How the 80/20 Rule Help Us Be More Effective

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How the 80/20 Rule Help Us Be More Effective

Hamish Pryde • October 9, 2014

In the very early 1900's, an Italian economist by the name of Vilfredo Pareto created a mathematical formula describing the unequal distribution of wealth he observed and measured in his country: Pareto observed that roughly twenty percent of the people controlled or owned eighty percent of the wealth. The assumption is that most of the results in any situation are determined by a small number of causes. A management thinker Joseph Juran developed this philosophy further in the 1940's, and suggested that this can be applied in business.

The vital few and the trivial many

The "80 / 20 Rule" means that in anything (workers, customers, etc) a few (20%) are vital, and many (80%) are considered trivial. In Pareto's case, he found that roughly 20% of the people in his country dominated with 80% of the wealth. It has been suggested that you can apply the "80 / 20 Rule" to almost anything.

There are business examples that 20% of customers are responsible for 80% of the business income. Others like 80% of your stock come from 20% of your suppliers. Then why is it that 80% of your staff problems come from 20% of your staff? The formula appears to work in both directions.

How Pareto's Principle can help us

The value of the Pareto principle in management is in reminding us to stay focused on the "20% that matters". Of all the tasks performed throughout the day, one could say (based on Pareto's principle) that only 20% really matter. Those tasks in the 20% very likely will produce 80% of our results. Therefore, it is critical that we identify and focus on those important things.

When the fire-fighting "crisis of the day" begins to eat up precious time, remind yourself of the critical 20% you need to focus on. If anything in the list of activities and action items has to be left undone, be sure it is not listed in that critical 20%.

Do not ignore the 80%

Thinking about the 80%: If 20% of your employees are likely to produce 80% of your results, you should focus your limited time in management of only that 20% – the so-called superstars. However, this proposed implementation of Pareto's principle to management is potentially flawed because it overlooks the fact that 80% of your time should be spent doing what is important, or most likely to deliver the greatest return. By helping your "average" salespeople become better; you are more likely to reap greater results than by dedicating the same management effort to helping the fewer "superstar" salespeople become terrific. In this case, the sheer numbers work against you spending time only helping manage and improve the few great workers. Thus, it is wise to evaluate various management situations and apply the Pareto principle appropriately ~ and wisely.

Work Smart

It is not only important to do things right, but also to ensure you are doing the right things. Pareto's principle should serve as a reminder to us to stay focused on investing 80% of our time and energy on the 20% of work that is really important. It is not just important to "work hard" and "work smart", but also to work smart on the right things.

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More & More Paper Less

By Hamish Pryde • September 11, 2024

Paper is everywhere. We spend a lot of time and money moving paperwork around. But with today’s technology it is now possible to get rid of paper entirely. Digital documents are simpler, easier to store and send, more searchable and permanent. How long does it take to post a document to somebody via the ole stamp and envelope method, that is snail mail? It is more efficient and timelier to email the document. How many times do you go to print a document at home and find that your printer has run out of ink? Why do we still hold onto printing paper documents? Sometimes it’s just because that’s what we’ve always done and let’s face it change can be difficult at first. Paper alone is cheap. But when you start paying for printers, toner, servicing and maintenance, paper starts to look more expensive. Let alone the storage cost. Paper tax records for seven years can be quite a few boxes of paper. We have embraced some paperless technology as part of a modern business practice. This includes digital signatures, digital collaboration, paperless minutes of business improvement and coaching meetings, electronic work papers and my new digital notebook which I am enjoying. We send questionnaires via email to you to gather vital information to enable us to prepare your annual financial statements. This is a PDF document. Instead of printing the questionnaires you could save the document down into a folder of your choice then edit the PDF document and return to us. How do you edit a PDF document you ask? Once you have opened the document the Adobe online editor lets you do some things for free. The online editor works in any web browser and lets you add text, sticky notes and highlights. Click on the fill & sign button to the right of the document, then in the top toolbar click Iab text button. You can add text directly on the PDF document. Have a try next time you have a PDF document open. Xero and Farm Focus users can attach invoices directly to the transaction loaded into Xero. Then if you are looking at the rates expense in the profit and loss account or farm working account, you can drill down into the rates code and see the transactions. Then attached to each transaction is the rates invoice if you use this great functionality. All invoices can now be stored in the cloud. So why paperless? Productivity - electronic documents are instantly and simultaneously available to everyone who needs them. Reduce waiting times with less risk of loss or damage. Cost savings - you will save money on printing, postage and associated costs. You could pay less rent because you won’t need all that space for your files. Security - electronic documents are more secure than printed ones. Digital records can be password protected and rendered unreadable through encryption. Printed documents are only as secure as their proximity to a copy machine. Reduced Clutter - paperwork on desks and shelves are not only untidy it’s inefficient too. The organisation of digital files is simpler and your office will look much neater. That will help you clear your mind to focus on your business. Environmentally friendly - less printing means fewer trees cut down for pulp and less energy used to make and transport paper. Disaster recovery - if there is a fire or flood, recovery from the backup is much easier with digital storage them with paper. There are great help articles available in Xero or Farm Focus if you are not attaching invoices to payments already. To find out how click on the links below: If you would like to explore ways you can go paperless we can help.