The Pareto Principle, also known as the 80/20 Rule, states that in many situations, 80% of the effects come from 20% of the causes.
This is a principle, not a hard and fast rule, but it can be extremely useful in project management and other leadership roles.
It can also be effective in managing your day-to-day work and aspects of your personal life.
What Is The Pareto Principle?
Known to many as the “80/20 Rule,” the Pareto Principle is essentially an observation that can be used effectively to guide decision-making and areas of focus.
The principle is widely applied in many areas, including business, economics, quality control, project management and others.
Leaders and managers in many industries use the guiding principles of the 80/20 Rule to help them identify and prioritize the most important factors in a given situation.
If you’re able to identify that 80% of your results are stemming from roughly 20% of causes, you can begin to focus on those particular causes to maximize your results.
Similarly, you can focus a bit less on the 80% of causes — often referred to as inputs — that are only creating 20% of your results, or outputs.
Who Created The Pareto Principle?
It should come as no surprise that the Pareto Principle was created — or, rather, identified — by an individual named Pareto.
Italian economist and sociologist Vilfredo Pareto solidified his principle in 1895.
He had observed that about 80% of the land in Italy was owned by just 20% of the population.
He then began noticing similar 80-20 patterns in many different areas, including income and wealth distribution.
Pareto even noticed that 20% of the pea pods in his garden were producing 80% of the peas he harvested!
Vilfredo Pareto formulated his concept in his work titled “Cours d’économie politique” or “Course of Political Economy,” and it later became known as the Pareto Principle.
Using The 80/20 Rule In Project Management
Project managers can use the Pareto Principle to help ID and prioritize the tasks and activities that might have the greatest impact on a project’s success.
This can apply to resources, processes, assigned workloads, and many different aspects of a project.
PM’s can also use the principle to help guide their evaluation of progress and performance within the project team.
Ultimately, the goal is to become more efficient by really honing in on those areas that have the highest impact, while simultaneously giving a bit less energy and attention to those that don’t.
Additional Uses Of The Pareto Principle
There are many, many potential applications for the Pareto Principle.
The 80/20 Rule can help organizations improve efficiency and productivity by helping direct their efforts toward the areas with the highest potential impact.
For example, a manager could lean on the Pareto Principle to identify the 20% of customers who generate 80% of revenue, and then focus on building stronger relationships with those valuable customers.
A team leader could use the 80/20 Rule to identify the employees who are responsible for the majority of the high-impact work, and then invest in further developing their skills and abilities.
Just as valuable is the ability to identify the bulk of activities that often generate the least amount of high-impact results, and then adjust how much time and attention you give those those.
Here are some additional ways the Pareto Principle could be used to increase efficiency in both personal and professional settings:
By identifying the 20% of tasks that will yield the most results, you can prioritize your to-do list and focus on the most important activities first.
The Pareto Principle can be used to identify and address bottlenecks and inefficiencies in a process.
For example, if 80% of defects in a manufacturing process are caused by 20% of the machines, then addressing those specific machines can greatly reduce the number of defects.
By measuring progress in terms of the Pareto Principle, you can determine whether you are spending your time and resources on the most important things.
Improving Customer Service
The Pareto Principle can be used to identify the 20% of customers who are responsible for 80% of your revenue.
By focusing on the needs and preferences of these key customers, you can improve your overall customer service.
Assessing Personal Time Usage
You can evaluate how you are spending your time by identifying the 20% of activities that consume 80% of your time.
By cutting down on the less important activities, you can free up time for more meaningful and productive endeavors.
The Pareto Principle, or 80/20 Rule, can be a very useful tool, applicable in both business and personal settings.
Keep in mind that this is not a fixed rule, but rather more of a concept, and it will not necessarily apply to every scenario nor work out to exactly 80% and 20% in all instances.
So keep the Pareto Principle in mind, and apply it where it makes sense to help you identify trends and make decisions.