2016 BUSINESS MANAGEMENT
12 Principles – Rule #4 The Pareto Principle
The Pareto principle, or 80/20 Rule, is the key to getting better and better in everything that you do. Pareto was a French Economist in the early 1900’s. He wanted to find out which form of government was best for the people. Pareto compared the distribution of wealth in different countries with communism, socialism, dictatorships, republics or democracies. Surprisingly, he found in almost every case that 80% of the wealth in that country was held by approximately 20% of the people. (Thus, the reason for the 80/20 Rule). He concluded that the reason so few people enjoyed the majority of the wealth no matter which form of government, was because of human behavior.
Today, we apply the Pareto Principle to everything we do that involves people. In a corporation, management expects 80% of the production to come from only 20% of the top producing sales representatives. In real estate, percentages have become even more one-sided. We’ve all heard that 90% of all commissions are earned by just 10% of the real estate agents. The Pareto Principal should also play a critical role in our personal lives. We should recognize that 80% of the success we have in our business and personal lives, comes from 20% of or activities. If you create a system that allows you to determine what those 20% activities are, your goal should be to duplicate them and delegate the rest of the activities to someone else. For example, if you make the most money when you’re on appointments with qualified buyers and sellers, your goal should be to delegate the 80% activities to others so you have more to time schedule more appointments.
As we already know, tracking is arguably the #1 key to success. By tracking how we’re spending our time every day, we can identify where our success is coming from and spend more time doing more of those activities. The end result, you become more efficient and make a lot more money. As you can see from the attached income example, it just keeps getting better and better. Best of all, the Pareto Principle also applies to our success in relationships. If 80% of all of the success you have in your marriage, and with your children and friends, comes from 20% of the things that you are doing with them, do more of those things by avoiding the activities that aren’t giving you a return. Once again, the end result is a happier, more successful you. Best of all, things keep getting better and better!