Pareto Principle

In 1906 Italian economist Vilfredo Pareto created the 80/20 Rule after observing that twenty percent of the people owned eighty percent of the land in Italy. Today we refer to it as the Pareto Principle. In the corporate world, regardless of your industry, 20 percent of the customers account for 80 percent of the business and 20 percent of your time accounts for 80 percent of your productivity.

Recently author Perry Marshall suggested that the Pareto Principle is actually exponential. If you take the initial 20 percent and use the 80/20 rule it works again; meaning the 20 percent of the 20 percent which amounts to 4 percent represents 80 percent of the 80 percent which works out to 64 percent. In essence 4 percent of your customers represent 64 percent of your business and 4 percent of your time accounts for 64 percent of your productivity.

This takes the importance of delegation and time management to an entirely new level. The key is to identify your highest priority tasks (which are usually those that you are passionate about) and find ways to spend the bulk of your time on them. This may require putting the right people and processes in place. Keep in mind, the Pareto Principle also applies to your employees. 80 percent of the work is done by 20 percent of the people. You must first identify the 20 percent. This should be easy as they are the ones that tend to be intellectually and emotionally connected to their work. Next, make certain that they have the resources to maintain their level of productivity, while also ensuring that they stay with you long term.

Make a list of your daily activities at work. Pick those activities that represent the 20 percent. These are your most productive tasks. Your goal now is to find a way to offload the 80 percent. Realize this is difficult to implement immediately but as you focus on it, you will begin to move closer to making it a reality. As you move through this process, you will experience a tremendous boost in your productivity. As we suggested earlier, the Pareto Principle is exponential which means this is a continuous process. The greater your focus the better it works.