Pareto principle and efficiency
80 percent of success is showing up
The Pareto Principle or the 80:20 rule
With busy family lives and multiple ‘hats' to wear, time for most homepreneurs is at a premium. This is particularly the case if you have small children when the working day is shrunk to just a few hours between nursery or school drop off and pick up. Added to this are the school holidays, snow closures and days when they're off sick. It feels like you are trying to squeeze a pint into a quart pot.
So how does a research by Italian economist, Vilfredo Pareto over 100 years ago help with our seeming lack of time? Pareto discovered that about 80% of the land in Italy was owned by 20% of the population. This 80:20 ratio named the Pareto Principle crops up in many situations:
- In economics, where the richest 20% have over 80% of world GDP
- In technology: Microsoft found that 80% of errors are found in 20% of code
- In sport, where 20% of exercises and habits yields 80% of the impact on results
- In business with 80% of sales coming from 20% of customers
- In project management, 20% of the effort yields 80% of the results, and
- In investment where 80% of returns comes from 20% of the stocks in a portfolio
It's important to remember that these statistics are broad observations. The Pareto Principle isn't a law, it's an observation. If you are going to apply the 80:20 rule to your situation it doesn't have to be an exact calculation. But what it does tell us is that focusing on a small number of important activities will bring the majority of the outcome.
How does the Pareto Principle help us with efficiency?
- Overcome the paralysis of perfectionism
- Focus on your most profitable activities
- Stick to what you're good at (and probably what you enjoy most)
- Start with The One Thing that is going to help you get nearer your goal
If you are a bit of a perfectionist then working under time constraints can be extremely frustrating. Let's take the example of writing a proposal to a prospective client. It's one of those tasks which is extremely important (a revenue task, as I like to call it) but it's also a task which eat into the day. There has to come a time when the proposal is good enough. As long as you have covered all the main points, checked the spelling and grammar you are 80% of the way there. It has to be sent at some point and when you are 80% happy that sometimes has to be good enough.
Another example is one I frequently see when advising clients who wish to grow their profits. Instead of working out which products or services are yielding 80% of the their existing profits, and focusing on those, they dream up some new category to test out on a completely new market segment they know very little about. Not a great strategy. If 80% of your revenue is coming from first aid training to nursery nurses, do more of that until the market is saturated.
When it comes to working out how to use our limited time effectively, it's vital to understand what 20% of all our activities is getting us 80% nearer to achieving our goals, and then focusing on the single most important first. Additionally, concentrating on those activities we are particularly skilled at rather than doing those things the we struggle with rather than outsourcing them to an expert, will not only save you time, but reduce your stress and the end result is likely to be a great deal more professional. When you are tackling the most important task you might like to adopt The Pomodoro Technique which will help you stay focused and motivated. Read more about the Pomodoro Technique for productivity.
What is your 80:20 principle? Let us know in the comments below.
Until next time, have an efficient week!