Do You Know the Pareto’s Principle?

Towards the end of the 19th century, a group of economists from the University of Lausanne in Switzerland studied the social inequalities in Europe. By analysing the tax data of several European countries, they found out that in each of them about 20% of the population owned 80% of the wealth. Today is even worse, but this is another story.

This discovery was a real springboard for the career of an economist, Vilfredo Pareto, who gave his name to a principle, the Pareto’s principle, also known as the law of 20-80.

Some examples of the application of this principle:

• to optimize production, some industries in Japan focus on 20% of the causes that generate 80% of production problems;

• customer services of most companies focus on 20% of customers who generate 80% of turnover;

• finance professionals agree that 20% of their investments represent 80% of the benefits.

What does this principle make you understand? The message of Pareto’s principle is that you would need to focus on 20% of the actions that would lead you to 80% of the results.

In practice, you must focus on high added-value actions because they are the ones that make you move forward.

This principle is very important because it deals with a precious resource: time.

To avoid being stuck on a goal and slowly losing sight of it, it would be beneficial to use this perspective (20-80).

However, how can you identify what are the essential things to achieve your goal? And how choosing high valuable actions?

Try to answer these two questions for each action you have planned but are hesitating to take:

1. Is this action vital in moving me towards my goal?

2. Am I the only one who can do this action?

The first question allows you to separate essential actions from those that can wait.

The second allows you to identify what are the actions that others can do in your place and that you can delegate.

Once this is done, you will know 20% of the actions you need to take to achieve your goal.

Now you could estimate the time required for each action but it is not ideal, because you would end up putting it on your “to-do-list” and you could continue to shift the priority order. Therefore, in the end you would have wasted some time.

Once again you have to ask yourself some questions:

1. What problems are stopping me from really moving forward with my goals?

2. What would I need to solve these problems?

3. What are the elements that allow me to understand if the problems have been solved?

You will be surprised to see how well these questions work. The 20-80 rule allows you to focus on actions that have a visible and direct impact. They will soon become a habit to you, and you will use them every time you feel stuck with something.

Do you think that the Pareto’s principle would be useful for progressing with your goals?

This article has been published originally on my personal blog crisbiecoach. Please, come to visit it.

8 thoughts on “Do You Know the Pareto’s Principle?

  1. By focusing on attaining the 80% “success” rate, you impliedly acknowledge the other 20% is left “out there”. Now, that occurrence may be deemed rare, but the results can be way more impactful than what you gain every day from getting the 80% right. The Bean Counters, now Data Digesters, are tools and you cannot let the tools run the toolbox. Every entity should seek out a person who is not restricted by the 80-20 rule in how they seek to solve, or prevent, problems. There is way more on this subject and I have stories from all around the world on the subject matter. Know this: Lateral Thinking is not supported by metrics because the metrics only apply to the path being walked, when a new path is better for all, but not seen by many until they are induced to discover it.

  2. Great post, Cristiana! In my business where computer uptime is important, it definitely follows the 20-80 rule. 20% of the actions provide 80% of the security to make sure a service/site stays up most of the time. And if you try to increase that security to meet a service level agreement of something like 98% uptime, it gets more and more expensive to do those final steps.

    Which is all to say, it makes sense to target that 20% first and then carefully evaluate whether you need to have the results provided by going further towards your goal.

    Thought-provoking and so helpful in clarifying how we need to prioritize! Thank you!

  3. Absolutely! It helped me already with some of my goals. Prioritizing them this way is an incredible tool to help me achieve my goals and let go of the ones that don’t serve me well. Thanks for this post😊

  4. I should start my day with your blog posts. This was truly inspiring. I’ve always focused on the high-value clients but now there’s a principle behind it. I believe it’s going to help me achieve my goals faster.

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