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The secrets of the 80/20 rule you need to know now

GeneralEdward KiledjianComment
Image by Jacob Bøtter used under Creative Commons License

Image by Jacob Bøtter used under Creative Commons License

We live in hectic times. For most of us, there will always be more work than hours in a day and we need to find some mechanism to prioritize work and stay sane.

There are hundreds of books on time management (my personal preference is the Getting Things Done methodology by David Allen).

Regardless of your chosen time management framework, there is an important time management principle called the 80/20 principle. This principle applies to work and life. It shows how effort and effort value are not balanced.

Remember student life

Most students know that they spend only the last few days ,before the finals, cramming and getting ready. Most often this yield’s the desired grade and you move on. This means that the little sprint at the end yielded the desired result. You could have studied religious every week for the entire semester and you probably would have achieved the same or very similar level of performance.

Business profits

In most businesses, 20% of the products/services yield 80% of the profits.

The 80/20 rule

The rule is that (roughly) 80% of the desired results will be generated by 20% of the effort.

Typically a small number of decisions/work effort result in the biggest gains for the organization.

The purpose of this framework isn’t to argue an exact split. Most people call it the 80/20 rule but the actual split can be 70/30 or 99/1.

The imbalance is everywhere even in linguistics

Imbalance is everywhere. You deal with it daily without realizing it. Sir Isaac Pitman discovered that 700 of the most common English language words make up 2/3 of every conversation. By extending the definition to include derivatives of those words, the ratio becomes almost 80%.

How it applies to your work

If we assume that this phenomenon is real and then apply it to your work, it means 80% of your time is spent on activities that generate very little return or value.

Think of all the activities you participate in today (or you cause to happen if you are the boss) that steal valuable productivity such as meetings, reports, etc.

My accepting this simple fact as valid, you can start asking yourself which of your calendar bookings are likely a waste of your time (aka they generate the least amount of value).

Large fast food chains try to iron out inefficiencies through carefully analyzed time and motion studies. You can do the same quickly by just thinking about value and trying to optimize your time.

Look at your company profits

List all of your company products/services and rank them by profits generated. You will likely find that 20% of your products/services generate the bulk (maybe 80% or so) of your profits.

By knowing this, you can prioritize these in the short term and ensure your teams are maximizing value by pushing and investing in these lines. It is also a chance to perform some risk assessment and determine what risks exist for these products and how you can react.

You may even decide to cut down on your less valuable products/services this reducing corporate complexity and overhead. In some cases making you a more nimble and reactive organization. In study after study, we see that the least complex organizations typically perform the best.

A tool when negotiating

When preparing to negotiate, each side will produce a list of desired outcomes. If you prepare your list by keeping the 80/20 rule in mind, you will be able to narrowly focus on what really matters to your organization. This narrower list also gives you more room to manoeuver because you can concede on some of the less important elements.

A tool when targeting customers

By knowing which 20% of customers generate 80% of your profits, you can concentrate your marketing dollars more intelligently. You can also ensure that you provide incredible customer service for these important customers and make them feel special.

The 80/20 rule in life

This rule also applies to your personal life. It means that some personal relationships are more important (more rewarding) than others. A simple way of looking at this is that 20% of your friends generate 80% of friendship value (joy, support, etc.).

When applied to friends, it is less mathematical and more introspectual but is a fantastic exercise. Are you spending your time with the people giving the most back to you?

I recommend everyone plan a couple of days every 6 months to sit and perform some deep introspection. This is a valuable time when you can decide where you want to be in 5/10/20 years. It gives you a chance to take a snapshot of your as-is situation and determine if you are where you thought you would be by now. Now add to this the 80/20 rule. 20% of actions delivery 80% of your life satisfaction. Figure out the “stuff” that is less valuable and try to change it. If work is not contributing to your overall life satisfaction then make a plan to change it. If your relationship with your partner isn’t contributing to your overall life satisfaction then make a remediation plan (counselling, honest discussions, or in extreme cases separation).

Remember that 80% of your life satisfaction comes from 20% of your activities. Try to waste less time with the other 80% of your time by replacing it with better more rewarding “things”.

The 80/20 rule in time management

Many executives I have worked with typically run after the work that is the loudest or seems the most urgent. In Getting Things Done, you learn to capture all open loops (commitments of work not yet completed) and then use this list to prioritize your work for the upcoming days, weeks and months.

If you apply 80/20 thinking to GTD, you will highlight the activities that actually generate the most “bang for your buck” and push everything else down the list.

Conclusion

This is a very simple concept to understand but much harder to implement. It is powerful because of its simplicity and it has proven to work over and over. Trust in its power and use it.