What is the 80/20 rule?
The 80/20 rule is basically The Pareto Principle. An Italian economist named Vilfredo Pareto coined this – one day, strolling through his garden, Pareto noticed that every year, 20% of the pea plants in his garden produced approximately 80% of the peas. This got him thinking about economic output on a larger scale. Sure enough, he began to find that in various industries, societies and even companies, 80% of the production often came from the 20% most productive portion. The original observation of the Pareto Principle was linked to the relationship between wealth and population. According to what Pareto observed, 80% of the land in Italy was owned by 20% of the population.
This became known as the Pareto Principle, or what is now often referred to as the 80/20 Principle. It basically tells us that 80 percent of results come from just 20 percent of effort and this has been applied to a wide range of areas including management and at a personal level too to amplify productivity.
It is actually a brilliant hack to focus time, resources and energy if done right.
Can the 80/20 rule be applied to Leadership?
Heck – Yes! After all 20 percent of the causes produces 80 percent of the consequences.
✨So 20% of your activities should account for 80% of your results
✨80% of ideas should come from your team, 20% should come from you
✨80% of your focus should be spent on the “right” 20% of the people (and those are not the low performers!)
✨20% of projects bring 80% of the revenue/reputation – so identify the right ones!
✨ And only 20% of your decisions are really really important and have leverage, give the other 80% to others (this is a micro-management reminder)
Is it that simple?
Well, to start with – The Pareto Principle is an observation, it is not a law nor a rule. So there will be situations where this application may not be observed as all tasks and projects do not generate the same benefits.
So, how do we apply the concept in Management and derive value out of it?
Managers can use the following strategies to leverage the 80/20 principle to better lead their team, focus on specific projects, and drive key results.
The 80/20 Principle has historically been most popular in business management situations.
🔆Businesses often found that roughly 20% of their customers brought in 80% of their sales.
🔆They found that about 20% of their sales reps closed 80% of the sales.
🔆They observed that 20% of their costs led to 80% of their expenses.
🔆 Some tech companies have found that 20% of the bugs found created 80% of the problems for their users.
🔆 In terms of time management, businesses often found that 20% of their time created 80% of their productivity, and that 20% of their employees created 80% of the value.
As time went on, the 80/20 Principle became a popular management tool that was used widely to increase efficiency and effectiveness within businesses and industries. In fact, even in healthcare, about 20% of infectious individuals are responsible for transmitting and spreading 80% of the disease, which has included STD’s, SARS, and even COVID-19.
Some of the key areas in leadership and management that the 80/20 rule can be applied as a best practice post sharing’s by leaders and managers are:
🎯 Distinguishing your long-term and short-term focus: While it is important to focus on the short-term goals now, it is equally important to spend the majority of your time and attention thinking about, and planning for the long term. This translates to spending 80% of your time on long-term strategic preparation and 20% on the tactical and logistical details.
🎯 Prioritizing Projects: Once you have classified your most important projects as a To-Do list then list out the priority 20% projects and give them 80% of your team’s time. It’s a good idea to prioritize those initiatives that promise the most significant strategic advantage as well as put timelines for the same. These could be new features or products or services. Projects like these entail fixing that glitch that is resulting in complaints from your consumers or something that is hurting your market reputation and driving your net promoter score down.
🎯 Focus on your most valuable customers: It is easily verified in most companies that 20% of the customers account for 80% of the business revenues. Apply the principle to zero in on your most important customers. “important” is relative, depending on your goals. E.g. if your product is new, ‘important’ users are the one’s doing the most online posting and sharing their product/service experience. However, if your product is already well-established, ‘important’ customers would be the volume buyers or the ones who generate the most revenues.
This gets the focus to identify that 20% of your customer base so that you spend 80% of the time cultivating those relationships – Make exclusive offers available just to them, involve them in your new product surveys, put them on priority for features or customization.
🎯 Decision Making: The best thing about the 80/20 rule is that it forces leaders and managers to guide, coach and empower their team members. Many managers commit the mistake of being overly directive whereas 80% of decisions should come from your employees. Big tech companies such as Google and Intel, use OKRs (Objectives and Key Results) as a way to instil a sense of responsibility and accountability among their employees.
🎯 Time Management: The Pareto principle can help you to make the best decisions during the problem-solving process. When there are many different problems or many solutions to one problem, the Pareto principle can help you prioritize solutions. Assign a value to each of these problems/solutions based on the impact to the business. The value can be as simple as a number between 1-10, or actual monetary value to indicate the importance.
Develop a plan to focus on the top 20% of the problems that impact the business. The idea is that one solution might resolve multiple problems. Based on the values you assigned to each problem, calculate which ones are in the top 20%. Once you’ve identified the main problem, develop a plan to create a solution that can result in 80% of the results using problem-solving strategies.
🎯 Team Management: As the leader or manager, you should shoulder not more than 20% of the actual managing. Spend 80% of the time listening to those you manage. The primary role of a leader or manager is to guide his staff, not to take on their work. Thus, 80% of the time should be spent on listening to them and guide them, not just tell them what to do.
🎯 Performance Management: If you recognize and reward your top performers in the same way you do with your average performers, they will most likely leave, and you will be stuck with your average workers. Focussing too much on your low-performers is not the solution. Consider providing greater rewards and benefits to top-performers – in a different context such as an improved healthcare, wellness programs, low-interest loans, retirement plans etc. which will reward them in kind and also motivate average employees to do better.
🎯 Productivity: You can use the 80/20 rule to prioritize the tasks that you need to get done during the day. The idea is that out of your entire task list, completing 20% of those tasks will result in 80% of the impact you can create for that day. So start by identifying which tasks have the most impact for your team and focus on those for the day.
Use the 80/20 Rule to Your Advantage
The 80/20 rule shows up almost everywhere in the workplace. It is emerging as an extremely valuable tool and helps save time while helping to guide our efforts on the most productive tasks and projects. Using it to involve the team members enables the employee an opportunity to share ideas, think deeper, and participate in many company initiatives.
The 80/20 rule is not a formal mathematical equation, but more a generalized phenomenon that can be observed in economics, business, time management, and even sports.
The biggest advantage of using the Pareto principle is that you can create the maximum amount of impact with the least amount of work. This can allow your team to work more efficiently and stay focused on specific initiatives.
The 80/20 rule can help your metrics increase in less time, simply by prioritizing initiatives in the right order.
Disadvantages of using the 80/20 rule
A huge misinterpretation of the Pareto principle is that with 20% of effort, you can achieve 80% of the results! This is the case at all. The 20% and 80% numbers don’t refer to the amount of effort you’re putting in, but the causes and consequences you’re working on.
The end goal is not to minimize the amount of effort, but to focus that full effort on a specific part of work to create a bigger impact. You still have to put 100% of effort into that 20% of focus to achieve 80% of results.
Another disadvantage the 80/20 rule brings is that sometimes team members can get too focused and lose sight on other tasks. If you only focus on the priority tasks and put aside the less important tasks, like email and other administrative tasks, things can come to a standstill.
The 80/20 rule and You
The challenge therefore is finding the sweet spot of using the 80/20 rule, and getting through the rest of your tasks.
What changes could you make in your life today based on the 80/20 Principle?
Start by asking yourself 👇🏽
💡 Which 20 percent of sources are causing 80 percent of my problems?
💡 Which 20 percent of sources are resulting in 80 percent of my desired outcomes?
➡If you want to know how you can get help and support for yourself or for your organization to apply the tactics of this principle, book an exploratory session on the calendar at: