Pareto Principle

The Pareto Principle (Pareto 80/20)

Have you ever heard of the Pareto principle as known as 80/20 rule? If you are a businessman, included in top management at the place where you work, then you need to know about this Pareto principle (80/20 rule). The principle of 80/20 or better known as the Pareto principle, is one of the most important principles for time management and productivity. For many events, roughly 80% of the effects come from 20% of the causes. Pareto observed that 80% of income in Italy is owned by 20% of the population.

Pareto Principle on The Business Aspects

Many business people use the Pareto principle in their daily lives. You can say that this theory is weak. In fact, there are many phenomena in the business world that makes this theory even so solid. This ratio is roughly illustrates that the majority of results (described as 80%) obtained from the efforts of minority (about 20%, although it is not always appropriate). Essentially, a small proportion of causes produce mostly a result.

We can see in the business world, 80 percent of revenues generated from the 20 percent of the type of product or top sales persons. Once again, percentages may not always be exact but it is enough to describe how much it gained caused by something minority. Another example, 80 percent of profit earned from 20 percent the largest customers. Similarly, 80% of the total complaints expressed by 20% of customers.

In a company, approximately 80% of the profit is generated by 20% of employees in a company. Therefore, the company should be able to identify these key employees, improve their skills, and maintain it in order to remain loyal to struggling together in the company.

A salesperson can improve performance by focusing on 20% of potential buyers and crucial sales processes (cold calling or making presentation). After that, he can improve his ability with training and reading a book. The sales person becomes an expert who occupied the top position in its ranks in the end.

The Pareto principle provides a useful idea for the effectiveness and efficiency when using time and other resources. By focusing on the 20 percent area, we can make a significant improvement in outcome and work productively.

Furthermore, did you know 20% type of your activities would generate 80% of your success? So try introspecting yourself now and improve your activities quality.

Benny Santoso

Full Stack Developer and Co-Founder in RECTmedia and also owner of Imperial-Audio.com, currently living in Semarang, Indonesia. Thanks for stopping by!

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