What Is Pareto’s Principle?

80/20 Principle

If you’re a business person, it’s possible that you have heard the 80/20 rule (also called Pareto’s Principle) in reference to your customers or clients. For example, that you make 80% of your sales, from 20% of your clients or customers. But that isn’t the only 80/20 rule that we live our lives by. The 80/20 rule comes in many forms, including that we spend 80% of our lives doing low-value tasks and only a mere 20% doing those high-value tasks that we really need or want to get done.

For example, if you work in or own a business, you might spend 80% of your time fixing mistakes made by other people or finishing menial tasks that, again, might have been someone else’s responsibility. That leaves only 20% of your time and energy working on tasks that are actually related to you and to your role in the business. This whole cycle costs serious time and manpower and is a drain on the company, as your time and talents are not being utilized in the right way.

If you do own a business, that means that 20% of your employees (the really good ones) are doing 80% of the work. And that 80% of your headaches are caused by the 20% of your lowest performing employees. You spend 80% of your time, worrying about that 20% that are not just neutral employees, but are a real drain on your company.

This might sound like a bad thing—and in business and in your personal life it is. It is the natural balance that most people achieve, but it’s not the most effective way to live. Most small business owners are quick to hire and slow to fire. They hire with their gut and fire only when a person has become such a drain that holding on to them will bring the company down. In reality, what should happen is the complete opposite.

Instead of spending 80% of your time on that low-performing 20%, spend it on the upper 20%, those that are getting great results. These are the group that probably do not need very much training. They already know what they need to know or they know how to figure it out on their own. Pouring your resources into this group of people, instead of the lowest-performing individuals, allows you to tip the 80/20 rule back in your favor.