You know the Pareto Principle or the 80-20-rule, right? It is one of the most powerful mental models to get forward in life faster. Understanding and applying the Pareto Principle in your life can boost your effectiveness. It can bring your success to a whole new level. Though it is very simple, applying it is sometimes tricky.
It demands a certain degree of courage and confidence to go all-in on the 80-20-rule. But the rewards are definitely worth it. Read on to improve your skills to apply the pareto principle in your work and life. It is one of the most powerful ways to look at almost anything in the world.
This is a step-by-step guide.
I will show you:
- Why it is important
- How to do an 80-20 analysis
- How to eliminate the bottom 80
- What to do with your free time.
What is the Pareto Principle in life?
The pareto principle states that in very many circumstances 80 % of the value comes from 20 % of the input. The principle is named after Italian economist Vilfredo Pareto who discovered that 80 % of the land in Italy was owned by just 20 % of the population. This was the result in developing the statistical concept of the pareto distribution.
Later in the 1940s, the Romanian-American management consultant Joseph M. Juran applied this distribution to quality management. He realized that 80 % of the quality problems can be solved by 20% of the issues. In other words: If you are a quality manager you can work on just 20% of your tasks at hand to achieve an 80% spike in quality. Other researchers later found that similar distributions are common in all kinds of areas. Since then, the principle of uneven distributions as been applied to all sorts of fields. Think sports, fundraising or occupational health.
Most of all, the Pareto Principle had a tremendous impact on project management and personal productivity. Experience shows: The value of tasks follows some form of pareto distribution. In other words: “Not all tasks are created equal“
Does the 80-20 rule always apply?
The distribution is not always exactly 80 to 20 but the message is clear: Most things in life have such a skew distribution and the pareto principle applies. Moreover, whether the distribution is 80/20 or 75/25 or 90/10 does not make a big practical difference anyway. So, let’s assume 80/20 for our discussion.
I am sure, your practical experience and common sense also prove the point. Sometimes a few little things can make a big difference. While at other times, you are working for hours or days without making much progress. Some tasks just create way more value than others.
How does the Pareto Principle affect your life and work?
When you apply this to your personal life it has several implications:
- 20 percent of your tasks create 80 percent of your value
- 20 percent of your friends create 80 percent of your joy
- 20 percent of your projects create 80 percent of your success
- in every task, 20 percent of effort already produces 80 percent quality
- 20 percent of your customers generate 80 percent of your income.
- you could create 80 percent of your income with 20 % of your work
Sure, this leads to the practical conclusion to focus on the 20 % of your work with the highest value. You could use the remaining time more wisely. How do you get there?
How to do an 80-20 analysis
Finding out what your most valuable work is, is not always easy. If you’ve never done an 80-20 analysis, you can first follow your intuition. You might have a good feeling on your most time-consuming and tasks with low value contribution. Start out by making a list of these tasks. We will later decide how to deal with them.
Get transparency on your time spent
To really make a leap forward, you need more transparency. Our mind tricks us too often and we are biased by our likes and dislikes if we only follow our intuition. Thus, we need to balance intuition with some scrutiny and analysis. It all starts out with transparency. You need to know, how you spend your time.
Track your time usage over a course of 2-3 weeks. You can use a time tracking app or a simple spreadsheet. The point is to track EVERYTHING and do it in sufficient detail. This level of detail will cost you time. But it is an investment into your future. See it as a temporary assessment. You will not want to track in this level of detail all the time. Do it for two to three weeks and then look a t the results.
Know the worth of your work
The other side of the 80-20 analysis can be trickier. For some topics you have hard indicators like the effective daily rate you charge a customer. In other cases, it is not clear what value different tasks actually do create. Finally, there’s not only money to be considered. Some activities help you grow your audience, improve your skills or your health. Do your best effort to evaluate the effect you can achieve with the different tasks on your list. Apply the same principles as when you set priorities on a daily basis.
Identify Pareto’s Bottom 80
You should now have a list of all your tasks together with the time spent and the value created. Either from analysis or from an intuitive estimation.
You now calculate the effort-benefit-ratio: Just divide the value by the time spent. Now you sort the whole list by this value with the highest ratios at the top. As a final step you start at the bottom of the list and add all time spend together. As soon as this number hits 80 % of your time, you draw a line.
Everything below this line is your bottom 80. This is the kind of stuff that keeps you from creating more value and becoming more successful. To cut a long story short: These are the things you should not be doing anymore. Look at them carefully and ask yourself: How can I get rid of this?
How to eliminate Pareto’s Bottom 80
It turns out there are six main strategies to follow Pareto’s Law and eliminate work with little value add.
Just don’t do
Some of the tasks can just be omitted. They produce so little value that you will not realize it anyway. Stop those right away.
Sometimes the reason for excess time consumption is complication. Either the task at hand or the way you perform is too complicated. Ask yourself if there is an easier way to accomplish your goals. Remember: Productivity is never about the work itself. It’s all about the output you produce. So, is there a way to use a better tool? Can you remove some of the steps or subtasks without compromising on the results? Are all reconciliations with other people really needed? Or are they organizational folklore that you could ignore?
If you need to do a task often, always look for ways to automate. It’s better to invest a day or more in automating a task than working on it for on hour each day. Tech savvy people have an advantage here. Nevertheless, even if you can not code, there are possibilities to use no-code environments to automate at least the simpler tasks. And you can also always ask others to automate for you.
Some of the low to mid value tasks could be delegated. You do not need to produce everything yourself. Instead, you can focus on the high value aspects of these tasks. Setting and defining the goals and general direction for a project brings higher value than actually doing it. Leadership and performance management also have higher impacts than being led. Use delegation wherever you can. If you do not have delegees, think about creative ways to delegate sideways or even upwards. Make sure you have an efficient follow up system in place.
Reduce the intensity of work
Some low value tasks might be what I call “infinity tasks”. Those tasks can essentially never be finished because the do not have an inherent end to themselves. Often, they appear in creative or conceptual work for which no clear outcome has been defined. Set a clear goal for this type of task to know when you are finished. If you can not define the outcome clearly, set a budget and stick to it. Set the budget low enough so that the effort you put in, corresponds to the value the task can create. It is essential to work with time constraints on these types of tasks.
Settle for good-enough solutions: 80 % perfection
The 80/20 value distribution of Pareto’s Law does not only apply to your work as a whole but also to every single task in itself. If you can get along with an 80%-is-good-enough solution on all your low value tasks, you could already cut almost two thirds of your workload. (80 % of 80% are 64 %). Think about that: You would not even need to stop doing anything. You only content with a little less perfection on those tasks that create little value anyways. This step alone has the potential to give you more than five extra hours in a 40-hour work week.
What to do with the free time?
When you are thorough with your 80/20 analysis and draw the consequences from it you will have a lot of free time. These can easily add up to several hours a day. How do you make use of these?
Double down on the high value stuff
A straightforward next step is to double down on your high value tasks. Do more of the things that make you successful. This will give you a boost in productivity and success. However, you need to realize that this will have diminishing returns at some point.
Do the important stuff better
You should also use some of the newly available time to improve the quality of your output of your most important tasks. Invest a little more time in this super important project pitch. Make sure you nail that audition that brings you to a new career level. Prepare better for the salary negotiation with your boss. Sometimes a single task can have a tremendous effect on your overall success. You should make sure to get it right.
Reduce your workload to have more time for other areas of your life
Finally, a not to be neglected approach is to reduce your workload. This is especially true if you are heavily overworked. Having decreased your workload, you can follow your interests outside the realm of your core work with hobbies, family, and friends.
Use the free time to explore new ideas and opportunities
The fourth and for many most rewarding possibility is to use a part of the freed time to explore new ideas and opportunities. Start the side project you were thinking about for a year. Participate in networking events and get in touch with new people. Learn a new skill or invest an hour a week in reflection. Your life can become more colorful and rewarding as you extend your opportunity space.
Pushing the Pareto Principle to the limits.
A fact, many people do not notice is this: The items within your top 20 percent also follow an 80:20 distribution. This means when you are done with focusing on the most value creating tasks, you can again increase your effectiveness by magnitudes just by redoing an 80-20 analysis on these top 20.
This means focusing on just four percent of the stuff you did previously. Doing this, you could achieve almost two thirds of the results with less than five percent of the effort. Your effectiveness would be 16-fold.
Just imagine how much better you would perform if you could only focus on those topics. You could channel a lot of time and energy into more productive uses.
Of course, this can be repeated again and again. The principle also explains the enormous differences between people regarding their effectiveness. Some people just naturally only focus on those topics that drive the most value. The rest they either neglect or delegate.
If you want to boost your success, get started by analyzing your work now.