Advertising
Advertising

How Useful Is the Pareto Principle?

How Useful Is the Pareto Principle?

The Pareto Principle states that 80% of the results from any series of actions are caused by 20% of the actions themselves. In other words, most of the results we get are because of a small minority of our actions. The rest are either wasted or produce little of value. This sounds like a useful observation. However, before you decide the Pareto Principle is true and can be used to guide your actions, I want to ask two important questions.

  1. Can you identify which actions make up the useful 20%? And can you do so in advance?
  2. Does this useful 20% always contain more or less the same actions?

Let’s take the first question. It’s easy to feel intuitively that most results arise from a small group of actions. The Pareto Principle feels immediately valid. It also feels like a practical tool. Identify the “magic 20%” of actions and you can more or less dispense with the other 80% without much impact on your results. What a marvelous saving of time and effort.

Of course, this only works if you can reliably distinguish the 20% of actions (or people, or events) that produce that disproportionate amount of benefits. It also assumes every result comes from a single, identifiable action — or at least a small, obviously linked group of them.

Advertising


But is this true? Don’t some results rely on the interaction of large numbers of events, choices, actions and decisions? Can we know which count and which don’t? What if we dropped some, only to find later they were essential in some way? Maybe they only produce good results in combination? Cutting seemingly unnecessary actions because they don’t obviously fit into the “magic 20%” might turn out to be a poor idea.

The Pareto Principle is perhaps most often applied to sales. Suppose you could reliably identify the 20% of sales calls that produced 80% of the orders you took this week. How much might the success of those calls rely on the market intelligence, knowledge and simple practice you gained by making the other 80%? Could you miss out all the rest, or even a significant number of them? That would include new customers being encouraged to place larger orders, prospects and old customers who might be won back from a competitor.

My second concern is this: is it always the same 20%?

Advertising

Let’s stick with the sales calls. This week, 20% of your calls produce 80% of your sales. Pareto rules! Next week, you need to sell just as much. Will you visit the same 20% of customers and receive the same orders?
Surely that’s unlikely. They only just placed an order. Most, maybe all, need to use up that order before buying again. Fine. You just need to find another 20%. But how? Everyone else was in the “unproductive” 80% last week? But if Pareto works, at the end of the next week you’ll once again find 80% of orders came from a new 20% of calls.

What’s going on? My guess is the Pareto Principle distinguishes groups you can only find after the event, once you can see what worked and what didn’t. The membership of the “magic 20%” of people or actions shifts each time. Wait long enough and every one will sometime be part of that 20% group.

If that’s so, the Principle is almost worthless as a guide to future action, which is how it’s most often used. There may be some actions or people (20% again? Who knows?) that figure so rarely in the “magic group” they could be removed without loss. There may be some regular members of that group that could be identified and given more focus and investment. Either way, what’s needed is time, careful observation and recording over many occasions, good records and much patience and reflection. None of these are actions or qualities much associated with today’s frenetic organizational pace.

Advertising

I’m not saying Pareto is wrong. I don’t know. I’m not sure anyone has ever done the lengthy and extensive research needed to find out. I’m merely suggesting it’s neither the universally applicable principle, nor the simple measure, nor the practical guide to decisions we’ve been asked to believe it is for so long.

To sum up:

I think the Pareto Principle has great intuitive attractiveness — which says nothing about whether or not it works, nor how it works (if it does). However, these questions remain unresolved:

Advertising

  1. How do you know which 20% is producing the results? Can you even find out at a time when the knowledge might be useful? I suspect you can usually only find the answer — if there is one — after the event. And if that’s so, it leads me to a second question.
  2. Is it always the same 20%? If it’s not (and I suspect it isn’t), over time maybe the whole 100% will be in that magic 20% group sometime. And if that’s true, the Principle applies only to a specific occasion (if it applies at all).

If any of my concerns is valid, the whole idea becomes worthless as a guide to future action or allocating resources (which is how people try to use it).

Adrian Savage is an Englishman and a retired business executive who lives in Tucson, Arizona. You can read his thoughts most days at The Coyote Within and Slow Leadership, the site for anyone who wants to bring back the fun and satisfaction to management work.

More by this author

Have You Ever Wished Your Kids Will Beg To Do Their Chores? 20 Things People Regret the Most Before They Die Overcoming The Pain Of A Breakup: 3 Suggestions Based On Science Quit Your Job If You Don’t Like It, No Matter What What Highly Successful People Do Every Day To Perform At Their Best

Trending in Lifehack

1 7 Helpful Reminders When You Want to Make Big Life Changes 2 Why Do I Procrastinate? 5 Root Causes & How to Tackle Them 3 9 Powerful Questions That Can Improve Your Quality of Life 4 How to Plan Your Life Goals and Actually Achieve Them 5 20 Time Management Tips to Super Boost Your Productivity

Read Next

Advertising
Advertising
Advertising

Last Updated on September 15, 2020

7 Helpful Reminders When You Want to Make Big Life Changes

7 Helpful Reminders When You Want to Make Big Life Changes

Overcoming fear and making life changes is hard. It’s even harder when it’s a big change—breaking up with someone you love, leaving your old job, starting your own business, or hundreds of other difficult choices.

Even if it’s obvious that making a big change will be beneficial, it can be tough. Our mind wants to stay where it’s comfortable, which means doing the same things we’ve always done[1].

We worry: how do we know if we’re making the right decision? We wish we knew more. How do we make a decision without all of the necessary information?

We feel stuck. How do we get past fear and move forward with that thing we want to do?

Well, I certainly don’t have all the answers, but here are 7 things to remember when you want to move forward and make positive life changes.

1. You’ll Never Have All the Information

We often avoid making important decisions because we want more information before we make a tough call.

Yes, it’s certainly true that you need to do your research, but if you’re waiting for the crystal clear answer to come to you, then you’re going to be waiting a long time. As humans, we are curious creatures, and our need for information can be paralyzing.

Life is a series of guesses, mistakes, and revisions. Make the best decision you can at the time and continue to move forward. This also means learning to listen to and trust your intuition. Here’s how.

Advertising

2. Have the Courage to Trust Yourself

We make all sorts of excuses for not making important life changes, but the limiting belief that often underlies many of them is that we don’t trust ourselves to do the right thing.

We think that if we get into a new situation, we won’t know what to do or how to react. We’re worried that the uncharted territory of the future will be too much for us to handle.

Give yourself more credit than that.

You’ve dealt with unexpected changes before, right? And when your car got a flat tire on the way to work, how did that end up? Or when you were unexpectedly dumped?

In the end, you were fine.

Humans are amazingly adaptable, and your whole life has been helping you develop skills to face unexpected challenges.

Have enough courage to trust yourself. No matter what happens, you’ll figure out a way to make it work.

3. What’s the Worst That Could Happen?

Like jealousy, most of your fears are created in your own head.

Advertising

When you actually sit down and think about the worst case scenario, you’ll realize that there are actually very few risks that you can’t recover from.

Ask yourself, “What’s the worst that could happen?” Once you realize the worst isn’t that bad, you’ll be ready to crush it.

When you’re preparing to make a big life change, write down all of the things you’re afraid of. Are you afraid of failing? Of looking silly? Of losing money? Of being unhappy?

Then, address each fear by writing down ways you can overcome them. For example, if you’re afraid of losing money, can you take a few months to save up a safety net?

4. It’s Just as Much About the Process as It Is About the Result

We’re so wrapped up in results when we think about major life changes. We worry that if we start out towards a big goal, then we might not make it to the finish line.

However, you’re allowed to change your mind. And failing will only help you learn what not to do next time.

Furthermore, just because you don’t reach the final goal doesn’t mean you failed. You chose the goal in the first place, but you’re allowed to alter it if you find that the goal isn’t working out the way you hoped. Failure is not a destination, and neither is success.

Enjoy the process of moving forward[2].

Advertising

5. Continue to Pursue Opportunity

If you’re on the fence about a big decision, then you might be worried about getting locked into a position that you can’t escape from.

Think about it a different way. New choices rarely limit your options.

In fact, new pursuits often open up even more opportunities. One of the best things about going after important goals with passion is that they open up chances and options that you never could have expected in the beginning.

If you pursue the interesting opportunities that arise along the path to your goal, then you can be sure that you’ll always have choices.

6. Effort Matters, So Use It

It sounds simple, but one of the big reasons we don’t make life changes is because we don’t try. And we don’t try because then it’s easy to make excuses for why we don’t get what we want.

Flunked that test? Are you stupid? “Of course I’m not stupid. I just didn’t study. I would have gotten an A if I actually studied.”

Stuck in a job you hate? Why haven’t you found a new job yet? “Well, I haven’t really tried to get a new job. I could totally ace that interview if I wanted.”

Why do we make excuses like these to ourselves? It’s because if we try and fail, then we just failed. But if we don’t try, we can chalk it up to laziness.

Advertising

Get over it. Failure happens to everyone.

And the funny thing is, if you actually try—because it’s pretty clear that most people aren’t trying—then you’ll win a lot more than you think.

7. Start With Something Manageable

You can’t climb Everest if you don’t try hiking beforehand.

Maybe applying for your dream job seems intimidating right now. What can you start with today?

Can you talk to someone who already has that position and see what they think makes them successful? Can you improve your skills so you meet one of the qualifications? Can you take a free online course to expand your resume?

Maybe you’re not quite ready for a long-term relationship, but you know you want to start dating. Could you try asking out a mutual friend? Can you go out more with friends to practice your communication skills and meet new people?

You don’t need to be a world changer today; you just need to make small life changes in your own world.

More Tips to Help You Make Life Changes

Featured photo credit: Victor Rodriguez via unsplash.com

Reference

Read Next