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80/20 Rule, use the Law of the Vital Few for greater impact

 

80 20 pareto principal

 

 

You’ve already know about the 80/20 rule so this is a reminder—because four-out-of-five times it will help you focus on what’s important.

In 1906 economist Vilfredo Pareto was studying land ownership in Italy and found that 20 percent of the people owned 80 percent of the land. The remaining 80 percent of the people owned the other 20 percent. Around the same time, he had noticed that 80 percent of his pea harvest came from 20 percent of the pods. He began to see that this ratio held in other areas, as well.

This 80/20 rule got more attention in the 1940s when “quality management” founder Joseph Juran began looking at manufacturing through Pareto’s lens. Juran found that in manufacturing 20 percent of causes created 80 percent of the defects. He described the “Pareto Principle,” but preferred to call it the “Law of the Vital Few.” Distribution of most things is unequal, and the “vital few” have high impact while the “trivial many” have little impact.

80 percent of the effect comes from 20 percent of the causes

This roughly true way to think of distribution can help you focus on those actions that yield a higher payoff. For example:

  • 80 percent of a business’s sales comes from 20 percent of the products or services and from 20 percent of the customers.
  • 80 percent of the traffic is on 20 percent of the streets.
  • 20 percent of patients make up 80 percent of our healthcare costs.

Don’t get lost in the actual numbers 80 and 20. That misses the point that in most efforts the “vital few” have high impact while the “trivial many” has little impact, often in a 4-to-1 ratio.

80/20 in your life

pareto principalThis can certainly be true in your own life, how you spend your time, energy and resources.

  • You may wear the same 20 percent of your clothes 80 percent of the time.
  • Two of the ten items on your to-do list will likely give you 80 percent of the important results.
  • Changing the unhealthiest 20 percent of the food you eat to healthy food could bring the greatest health results.
  • 20 percent of your relationships may bring 80 percent of the satisfaction. (So spend time with them and less with the trivial many.)
  • You use 20 percent of the apps on your smart phone 80 percent of the time.
  • Cutting back on the 80 percent of media and online noise that doesn’t bring useful information may make you happier and more informed.

In many aspects of life, focusing on the important “vital few” will bring greater results.

80/20 in the nonprofit

If you’re working in a nonprofit, some of these may be true:

  • One-fifth of the volunteers do four-fifths of the valuable work.
  • 20 percent of your program yields 80 percent of the impact.
  • 80 percent of your financial support comes from 20 percent of your donors and from 20 percent of the fundraising activities.

What low-yield activities can you drop? Do one or two of your fundraising programs work really well? Is there a way to grow them? Is there a program that brings greater impact to your cause than most? What potentially high-yield programs should you be spending most of your discovery energy on? Evaluate the impact of your different activities. Why not shift the resources from that low-impact program to one with greater returns?

20 percent of 20 percent

Beyond this you may also discover the vital few within the vital few. You may also find that 20 percent of 20 percent (or 4 percent) of your staff or volunteers create 64 percent (80 percent of 80 percent) of the personnel problems. In this scenario you and everyone else will spend a disproportionate amount of time dealing with the few until there is resolution. You’ll also be able to identify that tiny portion stars on your team. Support them, make sure that they have what they need to do their work, are rewarded and feel appreciated.

You may also find that 64 percent of your funds come from the top 4 percent of donors. There are likely some examples of your program that has an amazingly high impact. While you work on 80/20, keep an eye open for ways to grow these higher concentrations of things that work.

How to Focus

80-20-rule-3I recently told this story but it’s worth repeating. Billionaire Warren Buffett gave his pilot, Mike Flint, some valuable advice about reaching his goals. I want you to go and make a list of the 25 most important goals you want to accomplish in your life, Buffett told him. After some time, the pilot came back with his list of 25 goals. Then Buffett told him to now go and circle the five that were most important to him. The pilot came back with his five top priorities talked about getting to work on them immediately. When Buffett asked about list of the other 20 goals, Flint said he’d work on them around the edges. Buffett told him no! This is your “avoid at all costs list.” Until the top five were accomplished, any attention paid to the “avoid list” would keep him from reaching his important goals. Warren Buffett recommends the 80/20 rule and urges that Flint to avoid the trivial many at all costs.

Realistically, much of life doesn’t neatly follow the law of the vital few. But enough does. So you may want to look at your priorities through this window from time to time. You can’t do everything, so focus your energy on that which brings the greatest results.

See also: Appreciative Inquiry and Positive deviance.

 

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