What is Pareto Principle or 80/20 principle?
“Pareto principal” is a principle named after Italian economist Vilfredo Pareto which emphasizes on relation between efforts and results. While pursuing his studies and conducting research he observed that 80% of the land in Italy was owned by 20% of the population and the rest 80% people owned the remaining 20% of the land. Based on various similar observations he came to a conclusion that 80% of effects come from 20% of the efforts made. This principle is normally used by business entities in taking various strategic decisions. The numbers 80/20 used are not supposed to be taken on rigid basis, they may vary based on situations but the overall concept is about minor important areas to work on which gives the maximum results.
How does it actually work?
Pareto principle works on a very simple logic of “Prioritization”. No matter whatsoever the aspect you are dealing with in your life, this principle can be applied. In order to achieve an expected outcome, instead of beating around the bush, the mechanism of this principle focuses on identifying the core areas and triggering them, which will ultimately lead to required outcome. Meaning thereby, we need to find out the main 20% of actions which are most effective in giving the required outcome and then put our maximum efforts in those areas so as to achieve the 80% result with less efforts. Using the words less efforts does not mean that this principle is any shortcut to achieve success. Instead, it helps to divert your efforts from less effective work to more effective work and thus resulting to quick achievement of your goals.
Well, if it is this simple, why doesn’t everyone achieve their goals?
The main problem is the psychological hit. It is quite difficult for people to believe that with 20% efforts a result of 80% could be achieved. Well, yes it is possible!! Let me give you an example, Imagine there are 5 huge rocks lined up on the edge of a hill. Now there is a man who wants to throw the first rock at the edge, off the hill. What should the person do? Push the first rock at the edge or try to move the first rock by exerting force on the last rock in the line? Obviously, we can easily throw the rock by directly pushing the first one, but what we actually do in real life is that we go to the last rock, push it and try to move the first rock by exerting the force on the last one. That is where our energy gets wasted and achievement of our goals gets postponed. We always mess up in giving priorities to things and maintaining them further on daily basis. As a result the implementation of this principle becomes difficult.
Where and how can I implement it in real life?
It is already in use in businesses for taking various decisions relating to maintaining inventory, dealing with customers, employees, quality of inventory. Following are some of the observations that can help in businesses at top level management: –
√ 80% of problems can be attributed to 20% of causes.
√ 80% of a company’s profits come from 20% of its customers
√ 80% of a company’s complaints come from 20% of its customers
√ 80% of a company’s revenue comes from 20% of its products
√ 80% of a company’s sales are made by 20% of its employees.
Along with implementing it in professional life we can use it in our personal life for maintaining relationships with people around us. Instead of coping up and getting along with each and every person we can identify few people around us who are actually important for us and with whom we really like spending time. Limiting the people you interact with on daily basis will result into savings of your time, which you can spend in developing the important relations or spend it in any other productive activity. If we see other way round, then while it comes to putting efforts in our relationship we can focus on those 20% actions which gives about 80% happiness to the other person and implement it accordingly.Health can also be maintained based on this principal. Focus on a simple and nutrient filled diet which covers the basic need of whole body.
Also we can use the same principle in our educational life while preparing for examinations. Based on pareto we can decide what is to be studied and at what time it is to be studied. The content that gives maximum understanding should be chosen and studied at the time at which our productivity is the most.
If this simple rule of Pareto is considered and implemented on daily basis. I am sure, the chaos we face in our life of having “less time” will definitely be sorted out and we will be left with ample of spare time which in turn we can invest in other beneficial activities. The author can be reached at email@example.com.