This article draws on an entry on the Brian Tracy blog.
What is the Pareto principle?
The economist Vilfredo Pareto, when looking into the distribution of wealth in Italy in the 19th century, came across a principle that may be applied not only in economics, but also in business, time management and even sports training. This principle states that around 20% of your activities will yield 80% of your results. In other words, 80% of all that you produce (revenue, quality, quantity) comes solely from the most lucrative 20% of activities you perform to achieve these results. Of course, on the other hand, this means the remaining 80% of your activities will yield only 20% of your overall results.
What does this mean in practice?
In practice, it means, for instance, that 20% of your most lucrative clients account for 80% of your revenue and just 20% of your team's strategic work brings 80% of its overall results. These numbers are, of course, only approximate, but they very often do roughly match reality.
How can you make use of this principle?
The Pareto principle will help you better target your efforts and prioritise work. You need to:
- Identify the key activities that lead to most of your revenue. This means you need to identify the most lucrative 20%, then focus on these activities and make the given processes more effective. Even small changes will bring about significant results.
- Help your team reduce the time and effort spent on the remaining 80% of activities. These activities do not yield results that would match the time and effort spent on them. Make the lives of your employees easier in this sense, and either make these "non-lucrative" activities automatic or re-evaluate them so that less energy is wasted on them.
- Bear the Pareto principle in mind when distributing work. When organising and planning work within your team, keep the 80-20 rule in mind and leave employees enough time for the 20% of activities. Also, plan these activities for time periods in which employees are at their most efficient, i.e. ideally in the morning rather than, for instance, on Friday afternoons.
-mm-