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Pareto Principle

Intro

The 80/20 Rule: A minority of input produces the majority of results.

In 1906, Italian economist and avid gardener Vilfredo Pareto created a mathematical formula to describe the unequal distribution of wealth in his country. He observed that 20 percent of the people owned 80 percent of the wealth. While gardening, he later observed that 20 percent of the peapods in his garden yielded 80 percent of the peas that were harvested.

How the principle was formed

After Pareto made his observation and created his formula, many others observed similar phenomena in their own areas of expertise. Quality Management pioneer, Dr. Joseph Juran, working in the United States in the 1930s and 1940s recognized a universal principle he called the "vital few and trivial many" and reduced it to writing in his Quality Control Handbook. In an early work, a lack of precision on Juran's part made it appear that he was applying Pareto's observations about economics to a broader body of work.

The name Pareto's Principal stuck, probably because it sounded better than Juran's Principle. As a result, Dr. Juran's observation of the "vital few and trivial many", the principle that 20 percent of something is always responsible for 80 percent of the results, became known as Pareto's Principle or the 80/20 Rule.

Meaning of the 80/20 Rule

The 80/20 Rule means that in anything, a few (20 percent) are vital and many (80 percent) are trivial. In Pareto's case, it meant 20 percent of the people owned 80 percent of the wealth. In Juran's initial work, he identified 20 percent of the defects causing 80 percent of the problems. Project managers know that 20 percent of the work (the first 10 percent and the last 10 percent) consume 80 percent of your time and resources. You can apply the 80/20 Rule to almost anything, from the science of management to processes in the physical world.

For example, in the business world:
  • 80 percent of decisions come from 20 percent of meeting time.
  • 80 percent of a manager's interruptions come from the same 20 percent of people. 
  • 20 percent of a sales force will develop 80 percent of the annual results.
  • For example, in the martial arts world:
  • 80 percent of competition trophies are won by 20 percent of the competitors.
  • 80 percent of your school problems involve 20 percent of your students.
  • 80 percent of the work that gets done in your school is done by 20 percent of the staff.

Of the things you do during your day, only 20 percent really matters. That 20 percent produces 80 percent of your results, so identify and focus on those things in the 20 percent group.

When tasks begin to pile up, remind yourself of the 20 percent you need to focus on. If something is not going to get done, make sure it is not part of that 20 percent.

Your focus is on the 80 percent if the following statements ring true:
  • You are working on tasks other people want you to, but you have no investment in them.
  • You are frequently working on tasks labeled "urgent."
  • You are spending time on tasks you are not usually good at doing.
  • Activities are taking a lot longer than you expected.
  • You find yourself complaining all the time.

Your focus is on the 20 percent if the following statements ring true:
  • You are engaged in activities that advance your overall purpose in life (assuming you know what that is). 
  • You are doing things you have always wanted to do or that make you feel good about yourself.
  • You are working on tasks you do not like, but you are doing them knowing they relate to the bigger picture.
  • You are hiring people to do the tasks you are not good at or do not like doing.
  • You are smiling.   

You must be careful in how you apply the Pareto Principle. One management theory, Superstar Management, claims that since 20 percent of your people produce 80 percent of your results you should focus your limited time on managing only that 20 percent, the superstars. However, you should spend 80 percent of your time doing what is important. Helping the good become better is a better use of your time than helping the great become greater.

Managing time

When it comes to managing your time, there are four types of tasks:
  • Those that require low competence and add low value.
  • Those that require low competence and add high value.
  • Those that require high competence and add low value.
  • Those that require high competence and add high value (these tasks are where you should spend 80 percent of your time).
How does one identify one's areas of high competence and high value? Very often, by identifying which areas of life we enjoy. Many successful people are those who have identified what they enjoy doing and they spend most of their time doing just those things. When we enjoy doing something, we are also open to learning more about it; when we learn more as well as enjoy the activity, our performance improves. So, to be successful, identify what you enjoy doing, find a way to incorporate it into your job, and then invest more and more time in that activity or job
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In relationships, the 80/20 rule also applies. 20 percent of the people we deal with cause 80 percent of our problems and 20 percent of the people we deal with give us 80 percent of our satisfaction and happiness. That covers about 40 percent of the people we deal with regularly. The remaining 60 percent do not affect us much in one way or the other.

Once you have identified the 20 percent of the people who cause problems and the 20 percent the satisfaction givers, you may now deal with them on a case-by-case basis. Do something to move persons in the problem-causing group into the neutral 60 percent group, and spend more quality time with the 20 percent of satisfaction givers? In both cases, focus on what you can do, not on what they should do.

Regarding time, in many successful lives, the most productive work often occurs in only 20 percent of their time. Look at any successful project and you will find that the maximum effort and productivity occurs in the last 20 percent of the project. Therefore, if you can slash a project's time by half, you have doubled your productivity.

How the rule relates to school owners

To improve your martial arts skills
  • Spend 80 percent of your time on the worst 20 percent of your problem areas
  • 80 percent of your progress comes from 20 percent of your training time
  • To grow your martial arts school
  • Spend 80 percent of your time on the 20 percent of your students that show the most potential. 
  • Give 80 percent of your compliments to the 20 percent of students and staff that do the most work.
  • 80 percent of advertising results come from 20 percent of your advertising.
  • 80 percent of your future business comes from 20 percent of your customers.

Conclusion

In conclusion, focus on the vital few in every area of your life that provide geometric returns in terms of overall satisfaction, success, and stress management

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