In 1906, Italian economist Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country, observing that 20 % of the people owned 80 % of the wealth.
In the late 1940s, Dr. Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto’s Principle. While it may be misnamed, Pareto’s Principle or Pareto’s Law, as it is sometimes called, can be a very effective tool to help you manage effectively.
What It Means
The 80/20 Rule means that, in anything, a few (20 %) are vital and many (80 %) are trivial. In Pareto’s case, it meant 20 % of the people owned 80 % of the wealth. In Juran’s initial work, he identified 20 % of the defects causing 80 % of the problems. Project Managers know that 20 % of the work (the first 10 % and the last 10 %) consume 80 % of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to the physical world.
You know 20 % of your stock takes up 80 % of your warehouse space and that 80 % of your stock comes from 20 % of your suppliers. Also 80 % of your sales will come from 20 % of your sales staff. 20 % of your staff will cause 80 % of your problems, but another 20 % of your staff will provide 80 % of your production. It works both ways.
How It Can Help You
The value of the Pareto Principle for a manager is that it reminds you to focus on the 20 % that matters. Of the things you do during your day, only 20 % really matter. Those 20 % produce 80 % of your results. Identify and focus on those things. When the fire drills of the day begin to sap your time, remind yourself of the 20 % you need to focus on. If something in the schedule has to slip, if something isn’t going to get done, make sure it’s not part of that 20 %.
There is a management theory floating around at the moment that proposes to interpret Pareto’s Principle in such a way as to produce what is called ‘Superstar Management’. The theory’s supporters claim that since 20 % of your people produce 80 % of your results, so you should focus your limited time on managing only that 20 % – the so-called ‘superstars’.
The theory is flawed because it overlooks the fact that 80 % of your time should be spent doing what is really important – helping the good become better is a better use of your time than helping the great become terrific.
Apply the Pareto Principle to all you do, but use it wisely.
Pareto’s Principle, the 80/20 Rule, should serve as a daily reminder to focus 80 % of your time and energy on the 20 % of your work that is really important.
Don’t just “work smart”, work smart on the right things! Anyone can be a ‘busy fool’…