Understanding the Eighty-twenty Principle

Understanding the Eighty-twenty Principle

The Eighty-twenty principle is a rule of thumb that says that 80% of an event’s outcomes can be because of 20% of the causes. Joseph Juran first developed the rule in 20th century as a management tool to help managers address organizational challenges. Since then, the business world has applied the principle in different aspects. By using the rule, it is possible to indentify bottlenecks in your business and determine most important operating factors that need attention depending on efficient utilization of available resources. Importantly, resources ought to go into input factors that have the greatest effects on an organization’s results. The principle is also known as the Pareto principle, the law of the vital few, or the principle of factor sparsity.

A brief history of the Eighty-twenty principle

An Italian economist, Vilfredo Pareto is credited for developing the eighty-twenty principle as he studied wealth distribution in a host of countries towards the end of 1800s. He discovered a common trend that cut across the countries under consideration. In his research, Pareto found out that 80% of a country’s wealth is controlled by about 20% of the population of that country. He called this, ‘predictable imbalance.’

Dr. Joseph Juran discovered Pareto’s writings in 1914 and became popular under the name, ‘Pareto Principle’. While working in the quality control, Juran concluded that 80% of problems stem from 20% of causes.  Since then, this rule has been expanded and applied in various facets of life besides economics and quality control.

One can use 80/20 rule to refer to anything of skewed distribution. In this case, it does not have to be measured or have 80:20 distribution ratios. At individual level, you can apply this principle by monitoring the manner in which you complete tasks against the level of input at each level. If you were to look at the people around you, probably 80% offer you the support you need in life. This is incredible and you have to take care of them.

How Pareto Law works

Many people use the eighty-twenty principle, with almost a similar proportion ignoring the law in organizational and business management. This principle works well in a range of specialized quality management like planning, decision-making, six sigma and general performance management. In business, it is possible to use Pareto law to check business planning and project management.

Similarly, the principle finds application in leadership. For example, when this law is at the back of a leader’s mind, leadership becomes easier and effective. It is an important tool because it clarifies complex situations and problems in life, especially in determining where to focus your energies and resources.

The law also extends to sales and marketing since it emphasizes on activity and energy, which produces large improvements. Even though many people overlook the impact of Pareto’s law in sales and marketing, it is almost impossible to overstate its implications in business.

Implementing the eighty-twenty principle in life

The simplest way of looking at the eighty-twenty principle is focusing on the relationship between input and output, which is always imbalanced. When applied to work, it means that only 20% of your efforts give 80% of the results. To make the best use of time, one must learn and focus on the 20%. With the rule, you can also examine yourself and decide what you want to do with your life and time. This would help you discover the 20% of your work that should have your attention.

When it comes to reading, the eighty-twenty law allows you to read smart. In other words, read less. The most important thing is to read what is most valuable and trash the rest. To achieve your potential, you also must keep current by updating yourself with latest technological innovations. Some of these could help you achieve your 20% or could be shifting your focus away.

To succeed in applying the 80/20 rule, you must always remember the basics. At the heart of what you are doing, you must keep in mind your ethics and values. These should be the cornerstones of your decision-making process. If you do this, you would find it a lot easier attaining your 20% in everything that you do with your life.

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