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The Eighty-Twenty Rule

Simple rules if they stand the test of time can eventually become part of the culture. One such rule is very straight forward, and it’s called the eighty-twenty rule. I first became aware of its significance as a young computer salesman some 35 years ago. Our sales manager explained it quite simply when he said, “Twenty percent of you will deliver 80 percent of my assigned regional sales quota.”

The rule is credited to a sociologist in Italy about a century ago named Vilfredo Pareto. He discovered a very revealing statistic about the peas growing in his garden. He found that 80 percent of his peas came from 20 percent of the pea pods he harvested. Since he was a sociologist, after further study he discovered 80 percent of the land in Italy was owned by about 20 percent of the population, and so the rule was born.

The Pareto Principle as it is now referred to when developing information technology projects, further states that a small proportion of causes are responsible for a large proportion of results. Computer system developers claim 80 percent of the required benefits can be obtained with 20 percent of the work required for the total project. They further state the remaining 20 percent benefit will take an additional 80 percent of the overall time allotted for development, and this is always the most difficult part of the project.

Another rather dramatic example of the rule in action was the recent comment from the CEO of Goldman Sachs, when he implied that 80 percent of Goldman Sachs’s employees were irrelevant to the company’s success. “I don’t want to sound heartless,” the CEO said, “but in almost every one of our businesses, there are approximately 20 percent of the people who really add 80 percent of the value to the organization.”

In manufacturing, the rule is even more revealing in that for the typical product category, 80 percent of the products sold will be consumed by 20 percent of the customers. It’s quite interesting to continue to expand the premise to as many fields as possible, and over the years people have complied their list and the following represents some of their findings.
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* 80 percent of a worker's productivity comes from 20 percent of the tasks
* 80 percent of sales come from 20 percent of salespeople
* 80 percent of absenteeism from work is caused by 20 percent of the employees
* 80 percent of a managers headaches come from 20 percent of workers
* 80 percent of decisions come from 20 percent of meeting time

Finally, a business author named Brian Tracy applies the 80-20 rules to time management. He suggests that people identify which 20 percent of their tasks are most important to the company, and then focus on getting them done promptly and effectively by spending 80 percent of their time and effort on them.

If you have your additions to the list, please send me an email.
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William Dollar is a Senior Contributing Editor for the Wisconsin Technology Network, and has his own consulting company at www.billdollar.com. You can also contact him at bill@wistechnology.com.

Comments

vinod responded 7 years ago: #1

80 percent of the problems are beacuse of the 20 percent ofd the problem if we identify and solve them the 80 are automatically solved.
eg when we have a 10 problems in working on a software there wud be 2 major probs if we solve them the rest 8 wil automatically be resolved.

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