The Productivity of The 80/20 Rule

Posted by Mikkel Juhl on Oct 21, 2009 in General | 2 comments

80/20 rule also called Paretovs principle, should be used by any reasonable person, both as a personal tool and business tool.

80/20 argues that the smallest proportion of all causes, all inputs and all the action usually leads to the largest proportion of all outcomes, outputs or rewards.

In other words, this means that 80 percent of your work results come from 20 percent of the time you work.

Or a company, 80 percent of all errors caused 20 percent of error types. It will therefore be able to remove 80% of the errors in a production by eliminating 20% of error types. Thought-provoking, but is that right?

It was the Italian economist Vilfredo Pareto, who in 1897 discovered an interesting context. He accidentally discovered the link between wealth distribution and income distribution in England. He found out that most of the assets and income belonged to a minority among selected groups.

This was perhaps not surprising, but first there was a stable mathematical relationship between the proportion of people and amount of income or wealth in these groups.

It turned out that if 20 percent of the group owned 80 percent of the property, one could reasonably assume that  10% had such. 65% of the assets, and 5% had 50%. The main message is not percentages, but the fact that the wealth distribution in the group were predictable imbalance.

In our World

Now it becomes really exciting, because if you look closely at other phenomena here on earth, you will discover the same imbalance.

• Approx. 20 percent of the criminals is responsible for approx. 80% of the crime.
• 20% of drivers cause 80% of the accidents.
• 20% of those who marry, 80% in the divorce statistics.
• 20% of children receive 80% of the available educational qualifications.
• In your home will be 20% of your carpets exposed to 80% of wear.
• 20% of your clothes will be in use 80% of the time.
• The combustion engine is a great tribute to the 80/20 rule, because 80% of energy wasted during combustion, and only 20% reaches the wheels.

The link between the 80/20 rule and chaos theory is the question of imbalance. The two theories argue both that the universe is out of balance, ie. that cause and effect are rarely associated in a balanced manner. Much of what happens is irrelevant, and yet there are always some forces that have an impact that goes far beyond their numbers.

The man behind the quality revolution, the American engineer Joseph Moses Juran, 1950-1990, used the Pareto rule and the “rule of the vital few” in the quest for higher productivity. His big idea was to apply the 80/20 rule, together with other statistical methods to eliminate the quality defect and improve the reliability and value of products.

None of the leading American industries was interested in Jurans theories. In 1953 he was invited to hold a lecture in Japan, and here he met a receptive audience. He stayed to work for various Japanese companies to transform the qualitative value of their goods.

Juran was first taken seriously in the West after 1970 when the Japanese threat to American industry was a reality.

How can you use the 80/20 rule in your everyday life?

Do not read a book from beginning to end (unless you read it for your enjoyment). You can find out what a book contains, in very short time. Read the first conclusion, then the preface, and then the conclusion again. Then you can delve into the more interesting sections.

• Want to make a career, so concentrate on 20% of the main issues.
• It is better to be in the right place than to be clever and hardworking.
• It is better to focus on results rather than inputs.
• Look for shortcuts instead of walking the beaten path.
• Exercise control over their lives with the least possible effort.
• Be selective, not comprehensive.
• Aim excellence in a few areas rather than a good performance in many.
• Delegate as much as possible in everyday life and let yourself spur of the tax system in this area, rather than feel punished (use gardeners, mechanics, interior designers and other specialists, rather than doing it yourself).
• Choose your career and your employer with special care and employing about possible other than to be employed.
• Only do the things you do best and that you enjoy most.
• See into life behind the structure to uncover ironies and quirks.
• Think about the areas in which 20% of the effort could lead to 80% of the results.
• Relax, work less and determine a limited number of high-value targets, where 80/20 rule will work for you, rather than trying to exploit any opportunity.
• Make the most of the “lucky” moments in life when you are at a creative peak and the fate guarantee success.