How to Improve What Matters Most With the 80/20 Rule

November 5, 2013 by Stacey Barr

A problem many of us have is too many measures and, consequently, too much to improve. We need to prioritise, but we somehow don’t do it well enough. Here’s a method to focus on what really matters most, that has over 116 years of proof that it works…

In 1897, over a century ago, an Italian economist called Vilfredo Pareto made the discovery that 80% of the wealth of a population was owned by 20% of that population. The Pareto Principle, or 80/20 rule, is a pattern of predictable imbalance that keeps popping up in all kinds of contexts ever since. For example, the Quality Movement certainly grabbed onto it, coining phrases like “80% of the problem is caused by 20% of the causes.”

Is the 80/20 rule still relevant to us today?

The 80/20 rule is a guide for how to think about improving things. If you want a measure or result to improve, you have to change something. And with even a basic 80/20 analysis, you can find out what those “somethings” are which will have the greatest impact.

And in an age where time is scarce, and to-do lists are long, the sharper our focus can be on what matters most, the better our results will be.

When should we use the 80/20 rule?

If you’re not completely happy with how your work or life is going right now, or you know that there is scope to improve it, then practice asking questions like these:

  • Which are the 20% of tasks I perform that generate 80% of my output?
  • Who are the 20% of customers that generate 80% of our profitability?
  • Who are the 20% of customers that have 80% of the need for our services?
  • What are the 20% of products that generate 80% of our profitability?
  • What are the 20% of investments I make that generate 80% of the return?
  • What are the 20% of interruptions that cause 80% of my productivity problems?
  • What is the 20% of literature I read that gives me 80% of the knowledge I need?
  • Who are the 20% of suppliers that give me 80% of the goods and services I need?
  • What are the 20% of complaints that take up 80% of my complaint handling time?
  • Who are the 20% of friends & family that get 80% of my attention?

Asking questions like these shows you how much more influence you can have in changing things in your life and work. You don’t have to fight the current, nor do you have to just lay back and let it carry you. You can find a diagonal escape out of it with a focus on causes you can influence.

The 80/20 rule helps focus your attention on the things that have the BIGGEST likely impact on the results you want in your life. And by focusing on those things, you can more easily examine how you can influence them.

How to do a simple 80/20 analysis…

When you have framed your result and its potential causes in 80/20 questions like those above, you’ve set the scope for what kind of data to collect. If you’re going to know which are the 20% of causes that produce 80% of your result, you’ll need to measure both your result, and the degree of impact of each cause.

If you’re uncertain exactly what to collect data on, try using a cause-effect diagram to map out the possibilities (also known as a fishbone diagram – click here for examples). Then you can measure or estimate the relative impact of each cause on your end result.

A simple bar chart or Pareto chart is a great way to display the 80/20 analysis, once you have the data. For each cause you list, against it you will have a number that represents the size of its impact on your result. It might be dollars or hours or incidents, depending on your result. Chart the data and look for the tallest 20% of bars in the chart that visually account for about 80% of your measure (click here for examples).

A useful note: it won’t always be 80/20.

Sometimes you’ll find patterns that are 99/1, or 80/10 or 70/30. That’s fine. The point is that cause-effect relationships are very imbalanced; you’ll rarely find 50% of the causes producing 50% of the effect. So prioritise, and give your attention to the 20% that matters most right now.

JOIN THE DISCUSSION:

What experiences have YOU had with cause analysis and Pareto charts? We’d all love to hear your story so please share it at the Measure Up blog

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  1. srinivas says:

    Hi,

    Thank you for the interesting article. Tried to apply pareto chart by taking hours spend during the day on Y- axis and category of job performed …My question is does order to entering the category of job has the influence in determination of priorities based on 80-20 rule?

    Sincerely,
    Srinivas Kumar P.

    • Stacey Barr says:

      Srinivas, the way you order the categories of job performed on your Pareto chart should be from most hours spent to least hours spent. That way, you’ll see the first few bars in the chart are for the job categories that take the most time. This is a great example of how to practice using a Pareto chart. Perhaps you’ll discover that some job categories could be simplified in order to take less time.

      • srinivas says:

        Hi Stacey,

        Thank you for the reply, I have a case where I spent 3 hrs on preparation of lecture, 3 hrs on delivering the lecture,2 hrs on administrative work and 1 hr on research work.
        Now the scenario is that I can put preparation of lecture as the first item or I can put delivering the lecture as the first item since as per the suggestion you have given both took same amount of time.But results wise we will get different.Is it that the order of performing the task need to be considered while considering the order in the peroto chart?(I think preparing for the lecture will be succeeded by the delivering the lecture task, hence in pereto chart it shows 33% for the task preparing for the lecture, which means the priority need to be given to the task of preparation of the lecture- please correct my understanding if I am wrong)
        Sincerely,
        Srinivas Kumar P.

        • Stacey Barr says:

          Srinivas, Pareto charts work best when you have more than just a handful (like 4 or 5) categories to explore. You have only 4: preparation, delivery, admin and research. I’d suggest you consider an alternative factor to explore ways to reduce the overall time taken. Something like causes for delays in those activities that CAN be streamlined. My guess is that delivery time is a given, but the other times can be possibly reduced. These causes of delays might include interruptions, low energy, problem solving, going off on tangents, competing priorities, trouble finding resources, etc… This will mean keeping track of the delay time that each of these causes accounts for.

  2. Johannes van Schalkwyk says:

    Hi Stacey,
    Thanks for the thinking food. I found your site when I was looking for information on performance measurement for a project I was working on and found your writing stimulating – thinking food.
    I work in software development and you got me thinking. If 20% of the features provides 80% of the functionality required form the software then what would the savings be if this is used to guide the development and testing effort.
    It sounds so logical but is it done? Sometimes we sweat the small stuff and spend too little time on the real value adding features. He who shouts the loudest determines the focus and not what adds the most value.

    Regards

    Johannes

    • Stacey Barr says:

      Johannes, I don’t really know why we tend to more sweat the small stuff and listen mostly to squeaky wheels, but part of my whole reason for doing the work I do is to change this. Simple techniques, like the 80/20 principle and Pareto charts, are good because we can easily give ourselves the opportunity to get out of our bad habits and focus on what really does matter most.

      In all honesty, even I can get much better at this. As my business has been growing and I’ve had a hectic year, I’ve lost some focus on what really matters most to me. So this blog post was a little bit of self-coaching!!!

      We have to just keep practicing until old habits are replaced with new and more purpose-serving habits.

  3. srinivas says:

    Stacey,
    Thank you for the clarification.
    Sincerely,
    Srinivas

  4. Tariq says:

    Some times you look to the results and may you impressed with, currently for instance the quality assurance in education in delivering courses may be contributed by 40% of the faculty members.
    This may lead to design fair reward system based on the excellent performers.
    The image of the educational image also should be refers to such theme of measurement.

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