The Power of the Pareto Principle (aka the 80/20 Rule)

When I am conducting an organizing, time management or business related workshop, I often ask if anyone has heard of the Pareto Principle. I usually get a room full of blank stares. However, if I ask if anyone has heard of the 80/20 Rule, many people nod their heads yes, and have a better idea what I am talking about.

The Pareto Principle takes its name from a 19th century Italian economist named Vilfredo Pareto. In the late 1940s, business management guru Joseph M. Juran suggested the principle and named it after Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population. Pareto studied the unequal distribution of wealth in his country in order to offer suggestions as how to improve its disparity.

Pareto's Principle (or the 80/20 Rule as it is often called) has expanded over the years to include many examples of unequal distribution. Essentially, the 80-20 Rule now stands for the proposition that in any grouping of items or events, roughly 80% of the effects come from 20% of the causes. Or stated in the reverse, 20% of the items or events is always responsible for 80% of the results.

The 80/20 Rule has become a common business principle, resulting in the oft-repeated phrase, "80% of your sales come from 20% of your clients." Conversely, 80% of your complaints come from 20% of your clients, and 80% of the profits made in your industry come from 20% of the businesses.

The Pareto Principle also applies to a variety of other items and events: we only wear 20% of our clothing, we spend 80% of the time with 20% of our acquaintances, 80% of our interruptions come from the same 20% of people, 20% of the work we do consumes 80% of our time and resources, etc. You can apply the 80/20 Rule to almost anything, from business and time management principles, to clutter and physical possessions. The exact percentages may vary, but the overall gist of the principle remains the same.

The Pareto principle was also featured in the book, The 4-Hour Workweek by Tim Ferriss. Ferriss recommends focusing one's business activities on the 20% that contributes to 80% of the income. Boldly, he also recommends firing the 20% of clients that take up the majority of your time and energy, and cause the most trouble, often referred to as 'toxic clients.'

I personally love the way Joseph Juran described the phenomenon in the 1940s - the "vital few and trivial many." The 80/20 Rule means that in any grouping of items or events, a few (20%) are vital and many (80%) are trivial. 80% of our results come from 20% of our activity. That means that of all of the daily activities you do, and choices that you make, only 20% really matter (or at least produce meaningful results).

What is the takeaway that we can learn from the Pareto Principle?

Identify and focus on the 20% that matters! When life sets in and you start to become reactive instead of proactive, remind yourself of the 20% you need to focus on. If something in your schedule needs to be deleted or not completed with your fullest attention, try your best to make sure it's not part of that 20%.

Use the Pareto Principle as a litmus test to constantly check in and ask yourself: "Is this truly part of the 20% that matters?" Let the Pareto Principle serve as a powerful daily reminder to focus 80% of your time and energy on the 20% of your work and life that is really important and delivers positive results.