Being a leader is about living your life in a way that inspires or encourages others. Here is the 15th in my series of monthly newsletters, each with a section on the skills you need so you can be a leader of your life. To lead is to serve. If you make it your goal to do the best that you can and to help people, then you can't fail. I encourage you to commit to keep learning.
The content below is extracted from Mike Holt's Leadership Skills - Taking Your Career to the Next Level.
The Pareto Principle: 80-20 Rule
| What 20 percent of your efforts are generating 80 percent of your results? |
The Pareto Principle, also known as the 80/20 rule can change how you manage your life.
The concept is named after Vilfredo pareto, an Italian economist. In 1906 he created a mathematical formula describing the unequal distribution of wealth he observed and measured in his country: Pareto observed that roughly twenty percent of the people controlled or owned eighty percent of the wealth. An avid gardener, he noticed that 80 percent of the yield of his pea crop came from 20 percent of the pea pods. He then noticed that the same ratio appeared in the distribution of land in Italy, where 80 percent of it was owned by 20 percent of the population. He observed that this was a pattern in many other situations as well.
Pareto's observations laid the groundwork for what’s known today as the Pareto Principle. In 1937, Dr. Joseph Juran, a pioneer in quality management, applied Pareto’s observations about economics to a broader body of work. As a result, Dr. Juran’s observation of the “vital few and trivial many,” the principle that 80 percent of the effects come from 20 percent of the causes, became known as Pareto’s Principle or the 80–20 Rule.
The application of this rule can have large consequences for businesses and help leaders identify where they should focus their energy and their money—on the 20 percent that can have the most impact.
You can apply the 80–20 rule to your life and your career:
- What 20 percent of your team is generating 80 percent of the productivity?
- What 20 percent of your customers are generating 80 percent of your revenue?
- What 20 percent of your efforts are generating 80 percent of your results?
Let's take it even further.
- Meetings—80 percent of the decisions come from 20 percent of the meeting time.
- Time Management—80 percent of your measurable results/progress will come from just 20 percent of the items on your daily To-Do list.
- Interruptions—80 percent of a manager’s interruptions come from the same 20 percent of people.
- Product Defects—80 percent of defects typically come from 20 percent of input errors.
- Website—80 percent of your visitors will see only 20 percent of your website pages.
- Advertising—20 percent of your advertising will produce 80 percent of your campaign’s results.
When we look at it this way, it seems obvious that most of the effects (80 percent) come from the smallest number (20 percent) of causes.
The lesson here is for you to stop wasting precious time and resources on endeavors that drain money, energy, and time. Invest in things that provide the largest return. The key is in how you evaluate the questions you might ask yourself such as:
- Do you want to reduce your living expenses? Identify which 20 percent is consuming 80 percent of the resources—carefully consider whether they’re really necessary and get rid of them if they aren’t. Take a bagged lunch to work rather than purchasing it; you’ll be surprised at how much you’re able to save in a short time.
- Do you have talented employees? Focus that talent and energy on the areas that accomplish 80 percent of your goals, and be sure they’re praised and rewarded for doing so.
- Are you having problems getting through your to-do list? If something’s not going to get done make sure it’s not part of that 20 percent!
Separating the essential from the non-essential.
Using the Pareto Principle or “Pareto Thinking” should become a way of life for you, in your personal or your business life. Prioritize your goals #1 and #2. Don't even think about anything that's not a #1. Prioritize your #1 goals into 1s and 2s and only focus on the 1s. Opportunities will present themselves because you're not wasting your energy on the 80 percent that's not important. Your ability to separate the essential from the nonessential will improve with practice, especially if that practice involves the use of actual data and not just “eye-balling” the situation. Once you've established this approach it becomes a normal reaction to managing your time, and even solving problems. In time, an experienced “Pareto Thinker” will even be able to make quick, accurate judgment calls.
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We'd love to hear from you about this series, and the ways you're using it. Send us your comments and feedback by clicking on Post a Comment below. Look out for the next part in this series a month from now, and please share with your colleagues.
To review or catch up on previous newsletters on business and personal development click here.
The above content is extracted from Mike Holt's Leadership Skills textbook.
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