- What do we mean by the 80-20 rule?
- Understanding the principle behind the 80-20 rule
- Common misinterpretations
- Historical background
- Advantages of the 80-20 rule
- How to apply it
What do we mean by the 80-20 rule?
You might’ve heard the expressions “The larger the better” or “Go big or go home.” Well, the 80-20 rule proves that this is not always the case. In fact, this rule preaches the contrary. The 80-20 rule, AKA Pareto principle, states that “20 % of your effort should yield for 80 % of your results.”
In other words, this principle claims that 80% of all outcomes result from 20% of all efforts. It is frequently used to identify aspects that improve performance and lead to success. Then aspects are used to maximize good results.
It simply emphasizes that we focus most of our efforts on what is efficient and significant to achieve results. And not waste our energy on things that are minor and wouldn’t help us achieve our goals. However, this does not mean we ignore the minor details/aspects that may contribute to our success.
This rule is now commonplace in the business sector. It assists businesses in identifying and prioritizing areas that create the best results. Moreover, the Pareto principle can also be applied to situations outside of business.
Understanding the principle behind the 80-20 rule
To put it briefly, the 80/20 rule states that 80% of results must come from 20% of all efforts. It reflects the “universal truth” of the imbalance of inputs and outputs.
The 80-20 rule is a time-tested concept when it comes to focusing. As you know, our focus span is limited.
So, to maximize our efforts and achieve desirable results, we should focus on the most productive tasks. This is why prioritizing our daily tasks is vital in both personal & professional life.
No one has enough energy and time to focus on everything!
This rule has been called many names over the years some of them are:
- The Pareto principle
- The 80/20 rule (most common)
- The Law of the vital few
- The Principle of factor sparsity
There are two ways to interpret the rule:
- The vital few, in which a limited number of factors (20%) result in the large majority (80%) of results.
- The useful many, where a large number of resources account for a small number of results.
However, the principal’s goal is to find the best-performing assets and use them efficiently to maximize value.
The 80/20 rule helps you focus your time, money, and resources on things that produce the highest value. The more focused the inputs are, the better the outputs. In this context, inputs refer to efforts while outputs refer to results.
Also, just because it’s named the 80-20 rule doesn’t mean numbers have to be exactly “20 % ” and “80 % “. The idea isn’t about the ratio, it’s about imbalance. Most things in life, such as labor, reward, and output, are not allocated equally; some contribute more than others.
The rampant misconception of the Pareto principle is that it is a law, but this is not so. In fact, the rule is an observation that has become applicable to different aspects of human life.
Here are some other misconceptions about the rule
It is solely applicable to businesses
Although the Pareto principle is more commonly associated with business, it exists in practically any facet of life. It can be found in sports, science, medicine, and more. It is present in our relationships, beliefs, goals, habits, and health. I would even say It is integrated into the very fabric of life.
The ratio has to be 80/20
The fact that the rule is dubbed the 80/20 rule does not imply that the ratio must be 80-20. It is also called Pareto’s Principle, and it doesn’t mean it only applies to Pareto. That Pareto’s observation happened to be 80-20 rather than 70-20 is not a fixed mathematical rule.
For instance, if you have a to-do list of 10 tasks, it does not imply that there must be exactly 2 high tasks (20% of the total). It may be 3 or 4 tasks that account for 80 percent of the value. Again, the concept claims that a small percentage of inputs results in a big percentage of outputs.
That 80 must be added with 20 to equal 100
The rule’s percentages do not have to total up to 100. It is the concept underlying the principle that is important. Inputs and outputs are just different units. 80% represents the effects, while 20% represents the causes.
When Vilfredo Pareto established the connection, it was about the wealth distribution in Italy. He noticed that 20% of the people possessed 80% of the wealth. However, the ratio may be 70/20, 90/30, or something else.
Ignores other minor tasks
Some actions, while low in value, are not unimportant. The fact that 20% of inputs are the most significant does not imply that the remaining 80% are unimportant. Even if you prioritize the 20%, the 80 percent can be still significant.
The 80/20 rule is about laziness
Using the 80/20 rule increases efficiency, so it’s not about being lazy. The rule assists in increasing focus on the areas where you can have the greatest impact.
The 80-20 rule is most efficient when applied with the right mindset. If it is applied with the wrong notion of what the rule is, it may not achieve the desired goals.
The 80/20 rule was developed by Italian economist Vilfredo Pareto in 1896. He was born in Italy in 1848 and went on to become an important philosopher and economist.
The principle came to be when Pareto noticed that 20% of the pea plants in his garden generated 80% of the healthy pea pods. He then compared this observation to wealth distribution in Italy.
This led him to discover that 80% of the land in Italy was owned by just 20% of the population. He further investigated different industries and found that 80% of production typically came from just 20% of the companies.
The term “Pareto Principle,” however, was not coined by Pareto. It was rather coined by Dr. Joseph Juran, a business theorist.
In the 1940s, Juran applied Pareto’s observations to his field of operations management.
He exploited this principle to help businesses improve production. For instance, he helped businesses understand that 80% percent of their product defects were caused by only 20% of production methods.
So by using this Pareto analysis, he focused on reducing 20 percent of production problems to increase production quality.
Dr. Juran then went on to call this strategy the Pareto Principle. He also popularized the notion that we should focus on the “vital few” and ignore the “trivial many” to have the greatest success.
The 80/20 Principle became a prominent management strategy that was widely used to boost efficiency and effectiveness in businesses over time.
Advantages of the 80-20 rule
The 80/20 rule can help you determine where you should spend the bulk of your time, money, or energy. Based on this, you can set reasonable goals, identify effective strategies, and stay focused on what matters the most.
Other benefits of applying the Pareto Principle include:
- Increased productivity.
- Energy conservation
- Improved problem-solving abilities.
- Enhanced decision-making abilities
- Increased self-assurance
- Priorities are clearer
- You can divide work into portions.
- Less likely to experience burnout.
- You are aware of the issues that require attention.
- Better time management
- You can get more done with fewer resources.
How to apply it
The 80-20 rule is often applied in business and economics. This is due to the fact that the 80/20 rule is useful in identifying where to focus effort in order to optimize results.
But the Pareto principle has also come to be applicable to various aspects like relationships, time management, sports… The 80/20 rule can also be applied to practically any, if not all, situations.
To make use of it, you must first decide which 20% of your actions yield the most return. Then you devise a strategy to devote more time to that 20% of work.
Then, you should assess the value of the rest 80% and give the time & effort they deserve! This will help understand your priorities & goals better.
The 80/20 rule can really change the way you plan and accomplish your projects.
Here’s a breakdown of how to apply the 80/20 rule to your personal goals
- Identify all of your tasks.
- Determine the most important tasks.
- Determine which tasks provide the greatest return.
- Consider strategies to eliminate or transfer tasks that provide little return.
- Make a plan to help you focus on the tasks that will benefit you most.
Strategic planning is important, and the 80/20 rule can help you remain focused, especially with scarce means and high expectations. Learn how to apply this theory to your advantage and adopt this mindset to devote more time to the things that matter.
A famous wise saying goes, “You must dream big dreams, for only big dreams have the power to move the minds of men.”
In chasing your dreams, nothing works faster than casting off your limitations. The 80-20 rule can help you hack your dreams and make them a reality. With it, you can identify your strong points and work smarter not harder.