Pareto Principle – 80/20 Rule (2024)

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Most business people are familiar with the Pareto Principle, also known as the 80/20 rule. Simply put, it says that 20% of inputs generate 80% of outputs. It's a very simple concept, but many people struggle to use it. When it comes to communication, the practical application of the 80/20 rule is to listen 80% of the time.

If we are going to listen most of the time, we ought to do it well and that means using active listening. It is the most effective form of listening and it’s also the most challenging to use. Once you understand how to listen actively, you’ll start to understand why more people don’t do it all the time. It takes effort, especially when you’re first mastering the skills, but it has a huge payoff.

Let’s look at active listening as a process, step-by-step:

1. Mindset/Focus – The first step to active listening is to consciously focus on being an active listener. The act of listening actively cannot be contrived or the person to whom you are listening will know it and it will break your rapport and keep them from speaking openly and honestly. The importance of this cannot be overstated, as without rapport and trust the communication cannot be as effective as it otherwise could be.
2. Pay Attention – Listen to understand. Don’t get off task thinking about what you will say next.
3. Defer Judgement – Separate the person from the idea.
4. Feed it Back – Feeding back what you heard is different from just repeating what the speaker said. When you feed it back you put what the speaker said into your own words to confirm that you correctly understood, not only the words they said, but their intent, emotion and any other things that you sense are embedded in the words you heard. It is not uncommon that people use lingo, acronyms or words that are highly influenced by their culture. When you feed back what you heard, you are ensuring that whatever might have been unclear is brought out and clarified.

Active listening is often an iterative process. When you feed back what you heard the person may make clarifications, add on to what they just said or flat out correct a misunderstanding.

Going back through the process until you and the person you’re communicating with are satisfied that both sides are on the same page ensures you really understand and you have used active listening effectively.

One of the most common barriers to active listening is listening with an intent to reply instead of listening to understand. This is most people’s natural inclination for a variety of reasons and it makes you prone to being distracted trying to formulate what you will say next. Avoid this at all costs.

A great way to get better at identifying and using active listening skills is to model people who are exceptional active listeners. This is easy thanks to the vast amount of video clips of great active listeners at your fingertips online. A quick search for a few names will give you lots of great examples. Some great examples of active listeners include Oprah Winfrey, Charlie Rose and James Lipton, to name just a few.

Some common traits they share are their skillful use of open-ended questions, their excellent body language, and the way they give feedback. When you watch them, you will notice they ask a question and shut up. There are long stretches of people they interview talking uninterrupted. This skill is harder than it looks, as most people feel compelled to interject when someone talks for a while. Great active listeners revel in what they learn when they actively listen. They get information and stories out of people few others can.

The principles of active listening can be applied by FP&A professionals using analytics by looking for the minority of analytic results that drive the small number of the most important decisions. This is what the 80/20 rule is all about and modern analytics tools make it even easier to spot the critical 20%.

Conscientious application of the 80/20 rule can pay big dividends in your communication, so think more about how you can implement it in your day to day FP&A activities.

The article was first published inUnit 4 Prevero Blog