The Pareto Principle – Also known as the 80:20 rule or Pareto’s Law and named after the Italian economist Vilfredo Pareto, it’s a straightforward principle that 80 per cent of our work contributes to less than 20 per cent of its value. Don’t waste time on jobs that have little value to your business. Instead, identify the tasks that will have the most significant impact on your business’s performance.
To help, ask yourself what will be the outcome if the task isn’t done; what resources and inputs are required to complete this task? And should it be on the list in the first place? This doesn’t mean not finishing the other 80 per cent of functions. However, if you’re spending a disproportionate amount of time on trivial activities such as photocopying, filing and admin work, you must assess whether this could be outsourced. Offloading this work to another can be more cost-effective if you’re free to find new customers and win more business.
The 80-20 rule goal is to identify potentially the most productive inputs and prioritise them in business. For instance, once managers or business owners identify critical factors to their company’s success, they should focus on those factors.
Although the 80-20 rule is frequently used in business and economics, you can apply the concept to any field—such as wealth distribution, personal finance, spending habits, personal relationships, and family life.
Pareto Rule the 80-20 Background
The 80-20 rule—also known as the Pareto principle and applied in Pareto analysis—was first used in macroeconomics to describe Italy’s wealth distribution in the early 20th century. It was introduced in 1906 by Italian economist Vilfredo Pareto, best known for Pareto’s efficiency.
Pareto noticed that 20% of the pea pods in his garden were responsible for 80% of the peas. Pareto expanded this principle to macroeconomics by showing that 80% of Italy’s wealth was owned by 20% of the population.
In the 1940s, Dr Joseph Juran, prominent in operations management, applied the 80-20 rule to quality control for business production. He demonstrated that 80% of product defects were caused by 20% of production methods’ problems. By focusing on reducing the 20% of production problems, a business could increase its overall quality. Juran coined this phenomenon “the vital few and the trivial many.”
Benefits of the 80-20 Rule
Although little scientific analysis either proves or disproves the 80-20 rule’s validity, much anecdotal evidence supports the rule as essentially valid, if not numerically accurate.
The 80-20 rule has found applications in business management. 20% of a company’s customers are responsible for 80% of the sales for business sales. Also, 20% of the employees are responsible for 80% of the results. For project management, many managers have noted the first 20% of the effort put in on a project yields 80% of the project’s results. Thus, the 80-20 rule can help managers and business owners focus 80% of their time on the 20% of the business yielding the most remarkable results.
Salespeople in various businesses have demonstrated success by incorporating the 80-20 rule. External consultants who use Six Sigma and other management strategies have combined the 80-20 principles practices with good results.
80/20 Rule in Marketing and Business
One of the most common contexts for the 80/20 rule is in companies’ marketing and sales activities. While it’s often repeated that 80% of any company’s profit is generated by 20% of its customers, the exact proportions could extend to other areas of business activity, for example:
- 80% of complaints come from 20% of customers.
- 80% of profits come from 20% of the company’s effort.
- 80% of sales come from 20% of products or services.
- 80% of sales are made by 20% of sellers.
- 80% of clients come from 20% of marketing activities.
What does this mean in practice?
To maximise efficiency, businesses should focus on that vital 20% of activity.
I use the 80-20 rule daily to evaluate what’s working, what needs more focus and what needs to be delegated to others.
Like all the tools we have discussed in this module, each adds value to your management and time utilisation.
Productivity
Productivity is commonly defined as a ratio between the output volume and the volume of inputs. In other words, it measures how efficiently production inputs, such as labour and capital, are being used in an economy to produce a given level of output.
There are only so many hours in the day, so making the most of your time is critical. There are two ways to increase your output–either put in more hours or work smarter. I don’t know about you, but I prefer the latter.
Productivity versus Self-Management (Time)
They are two sides of the same coin.
You are managing time better => being more productive, => more time to do the things that drive your business’s highest value or personal life.
A lot of productivity is lost because people focus on time instead of work. It isn’t the amount of time spent on a task that matters–it is the amount of high-value work accomplished.
Unfortunately, time is often the easiest thing to measure. Because it is easy to measure, most people are paid for their time instead of what they accomplish.
Of course, in some rough way, time does translate into work. You can usually get more done in 2 hours than you can in 1, but the time element isn’t where the focus should be. It is easy to spend 2 hours without really accomplishing anything significant.
When we focus on time instead of work, we tend to do the most pleasant tasks first. When we focus on accomplishing work, we start with the functions that give the greatest return. We can increase productivity by shifting our focus away from hours and thinking more about what is being accomplished.
Being more productive at work or in business isn’t rocket science, but it requires being more deliberate about managing your time.
Below are 15 simple but effective strategies for increasing your productivity at work.
- Track and limit how much time you’re spending on tasks.
You may think you’re pretty good at gauging how much time you’re spending on various tasks. However, some research suggests that only around 17 per cent of people can accurately estimate the passage of time. A tool like Rescue Time can help by letting you know exactly how much time you spend on daily tasks, including social media, email, word processing, and apps.
- Take regular breaks.
It sounds counterintuitive, but taking scheduled breaks can help improve concentration. Some research has shown that taking short breaks during long tasks enables you to maintain a constant performance level while working without breaks leads to a steady decline in performance.
- Set self-imposed deadlines.
While we usually think of stress as a bad thing, a manageable level of self-imposed pressure can help us focus and help us meet our goals. For open-ended tasks or projects, try giving yourself a deadline, and then stick to it. You may be surprised to discover just how focused and productive you can be when you’re watching the clock.
- Follow the “two-minute rule.”
Entrepreneur Steve Olenski recommends implementing the “two-minute rule” to make the tiniest windows of time you have at work. The idea is this: If you see a task or action that you know can be done in two minutes or less, do it immediately. According to Olenski, completing the job right away takes less time than returning to it later. Implementing this has made him one of the most influential content strategists online.
- Just say no to meetings.
Meetings are one of the biggest time-sucks around, yet somehow we continue to unquestioningly book them, attend them and, inevitably, complain about them. According to Atlassian, the average office worker spends over 31 hours each month in unproductive meetings. Before booking your next session, ask yourself whether you can accomplish the same goals or tasks via email, phone, or Web-based meeting (which may be slightly more productive).
- Hold standing meetings.
If you absolutely must have a meeting, there’s some evidence that standing meetings (they’re just what they sound like–everyone stands) can result in increased group arousal, decreased territoriality, and improved group performance. When meetings are unavoidable, you may want to check out these 12 unusual ways to spur creativity during sessions.
- Quit multitasking.
While we tend to think of multitasking as an essential skill for increasing efficiency, the opposite may be right. Psychologists have found that attempting several tasks at once can result in lost time and productivity. Instead, make a habit of committing to a single task before moving on to your next project.
- Take advantage of your commute.
This goes for any unexpected “bonus” time you may find on your hands. I strongly suggest listening to a good Amazon Audible book about business and business growth or development. I always take notes when listening to business books and always find something I can use in my business. Do this instead of Candy-Crushing or Facebooking; use that time to pound out some emails, create your daily to-do list, or do some brainstorming.
- Give up on the illusion of perfection.
It’s common for entrepreneurs to get hung up on attempting to perfect a task–the reality is nothing is ever perfect. Rather than wasting time chasing after this illusion, bang out your task to the best of your ability and move on. It’s better to complete the task and move it off your plate; if need be, you can always come back and adjust or improve it later.
- Take exercise breaks.
Using work time to exercise WILL help improve productivity, according to a study published in the Journal of Occupational and Environmental Medicine. If possible, build in set times to take a walk or go to the gym during the week. Getting your blood pumping could be just what’s needed to clear your head and bring your focus back.
- Be proactive, not reactive.
Allowing incoming phone calls and emails to dictate how you spend your day will mean you do a great job of putting out fires–but that may be all you get accomplished. Something I often tell my business coaching clients is, “Set aside time for responding to emails but don’t let them determine what your day is going to look like. Have a plan of attack at the start of each day, and then do your best to stick to it.”
I plan my week and update my next day’s work the evening before; this alone creates an immense productivity increase.
- Turn off notifications.
No one can be expected to resist the allure of an email, voicemail, or text notification. Turn off your notifications during work hours and, instead, build in time to check email and messages. This is all part of being proactive rather than reactive (see number 11).
- Work in 90-minute intervals.
Researchers have found elite performers (athletes, chess players, musicians, etc.) who work in intervals of no more than 90 minutes are more productive than those who work 90 minutes-plus. They also found that top performers tend to work no more than 4.5 hours per day. Sounds good to me!
- Give yourself something nice to look at.
It may sound unlikely, but some research shows outfitting an office with aesthetically pleasing elements–like plants–can increase productivity by up to 15 per cent. Jazz up your office space with pictures, positive quotes, flowers/plants, or anything else that puts a smile on your face.
- Minimise interruptions (to the best of your ability).
Having a colleague pop their head into your office to chat may seem innocuous. Still, even brief interruptions appear to produce a change in work patterns and a corresponding drop in productivity. Minimising interruptions may mean setting office hours, keeping your door closed, or working from home for time-sensitive projects.
If you feel the need to increase your productivity at work, resist the temptation to put in longer hours or pack more into your already-full calendar.
Instead, take a step back, and think about ways to work smarter, not harder.