In Leader Development, Leadership, Leadership Tips, Strategy

The Pareto Principle (also known as the 80/20 rule) states that for many events, roughly 80 percent of the effects come from 20 percent of the causes.

More generally, the Pareto Principle is the observation that most things in life are not distributed evenly. It can mean all of the following things:

  • 20 percent of the input creates 80 percent of the result
  • 20 percent of the employees produce 80 percent of the result
  • 20 percent of the customers create 80 percent of the revenue
  • 20 percent of the software bugs cause 80 percent of the software crashes
  • And the list goes on and on and on…

The Pareto Principle can help you realize that the majority of results come from a minority of inputs. If 20 percent of employees contribute to 80 percent of the results, then focus on rewarding those employees. If 20 percent of bugs contribute to 80 percent of crashes, then focus on fixing those bugs (or issues) first. If 20 percent of your customers contribute to 80 percent of your revenue, then focus on satisfying those customers. The examples can go on and on. However, the point is to realize that often times you can focus your effort on the 20 percent that make a difference instead of the 80 percent that doesn’t contribute to much of anything.

In other words, 80 percent of our actions are daily routines and tasks that we can’t ignore, but they may not move us towards our goals. What matters is selecting the best activities for the 20 percent of our day that we reserve for strategic action. This 20 percent of our actions will lead to 80 percent of our results.

So, what 20 percent of your work drives 80 percent of your outcomes?

Apply the Pareto Principle to your strategy selection. As we strive to achieve ambitious annual goals, what is most likely to yield results? We can refer to research evidence and past performance to select amongst the many strategies available, but we will achieve more by selecting a small number of highly promising strategies, and committing 20 percent of our day to making them Leader Always Actions.

 

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