Being a leader is about living your life in a way that inspires or encourages others. Here is the 15th in my series of monthly newsletters, each with a section on the skills you need so you can be a leader of your life. To lead is to serve. If you make it your goal to do the best that you can and to help people, then you can't fail. I encourage you to commit to keep learning. The content below is extracted from Mike Holt's Leadership Skills - Taking Your Career to the Next Level.
The Pareto Principle: 80-20 Rule | | What 20 percent of your efforts are generating 80 percent of your results? | | The Pareto Principle, also known as the 80/20 rule can change how you manage your life. The concept is named after Vilfredo pareto, an Italian economist. In 1906 he created a mathematical formula describing the unequal distribution of wealth he observed and measured in his country: Pareto observed that roughly twenty percent of the people controlled or owned eighty percent of the wealth. An avid gardener, he noticed that 80 percent of the yield of his pea crop came from 20 percent of the pea pods. He then noticed that the same ratio appeared in the distribution of land in Italy, where 80 percent of it was owned by 20 percent of the population. He observed that this was a pattern in many other situations as well.
Pareto's observations laid the groundwork for what’s known today as the Pareto Principle. In 1937, Dr. Joseph Juran, a pioneer in quality management, applied Pareto’s observations about economics to a broader body of work. As a result, Dr. Juran’s observation of the “vital few and trivial many,” the principle that 80 percent of the effects come from 20 percent of the causes, became known as Pareto’s Principle or the 80–20 Rule.
The application of this rule can have large consequences for businesses and help leaders identify where they should focus their energy and their money—on the 20 percent that can have the most impact.
You can apply the 80–20 rule to your life and your career:
- What 20 percent of your team is generating 80 percent of the productivity?
- What 20 percent of your customers are generating 80 percent of your revenue?
- What 20 percent of your efforts are generating 80 percent of your results?
Let's take it even further.
- Meetings—80 percent of the decisions come from 20 percent of the meeting time.
- Time Management—80 percent of your measurable results/progress will come from just 20 percent of the items on your daily To-Do list.
- Interruptions—80 percent of a manager’s interruptions come from the same 20 percent of people.
- Product Defects—80 percent of defects typically come from 20 percent of input errors.
- Website—80 percent of your visitors will see only 20 percent of your website pages.
- Advertising—20 percent of your advertising will produce 80 percent of your campaign’s results.
When we look at it this way, it seems obvious that most of the effects (80 percent) come from the smallest number (20 percent) of causes.
The lesson here is for you to stop wasting precious time and resources on endeavors that drain money, energy, and time. Invest in things that provide the largest return. The key is in how you evaluate the questions you might ask yourself such as:
- Do you want to reduce your living expenses? Identify which 20 percent is consuming 80 percent of the resources—carefully consider whether they’re really necessary and get rid of them if they aren’t. Take a bagged lunch to work rather than purchasing it; you’ll be surprised at how much you’re able to save in a short time.
- Do you have talented employees? Focus that talent and energy on the areas that accomplish 80 percent of your goals, and be sure they’re praised and rewarded for doing so.
- Are you having problems getting through your to-do list? If something’s not going to get done make sure it’s not part of that 20 percent!
Separating the essential from the non-essential.
Using the Pareto Principle or “Pareto Thinking” should become a way of life for you, in your personal or your business life. Prioritize your goals #1 and #2. Don't even think about anything that's not a #1. Prioritize your #1 goals into 1s and 2s and only focus on the 1s. Opportunities will present themselves because you're not wasting your energy on the 80 percent that's not important. Your ability to separate the essential from the nonessential will improve with practice, especially if that practice involves the use of actual data and not just “eye-balling” the situation. Once you've established this approach it becomes a normal reaction to managing your time, and even solving problems. In time, an experienced “Pareto Thinker” will even be able to make quick, accurate judgment calls.
••• We'd love to hear from you about this series, and the ways you're using it. Send us your comments and feedback by clicking on Post a Comment below. Look out for the next part in this series a month from now, and please share with your colleagues. To review or catch up on previous newsletters on business and personal development click here.
The above content is extracted from Mike Holt's Leadership Skills textbook.
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FAQs
Focus that talent and energy on the areas that accomplish 80 percent of your goals, and be sure they're praised and rewarded for doing so. Are you having problems getting through your to-do list? If something's not going to get done make sure it's not part of that 20 percent!
What is the 80-20 principle of leadership? ›
Known as the Pareto Principle, this rule explains that 20 percent of your activities will account for 80 percent of your results. That being the case, leaders should change the way they set goals forever if they want to transform their teams and performance.
How do you explain the Pareto Principle? ›
The Pareto principle states that for many outcomes, roughly 80% of consequences come from 20% of causes. In other words, a small percentage of causes have an outsized effect. This concept is important to understand because it can help you identify which initiatives to prioritize so you can make the most impact.
What is the 80-20 rule explained simply? ›
The 80-20 rule, also known as the Pareto Principle, is a familiar saying that asserts that 80% of outcomes (or outputs) result from 20% of all causes (or inputs) for any given event. In business, a goal of the 80-20 rule is to identify inputs that are potentially the most productive and make them the priority.
What is the 80/20 rule for supervisors? ›
There is a phenomenon that occurs in workplaces everywhere, known as the 80/20 rule, or the Pareto Principle, which suggests that roughly 20% of the workforce is responsible for accomplishing 80% of the work. This concept has intrigued researchers and managers alike, leading to a deeper exploration of its implications.
What is the golden rule of leadership? ›
It, being the Golden Rule of leadership: Leading others is a privilege that is earned, not a right.
What is the 70 30 principle of leadership? ›
What's the 70/30 Principle? Deciding how to live with a healthy balance between tasks that energize (70%) and drain (30%) you is the core of GiANT's 70/30 Principle.
What is the Pareto formula? ›
Example: The equation for the first percentage is the most common defect divided by the total defects and multiplied by 100, or (15/45) x 100 = 34%. In order to calculate the next cumulative percentage, take the next most common defect, add it to the first data point, divide it by the total and multiply it by 100.
What is an example of Pareto? ›
80% of sleep quality occurs in 20% of sleep. 80% of results are caused by 20% of thinking and planning. 80% of family problems are caused by 20% of issues. 80% of retail sales are produced by 20% of a store's brands.
What is the Pareto principle also known as? ›
The Pareto principle, also known as the 80/20 rule, is a theory maintaining that 80 percent of the output from a given situation or system is determined by 20 percent of the input. The principle doesn't stipulate that all situations will demonstrate that precise ratio – it refers to a typical distribution.
Steps to apply the 80/20 Rule
- Identify all your daily/weekly tasks.
- Identify key tasks.
- What are the tasks that give you more return?
- Brainstorm how you can reduce or transfer the tasks that give you less return.
- Create a plan to do more that brings you more value.
- Use 80/20 to prioritize any project you're working on.
Prioritize the first 20% of your workday regarding the tasks you complete and know when it's time to pivot and make changes when working on the remaining 80% to ensure you don't waste too much productive time and energy.
What are three applications of the 80/20 principle to everyday life? ›
So, here are some Pareto 80 20 rule examples:
- 20% of criminals commit 80% of crimes.
- 20% of drivers cause 80% of all traffic accidents.
- 80% of pollution originates from 20% of all factories.
- 20% of a companies products represent 80% of sales.
- 20% of employees are responsible for 80% of the results.
1. They treat others as they would like to be treated. Much of what makes certain individuals more successful in supervisory roles than others is following the simple golden rule we all learned in kindergarten – treat others as they would like to be treated. Think of how you would like to be supervised.
What is the Pareto rule in HR? ›
The 80/20 Principle: 20% of Employees Shoulder 80% of the Work. The Pareto Principle suggests that a small minority of employees is responsible for the majority of an organization's productivity. These 20% are the floor leaders – the ones who know what to do and simply take care of things.
What is the Pareto analysis? ›
Pareto analysis is used to identify problems or strengths within an organization. As an overwhelming amount of impact is often tied to a relatively smaller proportion of a company, Pareto analysis strives to identify the more material issues worth resolving or the more successful aspects of a business.
How do you use the 80-20 rule to manage time effectively? ›
When applied to work, it means that approximately 20 percent of your efforts produce 80 percent of the results. Learning to recognize and then focus on that 20 percent is the key to making the most effective use of your time. Here are two quick tips to develop 80/20 thinking: Take a good look at the people around you.
What is an example of the 80 20 Pareto principle? ›
Practical examples of the Pareto principle would be: 80 % of your sales come from 20 % of your clients. 80% of your profits comes from 20 % of your products or services. 80 % of decisions in a meeting are made in 20 % of the time.
Which statement best describes the 80-20 rule? ›
The Pareto Principle states that 80% of consequences come from 20% of the causes.
What is the 80-20 rule also known as? ›
The Pareto principle (also known as the 80/20 rule, the law of the vital few and the principle of factor sparsity) states that for many outcomes, roughly 80% of consequences come from 20% of causes (the "vital few").
