The right set of principles or rules of thumb can be a game-changer. If you’re looking for ways to ramp up your productivity, efficiently tackle your to-do list, or even manage your business more effectively, one principle you should consider adopting is the Pareto Principle, also often referred to as the 80/20 rule.
In this blog post, we’re covering the basics of the Pareto Principle, walking you through a few examples of the principle at work, and exploring how you might apply it to your work life.
- What is the Pareto Principle?
- Examples of the Pareto Principle
- Why is the Pareto Principle important at work?
- Advantages and disadvantages of using the Pareto Principle
- The Pareto Principle: points to remember
We’ll start by defining the Pareto rule and explaining where it comes from.
What is the Pareto Principle?
The Pareto Principle states that around 80% of outputs from a system are caused by about 20% of inputs. It can also mean that around 80% of effects are brought about by 20% of causes, or that 20% of effort creates about 80% of the results — the Pareto Principle just describes any system where there’s an 80/20 split in productivity. That’s why it’s also known as the 80/20 Rule.
The Principle is named for the late 19th/early 20th-century Italian economist and sociologist Vilfredo Pareto, who observed that about 80% of Italy’s land during his time was controlled by about 20% of the population. Pareto’s observation was later popularized in the business world, as business owners, economists, financial planners, and marketers began noticing 80/20 productivity splits all over their industries.
Still not exactly sure how it works? Don’t worry; we’ll walk you through a few examples of the Pareto effect in action.
Examples of the Pareto Principle
If you look closely, examples of the Pareto rule start to pop up everywhere. Here are a few examples from the business and work world that you might encounter:
- 20% of clients account for 80% of sales. If you work in sales, you might dig into the numbers and find that this ratio—or something close to it—is true of your clients.
- 20% of shareholders own 80% of equity. Many companies find that their top investors actually own the vast majority of the company, similar to Pareto’s original example of Italy’s land ownership.
- Your most productive 20% of the day produces 80% of your work. On an individual scale, the Pareto effect is often true too. You might find that those couple of hours when you’re really feeling inspired result in the vast majority of your productivity.
If you’re not convinced, try crunching the numbers on a few different productivity areas—even areas like how often you clean your apartment, or how much time you spend totally focused on work. You might be surprised to find that the 80/20 Pareto Principle pops up in more areas than you’d think!
Why is the Pareto Principle important at work?
The Pareto Principle isn’t just a fun fact to bring up at parties. It can also be a useful tool to ramp up your productivity at work. By focusing on the things that produce the biggest results, we can get the lion’s share of the results with substantially less effort.
It still involves hard work, sure, but you can achieve your goals in an efficient way, rather than the feeling you’re bashing into a wall over and over—a feeling we’ve all had when chasing our goals. If you think about it, you might realize that you already apply this principle to some extent; we all try to focus on crucial things even if it means ignoring trivial ones.
But it’s important to realize that you can gain valuable insight on your work by actively trying to apply the principle to all aspects of your work life. Read on for ideas of how to make the 80/20 rule work for you.
How to use the Pareto Principle at work
Applying the 80/20 rule at work helps you know when to ease off the gas when you don’t have time to do it all. We all have stretches of time that are busier for us than usual, and you will need to make decisions about what gets done and what has to wait.
Here’s an example: Let’s say you’re in sales, and the top 20% of your clients make up 80% of your sales — these are your most valued clients. Imagine that you return to your desk and have missed two calls: one is from a star client from the top 20%, the other from a lesser client. Both calls are valuable, and both customers are cared about and should be looked after, but who do you call first?
The star client, of course. If something comes up unexpectedly, and you aren’t able to return both calls right away, you have at least input part of the 20% of effort that results in 80% of your profits. While getting interrupted like this isn’t ideal, it’s a fact of business life. Applying the 80/20 Pareto Principle can be a great way to manage priorities without losing as much productivity when something comes up.
It’s not just sales, though. The principle, however, works for many aspects of work: just as there are star clients and core parts of your job, the 80/20 rule can be applied to your productivity as well.
Here’s another example: You can apply the principle to your own workday: is there a time of day you’re most effective? The one or two hours where you’re wide awake, most energized, and undistracted? That’s the time to tackle your toughest, most valuable challenges. If you align the best 20% of your day with the top 20% of your list of work, you’ll get more done in that sprint than many accomplish in an 8-hour day.
Not everyone can choose exactly when they can get their work done, but to the degree that you can, it’s smart to plan out your workdays and workweeks based on the 80/20 principle. Maybe on Mondays, your mind is still on the weekend; or perhaps Friday afternoons are pretty much useless to you. Plan more challenging tasks for Tuesdays and Wednesdays to ensure they get done more effectively.
One last example: Similarly, there might be a 20% portion of the items on your to-do list that account for 80% of the total work output you need to produce. Maybe that means building a tool that will make other tasks easier, or managing a team so that everything else downstream becomes more efficient. This is another area where Pareto can be helpful.
Looking for more ways to be productive? Read through our guide on how to land an internship for helpful advice.
Advantages and disadvantages of using the Pareto Principle
As we went through above, there are tons of potential advantages that come with applying the Pareto Principle to your work life. Here are just a few.
- Gain insight into the causes and effects of your productivity routines.
- Learn more about where to best allocate efforts for maximum results.
- Restructure your workday or workweek to better match your max-productivity output days and hours.
Of course, the Pareto Principle also comes with a few disadvantages to be aware of. Like any rule of thumb, it’s important to remember that it doesn’t always apply. You might find that the numbers work out a little differently; maybe it’s 90/10, maybe 65/35 — maybe nothing even close to 80/20. Here are some disadvantages to consider.
- Some systems might not follow the Pareto Rule—you’ll have to research carefully which ones do.
- The Pareto Principle might not always be right to use; for instance, situations involving employees may call for a more equity-based or socially-conscious approach.
- The rule is not always smart to use for investing. For instance, it’s usually not wise to put all your money into the top performing 20% of shares in your portfolio. (Check out our post on how to get the most out of your 401k for savvier investing tips.)
Like any principle, it works best when you accompany using the Pareto Principle with critical thinking, asking yourself whether a situation would benefit from applying the rule, or whether there’s a smarter approach.
The Pareto Principle: points to remember
The Pareto Principle is a useful tool for analyzing productivity, improving efficiency, and understanding larger systems of cause and effect. Here are a few key points to keep in mind:
- The Pareto Principle states that around 20% of inputs to a system cause around 80% of the effects.
- Examples include top clients in sales producing most revenue or your most productive 20% of the day resulting in 80% of your total work output.
- By understanding what systems the Pareto rule applies to, you gain insight into where to input more effort and grow in productivity.
- Not all systems are subject to the Pareto effect. It’s important to use critical thinking to determine which ones it does or should apply to, and which it doesn’t or shouldn’t.