The Pareto principle (or 80/20 rule) is one of many productivity methods that can help you and your employees flourish. The idea is to work smarter, not longer or harder.

You may have come up short if you’ve tried other productivity methods to enhance your business’ time management skills. Companies are overwhelmed by complexity as they try to serve several markets with a dizzying range of products. Similarly, many of us have daily to-do lists that seem impossible in today’s fast-paced world — but don’t give up without trying the Pareto principle.

While other productivity methods require you to build matrixes or plan out your tasks the night before, this method will help you do less with more. Let’s get started.

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What is the Pareto principle?

The Pareto principle is an economic phenomenon where 80% of results are produced by 20% of the effort. While the numbers aren’t always exact, the idea is that the ratio between input and output is not always 1:1.

The Pareto principle (or 80/20 rule) is the ultimate “work smarter, not harder” methodology. Pareto enthusiasts believe that the key to increased productivity is identifying and capitalizing on the 20% of efforts that produce 80% of the results.

Where did the Pareto principle come from?

The Pareto principle was created in 1896 by Italian economist Vilfredo Pareto. While gardening, he discovered that 20% of his pea pods produced 80% of the peas he’d eat.

This relationship got Pareto thinking about how 20% of the population owned 80% of the land in Italy.

These days, it doesn’t take an economist to know that these imbalances exist. In many countries, mere fractions of the population control the majority of all wealth — a concept known as income inequality.

The morality of this situation aside, Pareto created the 80/20 rule to simply explain how this phenomenon is possible. In short, not all wealth is equal because not all work has the same return on investment (ROI).

Dr. Joseph M. Juran took this Pareto’s observation further by demonstrating how people could apply the Pareto rule to other fields. After successfully applying Pareto’s law in operations management, he coined the Pareto principle.

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How does Pareto principle (the 80/20 rule) work?

You can use the Pareto rule anywhere to increase productivity and expand your output. You can use performance metrics to investigate which 20% of the effort, time, or money produces 80% of the results. Then double down on the 20%.

It’s hard to believe in the Pareto principle at first, but give it a shot. You probably see differences in effort and reward in a variety of other situations too:

  • You wear 20% of your clothes 80% of the time
  • 20% of the pages you read in a book contain 80% of the essential information
  • 20% of sales leads become 80% of your revenue
  • 20% of product accounts for 80% of profits

Now that you’ve seen some examples, let’s explore how you can apply the rule for decision making.

How to apply the Pareto for decision making

Let’s look at how you can use the 80/20 rule to make decisions that will boost revenue for your business. There are several examples of the Pareto principle, but possibly the most significant is to optimize your product line.

To do so, you must first determine which products are profitable. Rank all your organization’s products by profit and sales.

For example, in this Pareto Chart, less than 20% of the products drive 75% of total revenue. Leverage and maximize that profitable 20%. Prioritize and promote these three products whenever possible.

Pareto decision making graph

You can use the law of the vital few to make decisions in any facet of the business.

Using the 80/20 rule in marketing is another example. If 20% of your customers provide 80% of your revenue, you should focus on identifying and retaining them.

Once you’ve found them, keep these customers loyal by offering outstanding customer service. Then, when creating new products or services, focus on the needs of these customers. Some companies even create a monthly newsletter to stay in touch with past customers.

Applying the Pareto Principle for time management

Time is our most valuable resource. We all have the same amount of time in a day, but many of us fail to use that time effectively. Working more hours does not necessarily mean you will get more results.

Better time management starts here

Track time to tasks and see productivity metrics in real-time with Hubstaff.

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Limitations and when not to use the 80/20 rule

The Pareto principle is more of a theory than a set of rules. It works in some circumstances, but there will be situations where it’s not applicable.

Exercise caution while applying the Pareto principle. There are a few scenarios where the 80/20 rule falls short.

Pareto diagram

One of the major drawbacks is Pareto analysis. In other words, the Pareto principle doesn’t provide answers to problems. It’s only helpful in identifying a problem’s underlying issues.

Once you’ve identified the most meaningful 20% of your work, you still need to develop a strategy for capitalizing on it. Other productivity methods can help you here, but the Pareto principle likely won’t.

Our friends at Asana also bring up a great point: the most important 20% of your work still requires 100% effort. Just because you’ve identified that 80% of your work isn’t high priority, you still need to give the same amount of effort on the other 20% — and make sure you don’t neglect low priority work.

Fortunately, there are tools that can help.

80/20 vision: using Hubstaff to prioritize tasks

Finding new initiatives to boost productivity is crucial for team leaders. Time tracking tools can help you uncover how each member of your team uses their time.

With Hubstaff, you can track time to tasks and projects, view website and app usage, and see productivity metrics in real time. This data will teach you the difference between time well spent (the 20%) and time wasted (the 80%).

Which strategies do you use to boost work efficiency? Let us know in the comments.

Category: Employee Productivity