In 1906 an Italian economist called Pareto published research showing that 80% of the wealth in Italy was owned by 20% of the population. Later researchers realised that this principle could be applied to other areas of life, for example
- 80% of sales come from 20% of customers
- 20% of your work produces 80% of the results
- 20% of products produce 80% of revenues
- 80% of accidents at work are caused by 20% of causes
- 80% of staff conflict is caused by 20% of staff
This principle is therefore very important, and when we look hard at it we can see intuitively that it is true. It is not exact – some relationships are 85/15 and some are 90/10, but 80/20 is a good guide to work from.
What does it mean to you? I will give a couple of examples from my own life.
Some years ago I was carrying out a household spending review. There were a whole lot of things we could have done to reduce expenditure, such as turn down the thermostat, eat fewer takeaways, buy cheaper brands, remember to switch off lights when we leave the room, and so on. These were all worthy and sensible things to do. However, at the time over half of our spending for the month was on the mortgage repayments. I called the mortgage lender and renegotiated the repayment rate, reducing our spending by £200 per month with one phone call and a follow-up letter or two. 20% of the effort involved produced 80% of the results.
On another occasion I wanted to get fit and lose some weight. Again, there are a number of actions which I could have taken to help, but I chose just one. I stopped drinking wine with my evening meal. Not only did I reduce my calorie intake, but also I stopped feeling sleepy in the evening, so I was more active. Because I was more active, I tended to snack less in the evening, so with one action I was able to become more active, reduce my calorie intake and become less hungry. Losing weight and getting fit became easy.
The 80/20 rule can work for you in the same way. When you want to achieve something, look at your options for action. There will probably be several possibilities, but choose the one which will make the most difference and concentrate on it. You will get rapid results and this will encourage you to make a review of the situation and decide if there is now a further factor that is the 20% which will make 80% of the difference.