The Pareto Principle (or 80/20 rule if you prefer) is a classic business rule that pops up all over the place. It states that 80% of effects come from 20% of the causes. Said differently:
- 80% of your time is taken up by 20% of your projects.
- 80% of your profit comes from 20% of your clients.
- 80% of your stress is caused by 20% of your employees.
- 80% of your costs are caused by 20% of your locations.
- 80% of your employees are in 20% of your locations.
Look through your numbers and you will almost invariably see this trend pop up over and over. It’s rare that I find a dataset that doesn’t include several versions of this rule in the numbers. When working with brand new numbers, this is a good place to start to identify trends and causal relationships.
The 80/20 rule is also good for setting out your day. Deal with the small things first so that you feel like you are productive before conquering the big things. Focus on the noise caused by the smaller populations to save yourself time.
It’s also a good thing to keep in mind when you find yourself underwater. Everything comes full circle. 20% of your days generate 80% of your productivity.