The 80/20 rule in business: find the work that matters

Key takeaways

The 80/20 rule in business, or Pareto principle, says a small share of causes often drives most of the results: a few customers bring most profit, a few tasks take most time, a few problems cause most complaints. The split is rarely exactly 80/20. The point is to find the vital few, focus there, and simplify, hand over or stop the rest.

• A few causes usually drive most results or most effort.
• The split varies; 80/20 is a rule of thumb, not a law.
• Rank by data: customers, tasks, errors or contacts.
• Focus senior time on the vital few; hand over the routine many.

What is the 80/20 rule?

The 80/20 rule is the observation that outcomes are often unevenly spread across causes. It is named after the economist Vilfredo Pareto, who noted around 1896 that a small share of people held most land in Italy. The quality expert Joseph Juran later applied it to defects, calling it the vital few and the trivial many.

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• Efficiency vs effectiveness: which should you fix first?

How does it apply to a small business?

It applies wherever effort or results are unevenly spread. A few customer types usually bring most profit. A few task types take most admin time. A few reasons cause most customer contacts or errors. Knowing which lets you put senior effort where it counts and handle the rest more simply.

• Customers: which bring most profit, and which most effort?
• Tasks: which take most hours each week?
• Contacts: which reasons drive most customer queries?
• Errors: which causes create most rework?

• Failure demand: the customer contacts you pay for twice
• Customer feedback loop: turn complaints into fewer contacts

How do you run a Pareto analysis?

List the items, measure each one, sort from largest to smallest and add a running total as a percentage. The point where the running total reaches about 80% shows the vital few. You do not need software: a spreadsheet and two weeks of data are enough.

• 1. Choose what to measure, such as hours by task.
• 2. Collect two to four weeks of data.
• 3. Sort from largest to smallest.
• 4. Add a running percentage total.
• 5. Mark where it reaches about 80%.

• Run a time audit to find what to outsource
• Work sampling: measure where office time goes, quickly

What does it look like in numbers?

In an illustrative firm, admin time is logged across 15 task types. Four of them, inbox handling, scheduling, invoicing and document chasing, account for about 75% of the hours. Those four become the first candidates for a written process and a managed team. The other eleven are left alone or simplified. Example figures only.

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What do you do with the trivial many?

Handle the trivial many as cheaply and simply as possible. Some can stop entirely. Some can be automated or batched. Some can go to a managed team alongside the bigger processes. What they should not do is consume senior attention out of proportion to their value.

• A stop doing list for your business
• Batching admin tasks: when it helps and when it slows you

When does the 80/20 rule mislead?

It misleads when small items carry large risk, such as a rare compliance task, or when the data covers too short a period to be representative. It also misleads if used to drop customers who are small now but growing. Use it to direct attention, not as an automatic cut-off.

• Compliance admin burden: what you can hand off

What does this look like in practice?

A pattern we see: an owner wants to hand over all admin at once. Ranking the tasks shows a handful account for most of the time. Starting with those makes the first handover simpler and delivers most of the gain early.

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• BPO Solutions for UK businesses

Pareto checklist

Use these steps on any list of tasks or causes.

• Pick one thing to measure.
• Collect at least two weeks of data.
• Sort and add a running percentage.
• Focus on the vital few first.
• Decide stop, simplify or hand over for the rest.

• Outsourcing efficiency checklist: 20 checks

Next step

Send us a list of your routine tasks with rough hours. We will help you find the vital few and say which would gain most from a managed team.