The Pareto Principle: Applying the 80-20 Rule to Your Team

I believe in playing to my strengths, and building relationships is very important to me both in life, business and investing. One advantage is that it provides the ability to network. For many years, I’ve been told that I am effective at networking, which I define as the exchange of information, ideas and resources. At The Fedeli Group, we strive to build a better, more successful business, with a goal of becoming a world-class organization. I have learned one of the most important aspects in business is that you need the right people in the right places in order to achieve more success. Although I am not an expert in any specific area, one of my strengths is assisting others to solve problems by identifying individuals who are incredibly talented in their area of expertise. These are people who have high integrity with incredible capabilities, and who are trustworthy.

Vilfredo Pareto was an Italian political activist and economist who, in the 1890’s, established that 80 percent of Italy’s land was owned by 20 percent of the population. His principle states that 80 percent of objectives (or effects) are accomplished by 20 percent of the means (or causes/agents/people). And it takes 80 percent of the means to achieve the remaining 20 percent. So, the cost to move from 80 to 100 percent is four times more than moving from 0 to 80 percent. This is ultimately what is now known as the Pareto Principle.  A common example of the Pareto Principle as it applies to business: 20 percent of customers account for 80 percent of one’s business. So, a business is likely to be more successful when it focuses on its strengths—that 20 percent that accounts for 80 percent of the business.

What are your strengths? How are you leveraging your talents, skills and abilities to forward your success, and the success of others? While it’s good to know your weaknesses, it’s much more important to play to your strengths.

Extending the Pareto Principle to your teams, and also to life, follows the belief that 80 percent of success comes from choosing the right key people. I have found that one way to be successful is that you must engage your clients, associates and community. If you can get people emotionally involved and engaged, you can achieve more. However, you have to have a genuine interest and real passion and then your energy can become contagious. The more engagement, the more success. Even if people don’t necessarily agree, if they feel that you are sincere, passionate and consistent, the fact that you believe is what will be important.

When people take a deeper dive into their customer base, they will likely find that their top 5 percent of customers make up at least 50 percent; the top 10 percent could be two-thirds; and the top 20 percent perhaps accounts for as much as 90 percent of the overall business. Inversely, the bottom 20 percent can be as little as 1 percent of the business.

A major lesson from the above is that it’s a small percentage of decisions, people, and investments that make a significant impact. I have found that the Pareto Principle works in business, politics, investments, and many other aspects of life.

I often ask myself: Where and How can I make a difference? Then, focus my efforts on those areas where I can make a significantly meaningful, positive impact. With the right people on your team, playing to their strengths, and with an alignment of interests, motivating and inspiring them will lead to more success.

It’s so easy to get bogged down in the details but focusing on a smaller number can result in exponential results. It ultimately goes back to ‘The Who’. If the Who isn’t right, the What becomes less important.