More generally, the Pareto Principle is the observation (not law) that most things in life are not distributed evenly. It can mean all of the following things:
* 20% of the input creates 80% of the result
* 20% of the workers produce 80% of the result
* 20% of the customers create 80% of the revenue
* 20% of the bugs cause 80% of the crashes
* 20% of the features cause 80% of the usage
* and so on ...
The numbers don’t have to be “20%” and “80%” exactly. The thing to appreciate is that most things in life (effort, reward, output) are not distributed evenly – some contribute more than others.
How can this be used effectively?
- reward the employees that produce the maximum result
- sort out the critical bugs before you get to the rest
- focus on the customers that give you the maximum revenue
- and so on ...
The economics term for this is "diminishing marginal benefit".
Realize you have the option to focus on the important 20%.
- Quality - When you're looking at overall quality, *everything* needs to be looked at. But when you're just trying to finish off things that need to be done - focus on the important 20% first, then look at the remaining.
- Effectiveness - You could read 3 articles in depth - or, skim a dozen articles in an hour (5 min each) and then read the 2 most relevant. Which is more effective?
- Volume - "Superstar management" : if you get top results from your 'superstar' 20%, spend all your time managing them. This theory is flawed, because it would be better to take 80% up a notch than try to squeeze more out of the hens that lay the golden eggs. Sheer numbers guarantee that.
And while you're at it, here's an interesting link about The Internet and the death of 80:20. And here's an application of the principle to betting on horce racing.
Work smart, not hard - on the right things.
