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August 05 2022
 min read

What is the Pareto Principle?

Anushka Das

Working efficiently with Pareto Principle

What is the Pareto Principle?

The Pareto Principle or Pareto Rule is also known as the 80/20 Rule. It is based on an observation that inputs and outputs are imbalanced. It must be noted that this is not a law that is proven, but an observation by an economist named Vilfredo Pareto. It is also called the 80/20 Rule since it states that 80% of the consequences come from 20% of the causes. Thus, the imbalance between inputs and outputs. Simply put, things are not distributed evenly in life. 

Interestingly, this principle can be applied in various scenarios in our lives. It can set you up for success in your personal and professional life. By realizing that 20% of your actions lead to most of the consequences, you can harness your energy and effort into that 20%

Why is the Pareto Principle important in daily life?

It helps you concentrate and focus on what areas you need to work on. It helps you decide which resources and skills need to be worked on to achieve maximum productivity. Just focusing on that 20% and not wasting time by putting in more effort, you can achieve more. 

How does the Pareto Principle work?

It's quite common that we don't get the result we have worked for. We end up putting in more effort than required. This mostly occurs because we concentrate on tasks that don't add much value and procrastinate on the tasks which could truly matter. We usually hold off on these tasks because they are difficult or time-consuming. But working on them first can make a huge difference. 

This principle also introduces the mapping frequency which states that the more frequently something happens, the more impact it has on the outcome. 

Interesting examples where this principle is used are:

1. 80% of an organization's profits are because of the work of 20% of the employees

2. 80% of a company's profits are due to 20% of the customers

3. 80% of the healthcare expenditure is by 20% of the patients

The benefits of using this principle:

1. Better time management 

2. Greater productivity

3. Improved problem solving

How can you use the Pareto Principle?

Several important people utilize this principle. It is impossible to dedicate time to complete each task thrown at us, this principle helps us decide what to focus on. 

If you are in a professional setting, as an executive with limited company resources and time, it becomes important to select the projects which would provide maximum revenue.

Sticking by customers which provide more work and are loyal is essential. Building long-term relationships with such customers would help in maintaining a constant flow. 

By understanding the Pareto Principle, you can focus your energy on that 20% of your skills which is bringing you the most result. There is only limited time in a day and how we spend that time decides everything. Indulge in personal development by improving your skills, and take on a positive approach towards improving your strengths. 

An excellent usage would be goal-setting. The Pareto Principle would allow you to set practical and achievable goals so that you can direct your visions.

The 96 minutes rule is also part of this principle and it suggests that we spend 96 minutes each day on important and urgent tasks that we can benefit from. Apply this principle to your daily life and see if there's any difference!