive. Spend some time considering what is standing between you and your goals – is it your environment or skill level? Or are you making excuses? Once you identify what your constraints are, you can exert energy into alleviating these constraints. When you have done this, you can maximise the time when you are actually going to engage in a high-priority task and the process should be a lot smoother. Re-organize your to-do list While to-do lists are definitely useful, try not to let anything and everything onto the list. Be more ruthless with what is a higher priority and what doesn’t need to be on the list. An endless list can feel overwhelming and is likely to be unachievable. Determine what items need to be completed that day or week and take off items that can wait until a later time. Prioritize tasks based on their perceived impact. This can be measured by estimating how much of the overall goal each task will contribute to, as well as how long it is likely to take (Backhaus, 1980). Perhaps put these items on a separate list titled ‘low priority’ and reach for this list when you have spent enough time on your high-priority tasks and when your motivation is lower. The next step involves focusing on completing the most impactful tasks first, using techniques like time boxing and focusing on one thing at a time (known as “single-tasking”). This may require initially setting aside less important tasks, which can be frustrating. However, in the long run, this approach is more likely to lead to the successful completion of goals and a better use of time (Backhaus, 1980). Advantages Specifically, in the workplace, the Pareto Principle can be used to increase effective leadership. Leaders can prioritise tasks to ensure their team is working most effectively and staying focused on specific initiatives. Resources such as time, money, supplies, and effort are less likely to be wasted in areas where they will have the least output. The Pareto Principle can also help to increase profits since workplace leaders can reassign high-performing employers to the biggest accounts or high-priority tasks and boost their skills through training to increase revenue. The Pareto Principle can also highlight the 20% of products or services that generate 80% of revenue, so these can be focused on and offered more. In general, some other advantages of using the Pareto Principle include:

  • Greater productivity

  • Efficient use of energy

  • Better problem-solving skills

  • Improved decision-making skills

  • Being able to create the maximum amount of impact with the least amount of work

  • Increased self-confidence

  • Clearer priorities

  • Can portion work into manageable segments

  • More time to do the things you enjoy

  • Less likely to feel burnt out

  • Can be informed on what needs fixing

Criticisms The Pareto Principle is not a mathematical law, rather it is an observation. This means that it is not true for every case and shouldn’t be taken as absolute. Variations of the Pareto Principle can occur such as 30% of employers being responsible for 60% of sales, so the 80-20 rule does not always apply. A common misconception of the Pareto Principle is that with 20% effort, you can gain 80% results, which is not necessarily the case. The percentages do not refer to the effort applied, but the causes and consequences you are working on. To achieve 80% results, you still need to put in 100% effort into that 20% focus. The Pareto Principle can be easy to misinterpret. Some may think that they should focus all their attention on the 20% that is a high priority and forget about the rest of their tasks. However, you shouldn’t neglect the 80% of smaller tasks such as responding to work emails, as this can build up and become a bigger problem over time. The challenge is to find the right balance when it comes to the Pareto Principle. Perhaps you can do the least important tasks at times when you feel less productive to do priority tasks. Lastly, the Pareto Principle can only apply to the past. Meaning, it reflects data from the past and can be useful for planning what you could do, but it will not make predictions for the future. Circumstances can change and evolve meaning that the Pareto Principle may not always be useful for designing future strategies. Critics have also pointed out that the principle can lead to an overemphasis on a small number of critical factors at the expense of others. In business, for example, this might mean focusing too much on improving sales from existing customers rather than exploring new markets or products. Others argue that the Pareto Principle reinforces inequalities by giving more power and influence to those who already hold a disproportionate share of wealth or influence (Backhaus, 1980). Time Management Tactics Track your time A useful technique to establish where all your time is being spent is to log everything you do on a typical day or week. Go about your time as normal and log everything you do without judgment. After doing this, you may find that you have a lot of gaps where nothing gets done or you spend a lot of energy on tasks that are of low value. Look at how many hours in your day are dedicated to tasks that are going to help you achieve your goals. You may find that you spend a short amount of time achieving your goals, but you often get distracted by other tasks. Having a log of your time is valuable data you can use to make better use of your day or week. Start with the most important tasks first Once you have identified what you should spend 20% of your time on, you can then ensure that you get this done at a time of day when you find you are most productive. For many people, their most productive time is first thing in the morning. Instead of spending the first part of your day doing low-value tasks such as answering emails, it may be more helpful to dedicate this time to your high-priority task. You should find that if you start with the hardest but most rewarding task in the morning, everything else in your day is easier to complete. Eliminate distractions With all the distractions or interruptions, the working day can end before you know it. While this may be of benefit to people, you might find that you have finished the day has not been productive at all. Try to decipher what your main distractions are, whether they be your phone or other non-work-related tasks, and put these aside. This does not only need to be put to one side during your 20%, but for the whole of your workday, if possible, so the whole day goes smoothly without interruption. Timeboxing To help you manage the time you want to work on a high-priority task, enter a block of time in your calendar that you will use to dedicate only to this task. This is called timeboxing. This box of time can be treated like a scheduled event that must be stuck to and not postponed or canceled. You can proactively decide how much time will be spent on the task and you can schedule it for a time of day when you feel the most motivated. You should put aside any distractions during this timebox and dedicate the time only for deep work on the most important tasks. This can help people who find they procrastinate a lot. It may help you to stop worrying about getting the difficult task done if you know that you have a dedicated timebox coming up in which you can complete the task. 96-minute rule A similar time management technique to timeboxing is the 96-minute rule. A typical workday is around 8 hours, so 20% of this workday is 96 minutes, however, you can adjust the times if the length of your workday differs. Using the Pareto Principle, you can spend 20% of your workday focused on a high-value task. During this time, you remove distractions and put in the high effort and intentional focus for the whole of that 20%. The idea is that you will have completed around 80% of what you wanted to achieve that day in just 20% of the time. This does not necessarily mean you should end your workday after 96 minutes, but that you can use the remainder of your time on the smaller, less important tasks that you want to get done. Further Information Piantadosi, S., Byar, D. P., & Green, S. B. (1988). Dunford, R., Su, Q., & Tamang, E. (2014). The pareto principle. Brynjolfsson, E., Hu, Y., & Simester, D. (2011). Goodbye pareto principle, hello long tail: The effect of search costs on the concentration of product sales. Management Science, 57(8), 1373-1386. References Backhaus, J. (1980). The pareto principle. Analyse & Kritik, 2 (2), 146-171. Bommier, A., & Zuber, S. (2012). The Pareto principle of optimal inequality. International Economic Review, 53 (2), 593-608. Dunford, R., Su, Q., & Tamang, E. (2014). The pareto principle. Juran, J., Taylor, F., Shewhart, W., Deming, E., Crosby, P., Ishikawa, K., … & Goldratt, E. (2005). Quality control. Joseph M. Juran: Critical Evaluations in Business and Management, 50. Pareto, V. (1906). L”ofelimità nei cicli non chiusi. Giornale degli economisti, 33, 15-30.

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