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How the Pareto Principle Can Erase 80% of Your Work

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What do landownership, economics and Italy have in common? No it isn’t a bad joke…it’s an honest genuine question. It's also my article's introduction.

So, to answer the intriguing question I made in the introduction; what do landownership, economics and Italy have in common? Well, back in the early 20th century an Italian economist named Vilfredo Pareto (am I the only one who craves a Penne Alfredo when they hear his name?) noticed that 80% of the land in Italy was owned by only 20% of the population.

No, this is not some occupy 20% socialist rhetoric, what contemporary economist have noticed is that this 80/20 distribution happens extremely frequently in both economic systems and the business world. For example, the application of the Pareto Principle has shown that more often than not 20% of your customers create 80% of your sales and that 20% of your time produces 80% of your work. I know this seems a little abstract but bear with me.

Prioritization

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If you are a decent (not even a sequin-wearing super-star) administrator, you already know the importance of prioritizing certain tasks over others. Well, with the Pareto Principle you can take it a bit further. Although, it’s true that all customers are important to a business or a company, the ones that create revenue should experience some sort of positive bias.

For example, a perks program is perfect for your revenue generating customers, which can offer anything from more personalized customer service and assistance to discounts on reoccurring orders. This way you dedicate more resources to the 20% of your clients that make purchases, but at the same time, you don’t risk alienating customers that don’t have that much purchasing power.

The Principle also applies to workload, so the 20% of the tasks you complete which yield 80% of your results should be prioritized. If you think about it, if you spend 80% of your time on something that only produces 20% if you didn't even bother doing it, do you really think it will make a difference? Probably not.

Further Divisions

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According to this Forbes.com article, the Pareto Principle subdivides into itself…kind of like a Pareto Principle inception. I know that sounds complicated, mathematical and convoluted but trust me it makes sense. So of the 20% of customers that create 80% of sales, there is 20% of your “good customers” that generate 80% of the original 80% of the sales. Yeah, it’s a mouthful and a little hard to conceive. Basically, 4% of your customers create 64% of all your sales.

But, The Pareto Principle (again according to the same article) is a scalable effect, meaning that there is a possibility to find more 4%er customers by scaling to the third and fourth power and beyond. Digging exponentially deeper to keep finding better 4%er customers..

Work Division

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The 80/20 ratio can be applied to your workload. 4% of all your tasks will produce 64% of your results. The only caveat here being assessing what are you most effective, efficient and cost-worthy tasks that yield those (admittedly) amazing results. Out of an 8 hour work day (and this is in an ideal situation, let’s all be honest with ourselves and admit that no one on the face of this earth works just eight hours anymore) less than 20 minutes of work, 19.2 minutes can yield more than half of the day’s results. Remember, though, first you need to figure out which of your daily tasks are the one’s that yield those results.

Trimming The Fat

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In extremely simple terms, the Pareto Principle is basically trimming the fat, curating the processes that you engage in on a daily basis to make them more efficient and beneficial (and potentially profitable). For example, according to the Physicians for A National Health Care Program most physicians spend an overwhelming amount of time on paperwork (or about 16.6 percent according to their study). Although the Pareto Principle doesn’t exactly overlap with this example, it comes pretty close.

About 20% of physicians’ time is dedicated to something that isn’t as beneficial as seeing patients. In 2014 it was estimated that $102 billion was spent on administrative tasks. $102 billion that could’ve gone into research, patient care or even to alleviate the burden of high-cost medical care.

See Also: 5 Signs You've Worked in Retail for Way Too Long

Have you experienced the 80/20 principle in practice? Let us know in the comment section below…but only use about 20% of the words you need to, to see if the Pareto principle works.