Pareto Principle

Spread the love

Pareto Principle

The Pareto Principle is one of the most helpful concepts for life and time management. Also known as the 80/20 rule,  Management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto back in 1895, Essentially, Pareto showed that approximately 80% of the wealth in Italy was owned by 20% of the population.

Understanding and applying this principle is not only essential but critical to learning how to set your priorities and goals and enable you achieve them effectively thereby increasing efficiency and productivity. Generally, the Pareto Principle is the observation (not law) that most things in life are not distributed evenly. For instance, the 80/20 rule suggests that 20 percent of your activities will account for 80 percent of your results, 20% of the input creates 80% of the output, 20% of the workers produce 80% of the result, 20% of the customers create 80% of the revenue 20% of the bugs cause 80% of the crashes 20% of the features cause 80% of the usage and on and on. Also recognize that the numbers don’t have to be “20%” and “80%” exactly. The key point is that most things in life are not distributed evenly, some contribute more than others.

You often see people that 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 the ones that could make a real difference to their companies and to their careers. Always ask yourself “is this in the top 20 percent of my activities or in the bottom 80 percent? Because if you start doing tasks that are not important and that produces the least results, you may get complacent and develop the habit of always starting and working on low-value assignments. The most valuable tasks you can do are often the most complex, but their rewards for completion can be of great benefits to you or your organisation, so resist the temptation to finish and clear up small things first.

In a perfect world, things should be done evenly, the same amount of effort should generate into the same amount reward, everything should be equally important, the same number of employees should produce the same number of results, same customers should generate the same amount of revenue, But it isn’t always the case, In your daily life you realize that you spend a significant amount of time with some people among the vast people you know. The Pareto Principle helps you realize that the majority of reward come from a minority of effort. Knowing this, it will admonish you to focus on the minor efforts that brings the most rewards. In your business focus on rewarding the 20% of the workers that contribute 80% of the results, focus on satisfying these 20% of the customers that contribute 80% of the revenue, not neglecting the other 80% of the workers and customers. The point is to realize that you have the option of focusing your effort on the 20% that makes a difference, instead of the 80% that doesn’t add much, this means spending more time, resources and energy on what’s important in your business or personal lives and less ones on what is trivial and inconsequential to you or your company.

 

You have to be absolutely clear about who you are, what you want, and where you’re going. Set very careful priorities and do something every day to move you toward your goals then you begin to become very good in the key areas of your chosen field. Focus on becoming outstanding and apply the 80/20 rule to everything you do, the 20 percent of tasks that contribute to 80 percent of your results. Assert yourself to continuous improvement and have the self-drive to propel yourself to concentrate single-mindedly on one thing, the most important thing, and stay with it until it’s complete. The more progress you make, the more convinced you become toward accomplishing things that are important to you, knowing that there are no limits on what you can achieve as an individual and also an organisation

As you focus on doing what you love to do and becoming excellent in those few areas that can make a real difference in your life and that of your business, you allow yourself to begin with the complex tasks, creatively abandon the activities that are taking up too much of your time, and focus your  energies on alleviating your main constraints, you start to feel an incredible sense of power and confidence, you begin to think in terms of possibilities rather than impossibilities, and you move  closer toward the realization of your organisation’s  full potential.

 

In a business sense, finding the 80/20 ratios is crucial for maximizing profitability & performance. Find the goods or services that generate the most revenue and drop the rest that only provide marginal benefits. Spend your time working on the parts of the business that you can improve significantly with your core skills and leave the low tasks that are outside your best to other people. Work hardest on parts that work hardest for you. Reward the best employees well, cull the worst. Drop the bad clients and focus on improving service to the best clients.

Finally, don’t think the Pareto Principle means only do 80% of the work needed. It may be true that 80% of reward is built in the first 20% of the risk, but you still need the rest of the 20%to get the maximum reward. It may be true that 80% of the revenue is generated by 20% of the customers, but the company wouldn’t have been profiting maximally without all the customers. The Pareto Principle is a theory, not a law of nature. If you are seeking top quality, you need the whole package which is all 100%. But if you are trying to find the optimum quality of your Resources, focusing on the critical 20% is time-saving. See what activities generate the most results and give them your appropriate attention.