Today I am presenting you one of the management principles, which some of you might already be knowing. This has helped many in both personal as well as professional life. It has wide usage in business as well as economics. The axiom “80-20 Rule”, in general, means that the input-output relationship is not balanced. In other words, 80% of the consequence (Output) is the result of 20% of the cause (Input).
How this Rule came:
This rule is also known as Pareto Principle, named after esteemed economist Vilfredo Pareto. He gave this principle after observing the land distribution pattern in Italy. According to his observation, 80% of the lands in Italy belonged to just 20% of the population. Taking cue from the skewed relationship, he furthered his observation
How we can understand it works!
*Student uses/can use this technique very well. (I also did :-D) Based on previous year question papers, they can easily understand which portion of their syllabus can fetch them maximum marks. Based on that analysis, they will only focus those parts (20%) which may fetch them maximum (80%) score in the exam.
*It is observed by many corporation that 80% of their Revenue comes from just 20% of the customers. Take an example, let’s say Telecom Industry. Not everyone recharge their mobile phones with the amount which is in higher bracket. Generally business firms or government offices which has the bulk of the connections are the source of larger revenue. Hence, the company may have millions of customers on paper but many of them keep balance in their phones just enough to maintain the incoming and outgoing facility.
*Many organisations has reported that 80% of the firms profit is driven by only 20% of the employees. Hence focusing to retain those 20% is their main concern.
*This principle also holds good in the field of quality assurance in manufacturing sector. Observation suggests that 80% of the defects are sourced from nearly 20% of the causes. Hence if the firm can minimise these cause then they can also get away from most of the defects from the product and in turn can save time, effort and money.
How can we apply it in day to day life:
The purpose of my writing is to let my readers know that we can use this principle in day to day life and hence we can increase our productivity as well as efficiency.
Let me just share one simple and relatable example which is more visible especially in the period of lockdown. Many a times we cry that we are not able to do certain things which are close to our heart due to dearth of time. This principle will help you in generating extra time. As saving is generating. I suggested this principle to one of my friend, who was also complaining that he is unable to learn guitar because he doesn’t have sufficient time. He recently applied this and shared his experience.
First thing he did is that he spent time in observation about his daily schedule. He found that his mobile usage on daily basis accounts for one of the highest source of time utilisation. He also took the help of technology in tracking his activity. Don’t get swayed away by the word “technology” as he did not purchase any gadget to monitor him, but used existing one i.e. Mobile Phone. There is a feature in his phone (now a days everyone has) which gives the hourly utilisation of different applications. He got astonished to know that WhatsApp and YouTube, only these two apps took his more than 5 hours daily whereas he had more than 30 applications installed in his phone. He realised that many a times he opened WhatsApp when it was not needed. He used just to check status, of which he has already seen many a times. So now he was aware that what is the distraction for him and accordingly he set a fixed time for each applications. After nearly a month along with his experience he shared with me a short clip of how he is learning the guitar by saving extra 3 hours!!!
This is just a single example of how 80-20 Rule can be applied in our life. Hope this piece will help you figure out your own interest area to reflect.
Note: One thing which needs to be understood that 80-20 is not a strict figure to follow. It just help us to prioritise the most important feature from other and accordingly one can work upon them.