Back to Resource Centre
Blog Img

Common Sense In Business Using the 80/20 Rule

Diagram explaining the 80 20 rule

I think most people have heard of the 80/20 rule, also known as the Pareto Principle … basically that 80% of the effects come from 20% of the causes.

In business it is often that case that 80% of revenues come from 20% of the clients.  It can also be suggested that 80% of your problems come from 20% of your clients.

Jim Rohn would suggest, “Spend 80% of your time with the 20% that produce the most.”

In a perfect world you might be able to use that data to fire 20% of your clients, replace them with “better clients” and hence your business would improve.  In reality life is never that simple.

This IS however a very handy way to look at your efforts at work because very often an 80% solution is perfectly adequate, and if it can be achieved with 20% of the effort then that is often a good choice.

Don’t get me wrong … if you are a surgeon then 80% success rate of your operations is not an acceptable target. Equally if you are a pilot them 80% of your landings being good is not acceptable!  However, if you are developing an IT project then just maybe a solution that meets 80% of the needs, but is developed at 20% of the cost would be a great answer!  If you are producing internal reports do they need to be “pretty” or do they need to be functional?  If they are readable and professional is that OK … or do they need to be in colour, formatted to the “nth” degree and publisher quality?  (Often not!)

This is where business common sense comes into play …

Ask yourself some basic questions:

  1. Does the 80/20 rule apply to my situation?

  2. Will the extra effort it will take to improve my result “here” be better spent elsewhere?

  3. Will the extra effort it will take to improve my result be time well spent?

  4. Am I aiming for perfection at the expense of practicality?

  5. Will my client be happy with the result I am providing?  (Note it can be an internal client, or an external client).

“The 80/20 rule should serve as a daily reminder to focus 80 percent of your time and energy on the 20 percent of your work that is really important” F. John Reh.