Use the 80/20 Rule to Get the Best Results of Your Life

 

You’ve probably heard of the 80/20 law also known as the Pareto Principle, Law of the Vital Few or Principle of Sparsity.  This rule states that for many situations 80% of the results/outcomes come from 20% of the inputs/actions.  This rule was initial described by  

•   80% of the results are created by 20% of the employees 
•   80% of the revenue comes from 20% of the clients 
•   80% of the beans come from 20% of the bean plants 
•   80% of the X come from 20% of the x and so on 

It’s important to note that the 80% and 20% are rough distributions.  You get about 80% of the results from 20% of the inputs. 

Now having gotten past that, why are we talking about this on a business blog?  We’re talking about this because you need to take it to heart and apply it to your work and organization.  Understanding the key drivers of results in any business venture allows you to focus your time and energy on those actions that will get you the most return on business. 

Let’s look at an example of a Manager of a sales team.  The manager has 10 salespeople.  2 of them are super stars.  They hit their targets early every month and then work to exceed them.  They compete for who can be the best.  80% of the $100k monthly sales target are met by these high achievers. They are reliable and the manager can count on them to achieve their goals without input from them.  The manager has 8 other salespeople that produce varying levels of results.  They typically need to be reminded of their goals throughout the month and often just barely meet their goal or miss it entirely.  The manager cannot count on them to produce the results needed. 

Conventional wisdom says that the manager should work with the 8 average to underperforming salespeople to help them improve their results.  If the manager can help those 8 improve their results 10%, they would have a huge performance boost.  This, conventional wisdom is wrong.  Let’s look at some math that shows it. 

The 8 salespeople that are achieving 20% of the $100K sales target are generating $20k in monthly sales.  If they were to receive high time and energy investment from the manager and generate a 10% improvement that only equals another $2,000 in sales revenue. 

The 2 Managers that are achieving 80% of the $100K sales goal are generating $80K in monthly sales.  If the manager invested time and energy into helping these salespeople improve their performance 10%, they would increase their output an additional $8,000.  That is four times the output for the same effort.  

While conventional wisdom says to allow the winners to win and try to help the underperformers reach the next level, you can see how that doesn’t equate to the best results.  Instead identify those that are driving the majority off your business and focus on them.  The potential for increased performance is much higher. 

This rule, of course, applies outside of sales teams.  Whether you’re reviewing which clients you can support, which products to sell or even which activities to do in your own job, it’s important to apply the 80/20 law.  Work to identify those behaviors and actions that are driving most of your results.  Be objective and cut out the focus on the behaviors and actions that aren’t driving your results.  If you’re constantly putting supporting low performing salespeople, stores or clients, stop.  Give them only what you’re obligated to and move on to your 20% salespeople, stores or clients.  The performance that you’ll generate will more than make up for any short-term discomfort from the change in strategy. 

Have you applied the 80/20 law in your work?  Tell us how it went in the comments.