Have you ever heard of the Pareto principle, also known as the 80/20 rule? This rule can be applied to practically anything in your life, both professionally and personally. Learning how to use it properly can save you a lot of time and money. However, not everyone understands this rule correctly.
Some people think that this tool is used by dividing a whole into 80% and 20%, and that’s it. It’s not that simple.
Paretovo pravidlo 80/20
The name makes it clear who devised this principle. It was the Italian economist, mathematician, statistician, sociologist, political scientist and professor Vilfredo Federico Damaso Pareto. Born in 1848. This man brought many theories and perspectives on society and economics during his lifetime. One of the most well-known is this principle.
The Pareto principle: 80% of results come from 20% of causes. You can essentially base anything on this rule, as we will see in the examples below. For a long time, it was also said that 20% of the world’s wealthiest people own 80% of the planet’s resources, and conversely, that 80% of the planet’s population owns only 20% of the resources and wealth.
Paretovo pravidlo příklady
Let’s look at one of the favourite examples about revenue: 80% of all revenue comes from 20% of customers. Sounds interesting? What does it mean for you? Pamper those 20% of customers a little more than the remaining 80%. Thanks to this rule, you know where to focus your attention. You don’t have to offer the best benefits to all your customers, but give them to the 20% most important ones.
Other examples of Pareto’s principle
- 80% of profits come from 20% of products
- 20% of your effort creates 80% of results
- 20% of your learning time yields 80% of new knowledge
- 80% of all sick leave is from 20% of employees
- 20% of the spices in food bring 80% of the flavour
- 20% of your food ends up in 80% of your fat stores
This rule can be presented from both sides
- 20% of paid advertisements reach 80% of new customers
- 80% of paid advertisements reach the remaining 20% of new customers
Let’s look at an example of effort, where 1/5 of your total effort brings most of the profit. The remaining 4/5, which is most of the effort, brings you quite little. Does that sound a bit depressing? How will you deal with it?
Jak využít tento princip
Do you know that you are most productive for 20% of your working day, and in those 20% you are capable of completing 80% of the entire daily work. Be aware of when your most productive time is and plan your most demanding tasks for then. Is it morning? Late morning? Or perhaps afternoon? Everyone is unique and therefore prefers something different.
Leave routine work for the remaining time. This approach will also be very motivating. In the fifth of the time when you have the most energy, you will do almost all of your important work, this will give you a pleasant feeling.
For example, consider revenue: you may have found that 80% of your revenue comes from 20% of your customers. Focus on these customers and treat them well. Be careful! Pareto’s law doesn’t mean you should ignore the remaining 80% of clients, it doesn’t. It’s mainly about consciously assigning priorities.
Nenechte se mýlit
Pareto’s principle is a tool for consciously organising priorities and allocating effort. It doesn’t encourage you to do only part of the work, but to start with the most important and productive tasks.
When you complete 80% of tasks with 20% of your time, it might tempt you to do only 80% of the work and discard the rest. This approach doesn’t consider that. Work must always be done to 100%. It’s about understanding the importance of individual activities. It’s about knowing what is worth starting and what can wait. If you spend your most productive time on unimportant tasks, it will be harder to complete the rest.
Let’s pause on the example of products. You know that 80% of your profits come from 20% of your goods or services. This doesn’t mean you should neglect less profitable products. No. Prioritise the top 20% most successful in terms of development and your energy. Give them the most attention. Also invest energy in the less successful ones, the rest.
How did Pareto come up with this rule?
How did Pareto even come up with this theory? What made him think of something like that? While tending his garden, he liked to harvest and shell peas himself. Over time, he noticed that 80% of all peas were always shelled from roughly 20% of all the pods. When he began to think about this interesting principle, he realised that around 20% of people own 80% of the land in Italy.
With this new perspective, he looked around and found that this finding could be applied practically to everything. People didn’t like his theory much, but over time they discovered more and more truth in it. That’s why many larger and smaller companies today use this principle when planning. And not just companies, but also private individuals.
When can you use this rule?
It’s not a lifelong dedication of your life to this rule. But there are moments when you should remember it and use it. Is your business functioning as you want it to and do you need to change anything? Certainly, there are situations where this principle can help.
1. You need your day to have at least 30 hours
Do you have days when you don’t know where to start? Remember Pareto’s rule and apply it to the activities you need to perform. Think about which tasks on your plan for the next day will bring you the greatest benefit. 20% of the activities you complete will bring 80% of the benefit. Be aware of them and focus on them first.
This principle will also help you when you have a long list of tasks to complete. Just this list itself is demotivating, so you end up postponing important tasks and instead inventing other things to do. Try to look at this list and identify which activities belong to the 20% that will bring most of the results. Then focus on this fifth. This tool helps to divide work into less important and more important.
2. You have lots of plans and don’t know where to start
Pareto’s rule is also helpful when you set too many goals and suddenly don’t know where to start or which direction to go. Thanks to this principle, you divide your goals into those that will bring more results and those where their fulfilment is less important.
Speaking of planning, are you familiar with the SMART method, which helps to precisely define your intentions and brings you closer to their successful fulfilment?
3. Creating the right habits
This tool shouldn’t fully govern your life. It’s more about reflection and organising the things you do. Perhaps you belong to a group of people who are satisfied with their lives and don’t need to change anything. In this case, you don’t need this rule.
If you are struggling with time, duties, energy or money, try to think about your habits and apply this principle to them. Focus your attention mainly on the most profitable things and slowly set up new habits and routines in this way. Analyse your day thoroughly and try to find out exactly what activities bring you what benefits.
Paretův princip jde do hloubky
You don’t have to stop at the explanation that 20% of your clients bring 80% of the profit. You can go even deeper. 80% of 80% of the profit is brought by 20% of those first 20% of customers.
It is not strictly given that the distribution of force must be exactly 80% and 20%. Sometimes 70% and 30%, or 85% and 15% may apply. It is not about perfect accuracy. It is about a certain awareness of how things around us work and how we can use these principles to our advantage.
Have you encountered this rule before? What do you think about it? Do you try to apply it to various life situations and when making decisions?
Do you have a moment? Read more interesting articles: the most popular retraining courses and how to create passive income.
