Smart business leaders are always searching for ways to allocate their time and resources better. While there’s no magic formula for success, the right framework can provide a springboard for modernizing your leadership tactics and achieving your organization’s goals. Enter the 80/20 rule, also known as the Pareto Principle. This simple yet powerful concept has the potential to reinvigorate the way you prioritize tasks to drive business success.
What Is the Pareto Principle (or, the 80/20 Rule)?
The 80/20 rule, or the Pareto Principle, is a concept that suggests roughly 80% of effects come from 20% of the causes. Essentially, a small proportion of inputs can lead to a significant proportion of outputs, according to the rule. For example, it implies 80% of your sales are likely generated by about 20% of the items or services you offer.
While it tends to pop up in various parts of life, the Pareto Principle, also known as Pareto's law, isn’t a mathematical law, and it’s not always true. It's more of a broad guideline that can help you more efficiently optimize business activities.
Real Life Examples of the 80/20 Rule
The Pareto Principle was first proposed by Italian economist Vilfredo Pareto, who wrote in his Manual of Political Economy that 80% of the land in Italy was owned by 20% of the population.
Though not always identified as a “rule,” this ratio has been recognized in various areas of life:
- Athletes, for instance, have been found to benefit from spending 80% of their time training at a lower intensity, with the remaining 20% spent at medium to high intensity.
- According to the National Library of Medicine, adults spend about 80% of our time in non-REM sleep and about 20% in REM sleep.
- In health care law, insurance companies are generally required to spend at least 80% of the money they take in on health care costs and quality improvements and 20% on administrative expenses and overhead.
In the business world, identifying the 20% of inputs that lead to 80% of outputs can help managers, employees, and the organization as a whole understand where to focus efforts to better inspire change or achieve the most value.
For example, if 20% of customers generate 80% of revenue, it may be smart to prioritize their needs and preferences to ensure retention and increase long-term customer value. Similarly, managers can use the 80/20 rule to inform their workforce management strategy.
The 80/20 Principle: 20% of Employees Shoulder 80% of the Work
The Pareto Principle suggests that a small minority of employees is responsible for the majority of an organization’s productivity. These 20% are the floor leaders – the ones who know what to do and simply take care of things.
If this is the case in your company, you can leverage the 80/20 rule to better manage employees and ensure workers are as productive as possible – while also creating a positive and rewarding work environment for all employees, not just the top performers.
To get started:
- Identify the 20% of high performers. Sometimes these people are obvious. Other times it’s harder to figure out who they are – have you ever had an unassuming coworker who was quietly shouldering the bulk of the load? Use performance metrics and feedback from colleagues to determine who’s contributing the most. Appreciate these individuals and reward them on occasion, whether through bonuses, promotions, public recognition, or something else.
- Develop the skills of the remaining 80%. Paying attention to and supporting the “average” employees reduces the chance they’re left feeling undervalued – after all, they’re important too. Ensure they have the tools they need to contribute more to the organization. This can include training programs and mentorship opportunities or even an annual stipend for skill-building courses.
- Delegate effectively. Identify each employee's strengths and weaknesses and assign tasks and roles accordingly. This ensures everyone’s responsibilities suit their strengths, which can in turn empower them to contribute more.
A Few Employees Cause Most of the Problems
What accounts for 80% of problems in the workplace? Often just a few – maybe 20% – of workers.
Whether their productivity is lacking, they’re frequently absent, or they regularly make mistakes, these are the employees who are more likely hurting the bottom line. In some cases, the solution is to let them go. This can be hard, especially if that 20% includes earnest people who are genuinely trying to do a good job.
But it’s not always best to immediately discipline or fire employees without addressing the root of the problem.
- Figure out what’s causing their behavior and address it directly. If an employee is making errors due to poor training, for instance, additional training opportunities might be enough to set them up for success.
- Provide regular feedback and support. Some employees are prone to acting out by “quiet quitting.” In other words, if they’re feeling underappreciated or burnt out, they disengage, putting in the absolute minimum effort required to get through the day. Routine check-ins can help problem employees understand the impact of their behavior and give them an opportunity to make positive changes.
- Genuinely listen to and consider their input. If employees are struggling to perform but are committed to the organization and want to give it their all, it may be time for some changes. Maybe they’re privy to some on-the-floor issues that have been disturbing workflow, or maybe they just need a greater sense of autonomy. Genuinely considering their thoughts can help foster a positive work environment and go a long way toward inspiring a sense of purpose. Think about how you’d feel about your job if your input didn’t matter. Feeling valued can transform work into more than just a means to a paycheck – and maybe help some “problem” workers get back on track.
Personnel Management: The 80/20 Principle
Business managers tend to spend a significant amount of time working with employees to resolve issues and give advice. If 80% of your time is spent working with the 20% of employees who require the most attention and support, and your must-do tasks are getting pushed to the back burner, it’s time to rethink your day-to-day.
To better manage your time and resources:
- Use the Pareto Principle to prioritize efforts. Focus on the workers who need the most help. If you have an employee who constantly asks questions or requests assistance, but you know full well they’re capable of success without the hand holding, shore up their confidence. Let them know you trust them to handle the work and encourage them to find their own solutions.
- Set office hours. To avoid constant interruptions, clearly convey to all employees you're available to talk during specific hours but at other times must focus on different tasks. If multiple people want to talk to you at once, prioritize meeting with individuals who rarely ask questions or have pressing issues. Doing so can help you manage personnel more efficiently.
The Takeaway
The Pareto Principle, also known as the 80/20 rule or Pareto's law, states that 80% of effects come from 20% of causes. Business leaders can leverage this framework to focus efforts and resources where they matter most. Pareto's law can be a great way to reveal insights into your employees and inform your workforce strategy. For example, if 20% of your staff is shouldering 80% of the workload, the Pareto Principle can help you decide who to reward and continually challenge, as well as who’s in need of additional training or development.
A version of this article was originally published May 10, 2010.
Images: Getty
