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Have You Ever Heard of the 80:20 Principle?

In this week’s Blog, we are going to get a little bit philosophical. Sometimes, it can be beneficial in our busy and hectic lives, to try and look at things and life in general, from a different angle or from a different perspective. Sometimes, by doing this we can reduce and relieve the stress and tensions of our busy modern day lives.

There is a principle that applies not just to Business life, but also usually applies to Personal life as well. This is called the 80:20 Principle, or sometimes known as Pareto’s Law.

Now as soon as I mentioned the phrase Pareto’s Law, I know some of you will automatically be reaching for the TV remote control button to find out when this new TV detective or Police drama series is about to commence. Well, I am sorry to disappoint you, it is not another Inspector Morse, Lewis or even Bergerac, or for those of you born in the late fifties and early sixties (like me!), another Dixon of Dock Green (Evening All! – remember that?), Z-Cars, or for slightly younger readers, the classic 70’s series of ‘The Sweeney’. No, Pareto’s Law is none of these things.

What Pareto’s Law does say is that the minority (20% say) of causes, inputs or efforts, usually leads to a majority (80% say), of the results, outputs and rewards. This means that, for example, 80% of what you actually achieve comes from only 20% of the time spent. So, what this means is that for practical purposes, 80% of the effort, a dominant part of it, is largely irrelevant. In other words, a few things are important, but most things are not.

There is not an exact % here, it could be 10% or 30%, rather than the 20%, but the key thing to remember is that there is an imbalance, with some things being far more important to the end result, than others.

You will, I am sure, be able to relate to some examples in personal life of this Pareto’s Law in action. For example in football since the formation of the Premier League back in August 1992, 75% of the Premier League title wins have been won by only 25% of the Premier League Clubs (there have only been 5 clubs out of a possible 20 clubs competing each time – these are Man Utd, Blackburn Rovers, Arsenal, Chelsea, and quite dramatically last year, Man City ). And keeping with the subject of football, and for a ‘Brucie Bonus’, who can name me the last title winners of the old English First Division Title, the predecessor of the Premier League?. – Ian from Hook, near Goole has just e-mailed me and asked was it Leeds United? As Churchill the Dog would say “Oh Yes!” – A Brucie Bonus is winging its way across to Ian from Hook.

So, in your personal life you just need to identify what results you want, and then look for, and continually search for, a super-productive way to get those results. If you can identify these super-productive ways, then by implementing these ways and methods, you will get an extraordinary return for your efforts, without having to put in extraordinary amounts of effort.

In the Business world, Pareto’s Law is easier to see and identify. Some of the things you would need to identify and target are:

  • The 20% of your customers that generate 80% of your profits.
  • The 20% of the different types of products or services you sell, that generate 80% of your profits.
  • The 20% of your customers that provide you with 80% of your problems.
  • The 20% of the things on your to-do list that will generate 80% of your results.
  • The 20% of your decisions that will lead to 80% of your progress.

We have an old English quaint phrase and old school of thought that it is wise not to put all your eggs into one basket. What the 80:20 rule does though is to suggest you choose your basket very carefully (ie so that it reflects the most important 20%), put all your eggs in this, and then watch it like a hawk, ie concentrate on this 20%.

If you do just that, then what you have effectively done is to identify the most important 20%. Then by concentrating on getting results from this 20% AND at the same time also identifying the not so important 80%, and so deliberately done less of these, you will be concentrating your efforts in the areas that will give you the maximum results.

But, there is no reason why this 80:20 rule or Pareto’s Law cannot be applied not just to Business, but also to every other aspect of your life, and so give you maximum results for the same input of effort. It is just making sure that your effort is being directed into the right areas.

Phew, I did warn you this Blog would get a little bit philosophical, so give me a Tax Book any day! – Ah, which one are you going to read to give you the maximum results, I hear you ask………………..?

Rickey

Rickey Cooper FFA, FMAAT, ATT
JCL – Jones Cooper Limited

 

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