Is there anyone around here who has not heard of Pareto principle (aka 20/80 rule)? I guess, not many. I think this is one of the most popular productivity tools out there. Rare time management or quality management book do not cover the rule of 20/80.
Even more so, I admit that I have a very vague understanding of how it works. I mean, I have a theoretical background, I know I’ve read about the principle on several occasions. I most certainly also googled the application rules. But somehow I have never really understood it correctly. Or, to tell the truth, did never go into the trouble of spending time on understanding the principle.
Recently I have decided to look again into some things I have stoved away on some shelf in my mental library. The Pareto principle is one of them. So – this is me giving it a go 🙂
Mostly, I am interested in the following:
- What is the Pareto principle? Why is it called that way?
- What is the central premise of the Pareto principle?
- What is the application of this principle?
- How can I practically apply it in my life?
What is the Pareto principle?
A bookworm as I am, the first source I refer to on my quest is a dictionary. Online Cambridge Dictionary (yes, I know, I should do better and have a proper paperback dictionary at home – by the way, does anyone know a functional English equivalent of German DUDEN?) states that the Pareto principle (or Pareto law) is
The idea that a small quantity of work or resources (= time, money, employees, etc.) can produce a large number of results:
– The Pareto principle, when applied to time, states that 20% of your time determines 80% of your production.
– The Pareto principle can be applied to quality improvement, as the majority of problems (80%) are produced by a few key causes (20%).
Britannica informs me that certain Vilfredo Pareto was an Italian economist and sociologist, known for his theory on mass and elite interaction. He also is known for his application of mathematics to economic analysis. He is known for quite a few complicated socioeconomic topics like Pareto optimality and indifference curve. He developed the 20/80 concepts during his work on Cours d’ économie politique; however, we have to thank Dr. Joseph Juran for the actual definition of the principle as we know it.
There are some variations on the origins and ownership of the concept (here an example). I’ll stick with the version where Mr Juran is also involved – I just learned one of his quotes, and I am in love:
Without a standard, there is no logical basis for making a decision or taking an action
I’m deviating. I have the weakness for quotes and ideas on the necessity of a thorough basis or standard for any developments 🙂
What is the central premise of the Pareto principle?
Pareto himself said to have observed the 20/80 principles on the example of land ownership – 80% of land tends to be owned by 20% of the population. Dr. Juran developed a theory that this principle can be applied to any organisation operation. 20% of your clients generate 80% of your profit. 20% of your efforts produce 80% of your results.
What I find interesting is that this 20/80 correlation does not lead to 100 in the end. It is not an illustration of the defined split. Therefore, concentrating on 20% of the efforts would not mean you have to do only 20% of the work. It just means that 20% of the activities are dealing with 100% of work more efficiently, than the other 80%.
Theoretically, it does not even have to be 20/80. If you have a sales team of 3 people and one salesperson makes all the sales, it is also the Pareto principle at work – only the split is 33/66 instead of 20/30. The Pareto principle is just an observation that most things in life are not distributed evenly, and some contribute more than others.
What is the application of this principle?
It turns out it’s not about creating a shortcut by applying some magic efficiency trick. It’s about investing energy into the efforts that help you deal with your load in the most efficient manner.
And you need to identify those tools before you can start investing more energy into them. It would help you to stay calm even through turbulent times. If the resources are limited, you are to make sure the most important efforts are taken care of to keep your business running.
This method could be applied to almost any area of your life – finance, education, reading, fitness etc.
How can I practically apply the Pareto principle to my life?
When you make a to-do list, prioritise each item by the amount of effort required (1 to 10, with 1 being the least amount of effort) and the potential positive results (1 to 10, with 10 being the highest impact).
Now, divide the amount of effort by the potential results to get a “priority” ranking. Do the items with the lowest resulting priority number first. Here’s a simple example:
Task 1: Write report on trip meeting.
Effort=10, Result=2, Priority=5
Task 2: Prepare presentation for marketing.
Effort=4, Result=4, Priority=1
Task 3: Call current customer about referral.
Effort=1, Result=10, Priority=0.1
The method described is useful for time management. And, with a little adaptation, it can be applied to other areas as well. For example, I have three learning topics which I need to cover in the next few weeks. I am equally interested in each of them, so I have difficulties with prioritising them based on my preferences.
- Leading productive meetings
- Learning to write for the Web
- How to design and deliver training programs
Applying the Inc.com advice to my learning topics, I’ve come up with the following:
- Topic 1: Leading productive meetings. Effort: 4 Result: 8 Priority: 0.5
- Topic 2: Learning to write for the Web. Effort: 4 Result: 10 Priority: 0.4
- Topic 3: How to design and deliver training programs. Effort: 7 Result: 10 Priority: 0.7
So, now I am clear what my priority is – I shall start with Topic 2 🙂
I understand now why I was confused when I tried to understand the Pareto principle intuitively. “20/80” is just an illustrative observation and should not be applied literally. It does not allow you to do only 20% of the work to get 100% result. So it is not really achieving more by doing less.
By identifying the most impactful efforts and concentrating on them, you focus the energy on the tools that will help you to reach the goal most efficiently.
You can choose any other method for setting the priority than the one I’ve referred to above. I am a fan of the to-do list and proper prioritisation. Therefore I will try to integrate this method into my efficiency toolbox and use it whenever I am free to set the priorities myself.
Are there any topics you have stoved on furthest shelf of your mental library deal with later?