The Pareto principle is a very well-known principle for productivity. In essence, it says that 20% of the causes gives 80% of the results. The implication then is to focus your effort on that 20% causes that gives 80% of the results.
But a question arose in my mind: how should we implement the Pareto principle? There are two possible strategies:
- Allocate 80% of the time to the top 20% causes and the rest 20% of the time to the lower 80%.
- Eliminate the lower 80% causes and allocate all the time to the top 20%.
To get a glimpse of what the answer might be, I did calculations to measure the total output of strategy 1 and 2 . I also calculated the output of not applying any of the strategies as comparison. I put the details of the calculation at the end of this post, but you may just skip them. What I want to emphasize here are the results.
The calculation shows that using either strategy gives you much better result (either 32.5 or 40) than not using them (10). Furthermore, the calculation also shows that the best result is given by Strategy 2 which gives 40 units as compared to Strategy 1 which gives 32.5 units. This result implies that the strategy we should choose to apply Pareto principle is elimination: totally eliminate the lower 80% causes that gives fewer results.
But I have a question: can that really be the case in reality? Can we just eliminate the lower 80% causes? Don’t we still need them in some way to keep the system run properly?
I don’t have definite answer here, so I’d like to ask your opinion (please leave it in the comments): which strategy do you think is the best, and why?
Calculation detail (you may just skip this part):
Note: The calculation here is actually simplified. For example, diminishing returns is not taken into account.
Let’s assume that the “causes” here are “tasks” we need to do. First of all, what does it mean if we say “20% of the causes gives 80% of the results”? In my opinion, it means that if we give each task the same amount of time, the tasks in the top 20% will give 80% of the results.
Suppose there are 10 tasks, and I have 10 hours of time. If I give 2 hours to the 2 tasks in the top 20% (which I call part A), they will produce 8 units of output. The rest 8 hours are then spent on 8 tasks in the lower 80% (which I call part B), which will produce 2 units of output. The total output is 10 units and this is the output of not applying any of the strategies. As you can see, A gives 80% of the results (8 units from the total 10 units) while B gives 20% of the results (2 units from the total 10 units).
From here we can calculate the output per hour for A and B:
Output/hour for A = 8 units / 2 hours = 4 units/hour
Output/hour for B = 2 units / 8 hours = 0.25 units/hour
So working on A is actually 16 times more productive than B given the same amount of time!
Now for Strategy 1, I allocate 8 hours for A and 2 hours for B.
Output for A = 4 units/hours * 8 hours = 32 units
Output for B = 0.25 units/hours * 2 hours = 0.5 units
Total output for Strategy 1 = 32.5 units.
For Strategy 2, I allocate 10 hours for A and 0 hour for B.
Output for A = 4 units/hours * 10 hours = 40 units
Output for B = 0.25 units/hours * 0 hour = 0 units
Total output for Strategy 2 = 40 units.
I think if you have to choose only one, increase the things getting results. I believe we have a fixed amount of resources and any increase in on will cause a decrease in the other. We only have so much time, or so much money. Any one of these resources put into areas of greatest result will reduce the amount going to areas of lower results.
Also regarding the title “how do you apply the Pareto Principle” I wrote on separate slips of paper the things that I enjoy doing and sorted them. I started doing more of the things that I enjoy doing.
I enjoy reading this blog. Thanks!
Great thoughts, Eric! I like the idea of writing our tasks in paper and sorting them. I agree that we will be more productive if we enjoy the things we do.
I am a firm believer of Perato’s Law (as some might call it) and I used the first approach: 80% of my work goes to the top 20% activities that contributes to my results! I have never tried the 2nd approached.
But since you have mentioned it I would suggest that the 2nd approach will work better if there are some activities that have negative effect on your result. Then eliminating them would produce better result.
Just my thoughts 🙂
Good idea, James! If something has negative effect, then it should be eliminated.
I think we need to use a holistic approach to assess the effect. For example, something may have positive effect financially, but it has greater negative effect on time. The overall effect will then be negative.
Comments are closed.