Vilfredo Pareto (1848 – 1923) was an Italian civil engineer, sociologist, political scientist and philosopher. In 1896, he conducted a study of land ownership in Italy, which showed that 20% of the population owned 80% of the property.
This became the foundation for what we know today as the “Pareto Principle” – or more commonly – the “80/20” rule. Turns out this is an accurate model for many things in life and business.
The primary rule states that 80% of the outcomes derive from 20% of the causes.
As a leader, I apply this rule frequently to a broad spectrum of situations. It’s like the Swiss Army knife in my leadership toolbox.
Today I’ll share six applications for the Pareto Principle that I’ve found valuable over the years.
First, Pareto analysis can be successfully applied at several levels. Individuals, teams, and entire organizations can benefit. I keep this rule in front of those I work with and coach. It is an excellent general leadership mind-set.
Second, it keeps the focus on progress. Many leaders rely too heavily on data and Matterhorn sized piles of information. Sometimes detailed data is vital, but many times it causes “analysis paralysis” or distraction. That slows things down or halts them altogether.
Third, it keeps the focus on relevance. I’m working with the Pastor’s Team at my church. We did a survey on the 15 expressions of our DNA that encapsulate our organizational distinctives. Three items emerged as needing work.
Guess what? That’s 20%. So, 20% of the DNA points were causing 80% of our team disconnects. We spent five successive weeks unpacking those. By focusing on the top 3, we experienced tremendous growth in a compressed time frame.
Fourth, it allows for quick adjustments. Things easily hop off the tracks. Missed deadlines, budget problems, delays in launching new initiatives or programs, conflict and many other items can hit the proverbial fan.
When this happens, ask – what adjustments can we make that will have significant and immediate impact? Most likely, a quick “20%” conversation with key parties will reveal the top issues. Save the rest for later.
Fifth, it allows for streamlined meetings. First, use it to focus attendance. Many meetings involve far too many people. Include only those relevant to the agenda.
Second, use it to focus discussion. People often bring the kitchen sink and all the associated plumbing on their list for a meeting. Being laser focused on your top items will yield the most benefit.
Finally, it allows for rapid prototyping and launch. Many times all you need are bright lines to start. A quick analysis will uncover 80% of what you need, or at least to determine if the idea is worthwhile and has acceptable risk. You can gather additional data and refine the plan once you’re on the road. Using Pareto to keep things “agile” helps foster innovation and creative thinking.
Give it some thought this week… how can you use Pareto to advantage in your leadership?
I’m sure Mr. Pareto had no idea the far reaching impact his simple study would have on future generations. But I’m sure glad I have that Swiss Army knife in my toolbox.
Plus – and not insignificantly – he had an epic beard.