The Pareto Principle

Do you know about Vilfredo Pareto? If nothing else, the last name must ring a few bells. This Italian gentleman had a fascinating life and ultimately came up with an idea that has survived through generations of people and is still used today. The Pareto Principle theorizes that there is an 80/20 distribution between most things. Pareto understood that 80% of the land in Italy during his time was owned by 20% of the population. He then investigated this theory in other countries and it turned out to be the same result. He also tended a garden in which he found the same distribution, 80% of the produce was grown by 20% of the plants.

Vilfredo had an interesting upbringing, he was born in Paris to a father who was an Italian civil engineer and a mother who was French. Vilfredo became a civil engineer and then later in his life he changed his profession to be an economist. Ultimately, he became the chair of Political Economy at the University of Lausanne in Switzerland. His most famous work is Trattato di Sociologia Generale which you can find translated into English by Arthur Livingston in The Mind and Society.

Why is the Pareto Principle important? It’s extremely relevant to business. In our organizations, we use the Pareto Principle in many ways but the most important way we use it is to determine what to prioritize and what will make the biggest impact to work on. This principle can be used across the organization from leadership to individual performers. It’s important to identify all the problems in your organization or on a smaller scale, all the potential problems on a project. Plot all of those on an axis of a graph. Start to tally up either the likelihood that those things will happen or if you are reviewing past data, identify the number of times that those issues caused a problem in the organization. Bonus points if you can identify the size of the impact those issues had and notate that impact. Once you’ve done that, you should find that just a few (probably about 20%) of the issues cause the vast majority of impact in your organization. You can then focus on just those few things (at least first) and make sure that your team is making the biggest impact in the shortest amount of time.

This is a great tool for those that seem to have trouble identifying what to work on first. Often times, we try to prioritize tasks or issues and we don’t do the work to identify why we are working on them. A Pareto Analysis will help drill down to the things that are most impactful and why. If we have the data, it makes it easy to know what to focus on first. If we don't have the data, we generally can use our gut feelings to know what it really is that is going to deliver 20% of the results.

One thing that you will often find as you do Pareto Analysis is that the 20% of things are the tough things or maybe even the ones that are not enjoyable. Tough conversations, tough challenges, deep thought or process revisions that needs to happen to really attack the problem. This tool or idea won't make it easier to deal with those things but what it will do is help you realize that the 80% of things we work on are generally the "filler" and the things that feel good to knock off the list and give us a hit of dopamine but don't really move us forward into the future.

So remember, always look for the 20% and be more like Pareto!