I hear the 80/20 rules used all the time, Sometimes, it drives me nuts.

Why? Well, mostly because it is used somewhat incorrectly to “prove” anything a person wants.

The origin of the 80/20 rule (aka: the Pareto Principle) was brought to us by Italian economist Vilfredo Pareto. He observed that 80% of income in Italy went to 20% of the population.

The ‘rule of thumb’ rule that can be applied would state:

80% of the effects come form 20% of the causes

It is important to note, that this is not an exact science. Sometimes it might be 95% of the effects 5% of the causes, or 70% of the effects and 30% of the causes.

The general idea is that most of the ‘problems’ that you see, or hear occurring around you (or worse, occurring to you) have a common set of ‘root causes’. If you can find and solve the smaller amount of root causes you will eliminate a great deal of the observed problems.

One must be very care full when applying the 80/20 rule, not to dismiss relevant problems and concerns. One of the common mistakes I see made is the statement

Read more in Small Business
« Success in The Mist of Chaos
What is Quickbooks and Benefits of Hosting Quickbook »

“Let’s not worry about issue ‘X’ right now, as it is not one of the 20% of the problems we need to focus on”

The logic is flawed as it states that if you knew the vital few (the 20%) and just focused your time on that 20% everything else will fall into place. Another invalid use of the rule suggests that you only need do “80%” of anything is “good enough”, and the other 20% is unimportant.

The first problem with this logic is that even if the principle were true in everyday life, how do you know which is the correct 20%? Is it focusing on the 20% of high performing employees?  Is it writing and submitting only 80% of your business plan to those venture capitalists? Who knows? But if you pick the wrong 20% which you almost certainly will, you are no better off then before.

No, the truth is, the 80/20 rule can only help us learn a lesson about cause and effect. That lesson is when we see a LOT of problems, it may look like things are entirely out of control. But the odds are they are not! Most likely if you take all of these problems, and search for the root causes, you will find a common thread/theme, and by solving that root cause, a great many of your “effects” will disappear.

So the next time you hear someone make a statement about “80/20″. Stop and reflect for a minute on what 80/20 really means, and ask yourself, is this an appropriate use of the Pareto Principle after all?