The 80-20 rule: the Pareto principle

The Pareto principle is also known as the Pareto effect or 80-20 rule. It is named after the Italian inventor Vilfredo Pareto. At the beginning of the 20th century, Pareto, who also worked as an engineer, so­ci­ol­o­gist, and economist, carried out some studies. These dealt with the dis­tri­b­u­tion of national wealth in Italy. Pareto's research revealed that one fifth, or 20 percent of Italian citizens, had about 80 percent of the state's assets. From this re­al­iza­tion, Pareto stated that banks should es­sen­tial­ly focus on the wealthy 20 percent of Italians in order to be more efficient and make more profit. Con­verse­ly, the banks would then provide 80 percent of the pop­u­la­tion with only a fifth of their time spent.

The Pareto principle rep­re­sents the unequal dis­tri­b­u­tion and lack of balance between resource input and return. This can also be il­lus­trat­ed in other areas:

• Sales: 20 percent of products or customers generate 80 percent of sales
• Storage: 20 percent of the products occupy 80 percent of the space
• Internet: 80 percent of online data traffic takes place on 20 percent of websites
• Road traffic: 20 percent of the roads are used for 80 percent of the traffic
• Phone calls: 80 percent of calls are made with 20 percent of the stored contacts

However, the 80-20 rule is best known for its ap­pli­ca­tion in time man­age­ment. With the right pri­or­i­ti­za­tion you can do 80 percent of the work with by spending 20 percent of the time.

The purpose of the Pareto method is to achieve great success with the least possible effort. After all, a lot of time is often invested in tasks that have only a low priority. However, with the right pri­or­i­ties and better time man­age­ment, you can work more ef­fi­cient­ly and pur­pose­ful­ly. Es­pe­cial­ly in work areas with strict deadlines, the Pareto principle helps in focusing the workload correctly in order to complete the tasks in the given time. The 80-20 rule is also often used together with other time man­age­ment methods, such as the Eisen­how­er principle.

There are some common mistakes that are often made in con­nec­tion with the Pareto principle. For example, it is often mis­in­ter­pret­ed that with 20 percent of the invested time or effort, you can also achieve the 80 percent return that you would achieve with your usual effort. This makes no sense, however, as then 100 percent would be achieved with 20 percent effort. This is a mis­in­ter­pre­ta­tion in which the in­di­vid­ual per­cent­ages are simply added up to 100 percent, although they stand for different aspects. However, expense and income are not the same, and cannot simply be added together. In order to generate the full 100 percent return, the ex­pen­di­ture must also be 100 percent. The mis­in­ter­pre­ta­tion described above quickly leads to over-op­ti­mistic as­sump­tions as to which goals can be achieved with how much effort.

But even if the basic principle itself has been un­der­stood, the con­clu­sion that 80 percent of the possible per­for­mance is due to 20 percent of the effort can lead to a reduction in all tasks to only 20 percent. After all, there are a number of tasks that do not con­tribute directly to the actual goal, but must nev­er­the­less be completed. This includes, for example, writing and replying to e-mails. E-mail cor­re­spon­dence usually con­tributes little to a company's success, but not re­spond­ing to business e-mails at all would have serious negative con­se­quences for the company (as would ne­glect­ing the ac­count­ing – even if the ac­count­ing de­part­ment itself does not generate any profits). These ab­solute­ly necessary, but seemingly un­pro­duc­tive tasks can be optimized by keeping the ex­pen­di­ture for them as low as possible.

In addition, the Pareto principle can lead to certain neg­li­gence, as the majority of tasks are con­sid­ered to be of little im­por­tance. Only those who dedicate them­selves to their tasks in a con­sci­en­tious, con­cen­trat­ed, and struc­tured manner can also achieve 80 percent of the results with 20 percent of the work – it is quite unusual to pull this off.

The 80-20 rule can be applied in many ways: It can be used for better time man­age­ment in private life, during studies, and at work. By making oneself aware of which work makes up the majority of the yield, one can pri­or­i­tize in­di­vid­ual tasks better. The Pareto principle helps to decide which work must be completed first.

The Pareto principle can the­o­ret­i­cal­ly be applied to all areas of life - in school and academic education, as well as in everyday life. However, the 80-20 rule is most often as­so­ci­at­ed with working life, and this is when you’ll have to meet deadlines fre­quent­ly. Even in private life there are daily tasks that have to be completed as ef­fi­cient­ly as possible within the shortest possible time.

Pareto principle: example of everyday use

If your family or friends announce a spon­ta­neous visit, there may be little time to tidy the home. If it normally takes three hours to complete all household tasks, a visit announced at a late stage can only take an hour and a half. For this reason, taking into account the Pareto principle, you should first occupy yourself with the tasks that have the greatest effect on the well-being of the guests. This includes, for example, removing objects and clothes lying around, stowing the dirty dishes in the dish­wash­er and wiping the tables. Since living rooms, guest rooms, and bathrooms will be visited more fre­quent­ly by the guests than the cellar, you should con­cen­trate on them.

The Yerkes-Dodson curve roughly cor­re­sponds to an upside-down U shape. If you continue to invest time and effort per­ma­nent­ly after reaching the optimum per­for­mance, pro­duc­tiv­i­ty drops: The higher pressure and the resulting stress then cause a per­for­mance drop, which leads to worse results. Similar to the 80-20 rule, the Yerkes-Dodson curve states that only a certain amount of effort results in the highest pro­duc­tiv­i­ty. Higher per­cent­ages of effort, on the other hand, don’t yield much in terms of pro­duc­tiv­i­ty.