The 80/20 rule. How the Pareto Principle can help you on your path to success
Although no one can say what would be the exact formula of success we know that several factors are necessary: skills, hard work, and a little bit of luck. When things do not go as we want, the first thought of many people is that they need to put in more effort to work harder. However, what is often needed is to work smarter, not harder.
The Pareto principle or the 80/20 rule is a simple strategy that could be applied to any problem that we are experiencing in work or private life to focus on those things that actually contribute to success and not waste our time on distractors.
What Is the Pareto Principle, and where did it come from?
Pareto Principle or 80/20 rule is one of the well-known strategies for improving efficiency. It is widely explored in many contexts, and numerous studies show the benefits of using it.
The Pareto Principle has a long tradition. In the 19th century, Italian economist Vilfredo Pareto noticed one interesting thing. Namely, he calculated that 80% of wealth is possessed by only 20% of people in Italy. Later this analysis was expanded to other countries where similar results were obtained (Abyad, 2020).
However, the term Pareto principle was coined by Joseph Juran (1974), who applied this rule in operation management in the 1940s. He noticed that only a few factors contributed greatly to the outcome. He also defined this principle as "vital few and trivial many." Later, the Pareto principle was tested in many various domains.
Although, based on the available literature, it is more justified to call this principle "vital few and trivial many," we will use the terms "the Pareto principle" and "80/20 rule" interchangeably since they might be more familiar and more frequently used.
How to Use the 80/20 Rule to Your Advantage
Even though the Pareto principle is indeed a very simple technique, beginners might struggle to apply it. Correct identification of key tasks/issues is a special skill that requires additional practice. However, don't be afraid of mistakes. Even mistakes can help you learn more about process and prioritization.
Once you identify what is important - stay focused on it. Although it could be very tempting to complete easy tasks first (so we feel a sense of accomplishment), it is important to keep the broader picture and to always ask yourself, "Is this relevant to my goal?" If it is not - skip it and go back once you have cleared more important tasks.
For example, if you need to make the presentation of the sales department's quarterly performance - first focus on numbers, and later if you have time, pick a new color pallet for graphs.
If your reaction to this example is, "Who is doing something like that?" Great. You might already are using the 80/20 rule without having explicit knowledge about it. However, if this example sounds too familiar - don't worry, you can improve your time management skills, and we will show you how.
The Pareto principle could be used by individuals and teams. The potential benefits would be the same:
- Focusing on priorities
- Increased productivity
- Better quality control
- Dividing goals into smaller subgoals that are more realistic to achieve at the time
Pareto Principle Examples
There are many areas in which the 80/20 rule could be applied, and numerous studies tried to apply the 80/20 rule to explain various phenomena in areas of marketing, time management, education, etc. Below we mentioned only some of them.
Time management
Rule 80/20 seems to be one of the most popular time management techniques, which is not surprising, knowing that the logic behind it is straightforward to follow.
We already mentioned that for some people is hard to determine which tasks are the most important. Another problem is that 20% of the tasks that make the greatest impact are those which are the hardest and the most demanding. So someone's ability to properly choose the most important task and complete them will directly affect their efficiency (Odumeru, 2013)
What you can do, if you are not experienced in using this technique, is to make a list of 10 tasks that need to be done and to choose two that make the most contribution (at least in your opinion). The next step is to measure the effects. Eventually, you will learn how to identify more relevant tasks and focus on them.
In some way, the 80/20 rule (at least its implementation) is similar to another popular time management technique, popularly known as "eat that frog" (Tracy, 2017). The main idea is to start your day with the hardest task (which usually has the greatest impact on the result). This strategy is also useful for dealing with procrastination.
Relationships
The Pareto principle in the context of a relationship could be used in several completely different ways: for solving issues and improving relationships but also for prioritization of people and relations that are more important.
Numerous studies showed that good social networks contribute to happiness and mental and physical well-being (e.g., Cacioppo & Cacioppo, 2014). However, some people have more impact on our lives than others (both positive end negative).
Identifying a few people who positively impact your life and investing your time and energy in them could be one of the ways to improve your overall life satisfaction and health. Prioritize those people and their needs over people who are just acquaintances.
Equally important is to also identify those few people who are making your life miserable. After you locate the problematic relations and people, you can try several things, such as: trying to fix issues (by applying the Pareto principle again), staying away from those people if the problem cannot be solved, or changing the environment (if you are dealing with a toxic working environment or you are in the toxic relationship the last thing might be the only effective action).
Goal setting
Similar to applying 80/20 in time management planning, this rule could also be useful for goal setting. Some of us tend to start too many projects at the same time, which, later, cannot be followed and properly executed, with could result in losing motivation and even negatively impact our self-esteem (knowing that we constantly fail to reach our goals).
The Pareto principle could help you prioritize a limited set of goals that are the most valuable at the time, taking into account your available time and resources. For example, you want to finish your master's thesis, learn how to play guitar, run your first marathon, start eating healthy, and find a romantic partner. Although all of these goals will potentially have a positive impact on your life, it is not realistic that you will have the capacity to do them all at once. So instead of starting all and miserably failing after the first week, decide what is the most important for you right now. Pick two things and focus on them.
Again, even though there is different underlying logic, the application of the Pareto principle is similar to making a kanban board (especially the part where you limit the number of currently active projects).
Problem-solving
Based on the 80/20 rule, focusing on 20% of key causes could solve up to 80% of some particular problems. To do that, first, you need to identify the problem you want to work on (more specific -better) and then try to figure out what are the key causes of that problem and work on them. We already mentioned solving the problem in relationships, but it could be applied to any problem.
Finally, you can also use the 80/20 rule to identify which problems or issues you want to work on in the first place. They are not all (equally) important.
Social Interactions
In the work context, it is not a secret that decisions that affect many are made by only a few people. The same thing happens even during meetings. Often only a few people talk or substantially contribute, while the rest are passive or not engaging.
While it is expected and completely natural that some people show more leadership skills, it is important to pay attention to quiet ones and give them a chance to express their opinion.
Finally, be aware that adding more people to the discussion will not (always) increase the number of generated ideas.
Education
There are many attempts to use the Pareto principle also in the process of improving education and enhancing the learning process. Kathryn O'Neill (2018) tested whether focusing on a few mistakes that students are making in writing could significantly improve their writing skills in terms of proper grammar, style, and mechanics. Although data did not fall into the exact 80/20 ratio, results confirmed that focusing on a few mistakes could significantly improve overall writing.
The same strategies could be useful for acquiring any skill, from learning a foreign language to learning some contemporary dance.
Income Inequality
As we mentioned at the beginning, Pareto's initial analysis of wealth distribution resulted in his observation of 80/20, where 20% of the population possesses 80% of the country's wealth.
One study (Dunford et al., 2014) showed that 20% of the richest people from the Forbes list own 56.72% of the money. The same study also analyzed Gross Domestic Product (GDP), and the result showed that 20% of the richest countries own 91.62% of all money. The authors concluded that although their results do not exactly represent 80/20 rules still confirm the general rule that minorities own the majority of global wealth.
Productivity
As it was previously mentioned, the Pareto principle gains its popularity in mid twenty century as a strategy to improve productivity in production.
There are many work-related situations when it seems that rule 80/20 reflects real-life data. For example, some authors (Ivančić, 2014) stated that 20% of employees are responsible for 80% of work done, 20% of meetings provide 80% of useful data, 20% of defects result in 80% of problems in production, etc.
Identifying the most valuable members of your team or organization could serve as a good starting point for developing fair benefits system that will adequately reward their work, resulting in their retention and even increased productivity.
Decision making
Another possible area is where the Pareto principle could be very useful in decision-making. For example, there are suggestions that 80% of revenue comes from 20% of customers (Read, 2010 cited in Ivančić. 2014).
Similarly, another study (Ivančić, 2014) provided some evidence that the Pareto principle could be useful also in the purchasing process, where it seems that rule that only a few (suppliers) bring the most outcome (supplies).
However, Ivančić warned that decisions should not be automatic but rather should be considered from a long-term perspective. Although 20% of customers or suppliers bring the most value currently, it should also be considered whether that will also be the case (and also sufficient) in the future.
Quality control
Quality control and improvement of productivity were the first areas where the Pareto principle was applied and where it gained popularity. Namely, Joseph Juran noticed that "relatively few of the defects accounted for the bulk of the defectiveness." He noticed the same pattern in other work-related domains, such as absenteeism, causes of accidents, etc. (Juran, 1974).
Even nowadays, many organizations are using this principle to improve the quality of production, processes, or services.
How the 80/20 Rule can help you on your path to success
As we already mentioned multiple times, the Pareto principle helps you to focus on important tasks that have a bigger impact on the outcome. This is important because most of the time, we will not have enough time to focus on each detail. Most of the time, that is not even necessary. The Pareto principle is all about working smart instead of working hard(er).
However, be aware that any rule or technique, no matter how good it is, cannot be applied to all situations. For example, many studies failed to confirm the exact 80/20 rule. This is not surprising, knowing that even Joseph Juran did not talk in terms of exact ratio (Juran, 1975). Still, although 80/20 might not be the exact ratio, there are many empirical shreds of evidence that only a few factors greatly influence outcomes. In other words, to make the Pareto principle works for you - you need to focus on a limited number of vital factors and not just chase 20%.
Did you try the Pareto principle? Does it work for you?
Literature
Abyad, A. (2020). The Pareto Principle: Applying the 80/20 Rule to Your Business. Middle East Journal of Business, 15(1), 6-9.
Cacioppo, J. T., & Cacioppo, S. (2014). Social relationships and health: The toxic effects of perceived social isolation. Social and personality psychology compass, 8(2), 58-72.
Dunford, R., Su, Q., Tamang, E. & Wintour, A. (2014). 'The Pareto Principle', The Plymouth Student Scientist, 7(1), p. 140-148.
Ivančić, V. (2014). Improving the decision making process trought the Pareto principle application. Ekonomska misao i praksa, (2), 633-656.
Juran, J. M. (1974). The non-Pareto principle; Mea culpa. Quality Progress, 8(5), 8-9.
Odumeru, J. A. (2013). Effective time management. Singaporean Journal of business Economics, and management studies, 1(1), 9-17.
O'Neill, K. S. (2018). Applying the Pareto Principle to the Analysis of Students' Errors in Grammar, Mechanics and Style. Research in Higher Education Journal, 34.Tracy, B. (2017). Eat that frog!: 21 great ways to stop procrastinating and get more done in less time. Berrett-Koehler Publishers.