Italian economist Vilfredo Federico Damaso Pareto observed in 1906 that 80 percent of the land in Italy was owned by 20 percent of the population. Later, he observed this noteworthy ratio seemed to apply to other parts of life, such as gardening: 80 percent of his peas were produced by 20 percent of the peapods. Over time, this concept has come to be known as the “Pareto Principle,” “The 80/20 Rule,” and even “The Vital Few and Trivial Many Rule.” Interestingly, another of Pareto’s most noteworthy and controversial theories is that human beings are not, for the most part, motivated by logic and reason but rather by sentiment.
In the business work, it has been found that the principle could be applied to many areas, such as:
- Applied to Meetings: 80% of decisions come from 20% of meeting time.
- Applied to Managerial Headaches: Roughly 80% of your managerial problems and headaches are caused by just 20% of your problems.
- Applied to time management and your daily To-Do List: 80% of your measurable results and progress will come from just 20% of the items on your daily To-Do list. The major problem is that most people are so busy fighting fires that they never get around to the most vital few activities that will lead to the greatest results.
- Applied to Interruptions: 80% of a Manager’s interruptions come from the same 20% of people
- Applied to product defects: Roughly 20% of the input errors typically cause the lion’s share of defects.
- Applied to Salespeople: Roughly 20% of a sales force will develop 80% of the annual results.
- Applied to Customer Complaints: Roughly 80% of customer complaints are about the same 20% of your projects, products or services.
- Applied to Business Units: Roughly 20% of a company’s business units will produce 80% of the annual revenue.
- Applied to Advertising: Roughly 20% of your advertising will produce 80% of your campaign’s results. If businesses could only determine which 20% of their advertising was really working, U.S. businesses could save literally billions in advertising costs each year.