Live the 80/20 Rule
“There is nothing quite so useless, as doing with great efficiency, something that should not be done at all.”
Peter Drucker
Also known as the 80:20 rule, irrespective of the nature of your business, the Pareto Principle holds that 80% of the consequences of any action come from 20% of the causes.This principle can actually be applied to everything you do. It is a powerful, fundamental principle of life – and of working smart.
The original 80:20 observation was as a result of Italian economist Pareto noticing in 1906 that 80% of Italy’s land was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied. He and others later discovered that this principle is proven in many other areas of interest:
- 80% of results come from 20% of effort;
- 20% of your customers will account for 80% of your profit.
Apply the 80:20 rule to the information you receive: 20% is useful, whereas 80% is not. The key is to identify and focus on that 20% and ignore or remove the rest completely.
The same is true of time expended for results achieved. Think of the benefits of applying the Pareto Principle to your time management and personal and business productivity!
Which one of these statements rings true for your business?
- 80% of your business comes from 20% of your customers
- 20% of your product or service range contributes 80% of your profit
- 80% of customer complaints originate from 20% of the causes.
- 20% of your individual effort and time achieves 80% of the desired results
- 80% of your business productivity loss results from 20% of the causes
- 20% of your staff is responsible for 80% of the business outputs and results
- 80% of the value in the business is generated by 20% of the processes
The common approach to business is to squeeze every last drop out of each opportunity, to go ‘100% all-out’, without consideration of the impact on time, productivity and wastage. Simple, time-efficient businesses recognise that it is fundamentally inefficient to go for the ‘whole pie’ when you can get the majority of results for the minority of effort. With knowledge of the 80:20 principle, you can concentrate on what wins you customers and success. Look at your business and concentrate on the 20% that produces the 80% of benefit. Spend 80% of your time doing the 20% that really gets you results. ‘You win some, you lose some’ is no way to run a successful business, but armed with knowledge of the Pareto Principle, you can work the system to your benefit.
It’s not just about working smarter – it’s about working smarter on the right things that will get you the best results. Think really boldly about this law – how far, and in how many ways you can apply it. The more incredible the results can be.
- Why spend 100% of your money and time on ‘growth at all costs’ when you could downsize, freeing up capital and time? Spend just 20% in developing the most profitable 80% of your current business, and invest the rest in other ventures?
- Why work full time, when you can work only 20% of the time on the things that get you 80% of your profits? And spend the rest of the time sipping a cold beer on the beach, watching the sun go down!
How can you use this rule to revolutionise your business and your life? Take it to the limit!
Further Reading:
The Four Hour Work Week by Tim Ferris (Amazon LinkUK,US)
If the above topic, or indeed any of my blogs are of interest to you, sign up for my weekly blog post at www.theviewinside.me or email at getintouch@marcwinn.com.
Employee Advocate | Agile Evangelist | Transformation Agent at Amivero (Woman-owned, HUBZone)
9yAn old friend from Manitoba once said something to the extend of: 80% of the budget is spent on 80% of the project, the next 80% is spent on the remaining 20%. Similar to John Phillips comment.
RETIRED (?) Construction Project Manager / Owners' Representative.
9yThe last 20% of any project takes 80% of your focus and energies to complete!
PROCESS ENGINEER (BE Chem. Eng), RETIRED
9yHaven't commented for a while, but it's been on my mind. For me, the 80/20 rule is a useless phrase used by losers (especially loser managers, and I've known quite a few). It actually makes me cringe when I hear that expression. Those who use it have not been bothered to go the hard yards to be involved in the details of activities upon which they make that comment. For me, a task/job is either 100% complete .... or simply incomplete or overdone. In terms of performance reviews, the manager should then be able to then define the gap based upon detailed definition and terms of reference. Thus, a situation where more has been done than was anticipated is often due to overenthusiastic pride to excel by the worker. Correct training, coaching and guidance is the solution, not ridicule that you're "not working to an 80/20 rule". As another example, incident investigations and other problem analyses is an area where you simply cannot define "80/20", because 80% of the information is usually insufficient to arrive at a 100% conclusion (and, as we all know, for the other 20%, "facts don't cease to exist because they are ignored").
Owner, Cultural Projects
9yThe 80:20 rule is so often cited as if it were indeed an accurate, universal and infallible "rule"; it's not. It is at best expressing a broad observational and analytical principle and at worst entirely misleading. In its own way it damages objective scrutiny, offering up an over-precise pattern of cause and effect which people are then looking to find in every situation.