LEADER-BOARD - Masterclass - 051 - Understanding The Pareto Principle
0THEME: Personal Productivity
LESSON: Understanding The Pareto Principle
The Pareto principle states that, for many events, roughly 80% of the effects come from 20% of the causes. It is an axiom of business management that "80% of sales come from 20% of clients".
Richard Koch authored the book, The 80/20 Principle, which illustrated a number of practical applications of the Pareto principle in business management and in everyday life. Following Koch's seminal work, many business executives have cited the 80/20 rule as a tool to maximize business efficiency.
What does it mean when we say “things aren’t distributed evenly”? The key point is that each unit of work (or time) doesn’t contribute the same amount. This is why we offer bonuses and not everybody is, or should be, subject to equality of wage distribution across the board.
In a perfect world, every employee would contribute the same amount, every error would be equally important, and every feature would be equally loved by users. Planning would be so easy. But that isn’t always the case. At least in my experience.
The Pareto Principle helps you realize that the majority of results come from a minority of inputs.
For Example, if…
20% of workers contribute 80% of results: Focus on rewarding these employees.
20% of bugs contribute 80% of crashes: Focus on fixing these bugs first.
20% of customers contribute 80% of revenue: Focus on satisfying these customers.
In economics terms, there is diminishing marginal benefit. This is related to the law of diminishing returns: each additional hour of effort, each extra worker is adding less “oomph” to the final result. By the end, you are spending lots of time on the minor, often unimportant, details.
The point of the Pareto principle is to recognize that most things in life are not distributed evenly.
Make decisions on allocating time, resources and effort based on this:
*Instead of spending 1 hour drafting a paper/blog post you’re not sure is needed, spend 10 minutes thinking of ideas and then spend 50 minutes writing about the best one.
*Instead of agonizing 3 hours on a single design, make 6 layouts (30 minutes each) and pick your favorite and work on that one.
*Rather than spending 3 hours to read 3 articles in depth, spend 5 minutes glancing through 12 articles (1 hour) and then spend an hour each on the two best ones (2 hours).
These techniques may or may not make sense – the point is to realize you have the option to focus on the important 20%. Once you do this, everything changes.
What is your experience of the relationship of time to productivity?
Think about it.
Key Words & Phrases
Roughly + Axiom + Seminal + Distributed + Equality + Bugs + Revenue + Allocate + Glance
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