The 80/20 Rule
The 80-20 Rule states that a small number of causes (20%)
is responsible for a large percentage (80%) of the effect.
In 1906,
Italian economist Vilfredo Pareto created a mathematical formula to describe
the unequal distribution of wealth in his country, observing that twenty
percent of the people owned eighty percent 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.
After Pareto made his observation and created his formula,
many others observed similar phenomena in their own areas of expertise. Quality
Management pioneer, Dr. Joseph Juran, working in the US in the 1930s and 40s
recognized a universal principle he called the "vital few and trivial many" and
reduced it to writing. In an early work, a lack of precision on Juran's part
made it appear that he was applying Pareto's observations about economics to a
broader body of work. The name Pareto's Principal stuck, probably because it
sounded better than Juran's Principle.
As a result, Dr. Juran's
observation of the "vital few and trivial many", the principle that 20 percent
of something always are responsible for 80 percent of the results, became known
as Pareto's Principle or the 80/20 Rule.
What it means
The
80/20 Rule means that in anything a few (20 percent) are vital and many(80
percent) are trivial. In Pareto's case it meant 20 percent of the people owned
80 percent of the wealth. In Juran's initial work he identified 20 percent of
the defects causing 80 percent of the problems. Project Managers know that 20
percent of the work (the first 10 percent and the last 10 percent) consume 80
percent of your time and resources. You can apply the 80/20 Rule to almost
anything, from the science of management to the physical world.
In our
business I think you'll find 80 percent of your successes will come from 20
percent of your prospects.
How it can help you
The value of
the Pareto Principle for us is that it reminds you to focus on the 20 percent
that matters. Of the things you do during your day, only 20 percent really
matter. Those 20 percent produce 80 percent of your results. Identify and focus
on those things.
Pareto's Principle, the 80/20 Rule, should serve as a
daily reminder to focus 80 percent of your time and energy on the 20 percent of
your work that is realy important. Don't just "work smart", work smart on the
right things.
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