The Pareto Principle, sometimes called the 80/20 rule, holds that 80% of consequences result from only 20% of causes. In the corporate world, this shows up everywhere from finance to manufacturing. It was first noted in the 1870’s by Italian economist Vilfredo Pareto, later was popularized in the 1940’s by management consultant Joseph M. Juran and has bounced around boardrooms ever since.
The principle’s staying power is attributable to its utility: 80/20 is simple shorthand for the fact that many things in life are not distributed evenly. For example:
A handful of products account for the majority of profit margin
A small portion of the staff (the sales team) drives most of a company’s revenue
The majority of pollution originates from the minority of factories
It stands to reason that an advantage may be gained if we identify and prioritize the 20% — either by increasing time spent, money spent, or both. This is can also be rephrased as majoring on the majors – focusing on those activities that have a disproportionate impact.
Recently, we heard a new take on the 80/20 principle from ProAmpac’s Founder and CEO Greg Tucker:
80 % of issues we individually face are actually created by ourselves –
20% of the issues we face are out of our control
Greg’s statement struck us because it focuses on holding individuals to “own” their own reality. It’s also a critical component to a culture of accountability, especially as we define it: “Taking personal ownership to ensure commitments are achieved as agreed.”
This definition is far harder to live by than it first appears.
A basic human driver is the need for agency – that we have a choice about what we do. However, we also have the great human need to be viewed as competent. When things do not turn out as planned, these competing needs are a recipe for minimizing our individual roles in the choices we make… and therefore the outcomes achieved.
When times are good, we can easily recognize and celebrate our own brilliance, tenacity and accomplishment. If we hit a rough patch it becomes easy to blame factors that we frame as completely out of our control. We often start talking about the “the”: “the market,” “the competition,” “the customer,” “the regulations.”
These “the’s” become mysterious and mercurial entities that we just can’t do anything about and we start to act as if the 80/20 is reversed – with 80% out of our control. We start mumbling about supply chain, tariffs, interest rates – we conjure up all sorts of reasons and rationale – suddenly forgetting our brilliant and tenacious self.
In reality, things are neither fully in our control nor fully out of our control. Tucker’s 80/20 rule captures what is closer to the truth, and more important – what’s much more actionable and approachable.
When we realize that 80% of the issues we face are areas where we can make a difference right away (because they’re created by ourselves), our agency need lights up again – we start to act as if we have the control to make things happen. The 80% ownership diminishes stress.
It’s also a critical mindset to model and coach because the other reality is that this is hard. Sellers, especially, are fantastic at getting in their own way. A focus on the relationship with customers means that we often place ‘rules’ around our situations. We find ourselves saying things like:
“It’s not the right time for that, I have to wait until (fill in excuse here… I get to know them a little better / more time has passed / their favorite team makes the playoffs, etc.)”
In the same category, the more challenging aspects of sales become outsized: small bumps become hurdles, hurdles become roadblocks and roadblocks become catastrophes. A budget that a seller commits to achieving, for instance becomes not simply a commitment they’ve agreed to, but something that was “done to” them – a much heavier burden than in reality.
The beauty of Greg’s new take on the 80/20 rule is that it ultimately helps us tap into our better selves. The self that is resourceful, clever and wants to deliver on the things we’ve committed to (budgets included). It tells us that we have created our world – and therefore we can change it. What can be more liberating than that?
Plato said “Reality is created by the mind. We can change our reality by changing our mind.” Tucker tells us that reality is created by the choices and actions we take, that we can change the reality by changing our choices and actions. It starts by embracing his 80/20 rule.