The Powerful Pareto Analysis Approach and 20/80 Rule: FAQ

Jun 12, 2023 | Pareto Rule - 80/20 Rule - Pareto Law - Pareto Principle, Pareto Rule and Business

Pareto Analysis and 80/20 Rule - Overview

 80/20 Rule Illustration

Pareto Analysis: what is it?

A Pareto Analysis uses the Pareto Principle that assumes that the large majority of outcomes or effects (Typically 80%) are driven by a few important causes (Typically 20%). The Pareto Principle is also known as the Pareto Law or Law of Vital Few.

Pareto Principle or 80/20 Rule - Illustration

80-20 Principle - Pareto Principle - Pareto Law

A Pareto Analysis can be applied to various matters such as profit optimization, quality management, decision-making process, and other complex issues. It can be used as a stand-alone method or within another optimization process such as the Eisenhower Matrix to quantify the most important projects.

A few of the 80/20 rule examples from daily practice that are often observed are:

  • 80% of the customer complaints ensue from 20% of the products or services delivered.
  • 80% of the malfunctioning issues reported are caused by 20% of the known system bugs.
  • 20% of the people responsible for sales generate 80% of all the sales.
  • 20% of the products or services yield 80% of the profits.
Manual Excel Pareto Analysis
Pareto Analysis in Excel

The example above illustrates a perfect 80/20 Pareto distribution.  In this Pareto Analysis example, the results show that only a few important products (20% here 200 products out of 1000 products)  generate most of the sales (80% here around $ 1.6 million out of $ 2 million). The illustration above comes from the following Excel Pareto Analysis tutorial

>> How to do a Pareto Analysis in Excel step by step <<

Automated Excel Pareto Analysis

To automate an Excel Pareto Analysis in just one click like shown in the DEMO section of this website,  you can use an Excel Pareto Analysis Add-In. An Excel Add-in is particularly useful for Excel users who have to do Pareto Analysis in Excel on a frequent basis. The Excel Pareto Analysis Add-In also helps to save time when the data-set to analyze is defined with active filters in Excel. These filters can stay in place when using the Add-in hence avoiding additional time-consuming steps of data preparation.

>> Automate any Excel Pareto Analysis  in just 1 click <<

Excel Pareto Chart or Pareto DIAGRAM
What is a Pareto chart or Pareto Diagram used for?

A Pareto Chart or Pareto Diagram is a visual tool that helps you identify the most frequent defects, complaints, or any other factor or business driver you can count and categorize.

Pareto chart or Pareto Diagram Example

Excel Pareto Chart

The example above illustrates a perfect 80/20 Pareto distribution.  In this Pareto Chart,  the results show that only 2 products (20%)  generate most of the complaints (80%).

The illustration above comes from the following Excel Pareto Chart tutorial:

>> How to make a Pareto Chart in EXCEL in 2 Simple Steps <<

The same dataset is also used in our Google Sheets Pareto Chart tutorial:

>> How to make a Pareto Chart in  GOOGLE SHEETS in 2 Macro Steps <<

Pareto Principle: is it always 80% caused by 20% ?

Although the 80/20 Rule is observed in many situations, the typical "Pareto Distribution" doesn't exist everywhere. The 80/20 Rule is a precept, not a rigorous mathematical law. It can be 70/30 or 90/30 for example as the numbers do not necessarily have to add up to 100.  A 90/30 distribution would mean that  90% of an outcome is driven by 30% of the inputs.

Pareto Distribution: do the numbers need to add up to 100?

The two numbers don't need to add up to 100. For instance, you may have 20% of your products that generate 90% of your sales.

Focusing on the causes that drive most of an outcome to save time and energy is the key concept underlying any Pareto Analysis.

What is an 80/20 Mindset or Pareto Mindset?

The 80/20 Mindset is all about working smarter, not harder. It consists of getting things done by relentlessly leveraging the small efforts and activities that lead to the most considerable positive or negative outcomes.

The Pareto principle and the 20/80 rule: what is the difference?

It is exactly the same!

The Pareto principle, also known as the 80/20 rule, the law of the vital few, or the principle of factor sparsity states that, for many events, roughly 80% of the effects come from 20% of the causes.

Source: Wikipedia

Pareto Analysis: where does it come from?

Management consultant Joseph Juran suggested the principle and named it after Italian economist Vilfredo Pareto. 

Vilfredo Pareto actually noted the 80/20 connection while at the University of Lausanne in 1896, as published in his first work, Cours d'économie politique. In it, Vilfredo Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.

What is a Pareto Analysis in a problem solving context?

A Pareto Analysis is a formal technique that helps to identify the top portion of causes that need to be addressed to resolve the majority of problems.

Once the predominant causes are identified, then tools like the Ishikawa diagram or Fish-bone Analysis can be used to identify the root causes of the problems. While it is common to refer to Pareto as the "80/20" rule, under the assumption that, in all situations, 20% of causes determine 80% of problems, this ratio is merely a convenient rule of thumb and is not nor should it be considered an immutable law of nature.

The application of the Pareto analysis in risk management allows management to focus on those risks that have the most impact on the project.

Source: Wikipedia

How to apply the Pareto Principle in Project Management?

There are several ways to use the Pareto Principle in Project Management and Time Management: 

  • putting a deadline on the project's most valuable tasks as a way to get the most important things done within a given timeframe (in tandem with Parkinson's Law)
  •  working first on the project's most valuables tasks to prevent procrastination with easy but low-value-added tasks (to counteract Laborit's Law)
  • establishing robust operating procedure and contingency plans on a short-list made of the project's adverse events having the most significant negative impacts (to counteract Murphy's Law)

In particular, a Pareto Analysis can provide a robust and rational approach each time a short-list of the most or least valuable tasks needs to be established to act upon it.

What is a Pareto Efficiency or Pareto Optimality?

Pareto Efficiency or Pareto Optimality pertains to the highest efficiency level resulting from an optimal allocation where any change to this allocation would make someone or something worse off. A situation is Pareto Efficient when there is no better alternative allocation: no individual or preference criterion can be better off without making at least one individual or preference criterion worse off or without any loss thereof. Find more about Pareto Efficiency here.

Pareto Analysis Excel Add-In Related Questions

Why doing a Pareto Analysis?

A Pareto Analysis is a simple yet powerful process derived from the 20/80 rule that allows you to focus on what really matters, usually time or money.

A Pareto Analysis can be applied to various matters such as profit optimization, quality management (six sigma), decision-making process, and complex issues. You can also apply the Pareto Principle to your life!  Get happier and more fulfilled by prioritizing your highest-valued activities, tasks, and projects with a Pareto Analysis of your activities.

Want to know more? Check the FAQ here

Why an Excel Pareto Analysis Add-In?

Doing a Pareto Analysis in an Excel spreadsheet is a simple yet powerful process.

However, this process is tedious and time-consuming, and it is especially true when your Excel spreadsheet suffers from information overload.

For example, suppose you manually do a Pareto Analysis in Excel. In that case, you first need to apply filters to define the dataset you want to draw a conclusion from and fix values such as #N/A or #DIV/0 due to missing or erroneous data, etc... You don't need this with Pareto Analysis Add-In.

This Pareto Add-In brings the benefits from automation in one click:

  • Convenience
  • Time Savings
  • Reliability

Not convinced? Check the DEMO here!

How Easy is the Excel Add-In to install?

Installing the Pareto Analysis Add-In in Microsoft Excel is a straightforward process, and it is no different than any other standard Excel Add-In. Check the video below for more details.

Why should I use a Pareto Analysis Add-in to prioritize my tasks or projects?

If you are in the business of juggling small projects, prioritizing the most important ones every week can be difficult. Assuming that your value for projects is quantified by relevant numerical metrics such as NPV (Net Present Value), total savings, or number hours saved; this Pareto Analysis Add-In for Microsoft Excel helps by providing an easy way to see which tasks will provide the most value for your time and money.

Knowing the most important projects on your to-do list is a key aspect of any prioritization method such as Eisenhower's Urgent-Important Matrix Prioritization tool.

Pareto Analysis in Excel – Download section

Microsoft Excel Pareto Analysis Template

Check if the 80/20 Rule works with your data with these free and ready-to-use Pareto Analysis Templates for Microsoft Excel:

>> Excel Pareto Analysis Templates <<

Microsoft Excel Pareto Analysis Add-In

Get your Pareto Analysis done in just one click: applying the 80/20 Rule (or any other split)  to your Excel dataset has never been so easy!

  >> Download the Excel Add-In <<

Pareto Chart in Excel & Google Sheets – Download section

Microsoft Excel Pareto Chart Template

Check if a Pareto distribution exists in your data with this free and ready-to-use Pareto Chart Template for Microsoft Excel. These 2 Pareto Templates for Microsoft Excel files are bundled in one free download:

 >> Download the Free Excel Pareto Chart Template <<

>> Additional Free Excel Pareto Chart (with/without target line) Templates <<

Google Sheets Pareto Chart Template

Verify the existence of a Pareto distribution in your data with this free and ready-to-use Pareto Chart Template for Google Sheets:

>> Access and Make a Copy of the Google Sheets Pareto Chart Template <<

How to build a Pareto Chart in Google Sheets?

Follow this simple process: Pareto Chart Google Sheet Step-by-Step Tutorial.

Applying the Pareto Principle in Life

Optimize Easily Your Well-Being With The 80/20 Rule Approach

Take control of your well-being by applying the simple yet powerful 20/80 Rule to your life. This article shows how to optimize your well-being easily in 3 simple steps with the Pareto Principle – also called the 80/20 rule. Everyone deserves to have a happy and fulfilled life. Read and hack your happiness now!

>> Optimise your Well-Being with the 80/20 Rule Approach <<

Pareto Your Time & Energy: How to Use the 80/20 Philosophy to Be The Best of Yourself

Pareto your time and energy across the day so you’re always the best of yourself: your mood, motivation, and ability to do specific tasks vary across the day. A 20/80 Approach or Pareto approach to your time and energy is a powerful method to maximize productivity and wellbeing and any tradeoff you may have between these two somehow contradictory goals.

>> Pareto Your Time & Energy To Be The Best Of Yourself <<

Use The 80/20 Principle To Make Things Happen, Not The Latest Fancy Time Management App

A time management tool is a prerequisite to any successful project, but that’s not enough. The key factor to success is being surrounded by the right people. On a given project, a minority of people (20%) are likely to contribute to most (80% ) of the project’s value. This article is a good reminder that your best time management tool is probably useless if you don’t focus on value: the value of the project’s outcome and qualitative people.

>> Why Your Best Time Management Tool Is Probably Useless If You Don’t Focus On Value <<

Don’t forget rule number one: apply a Pareto Analysis on everything you can control to focus on value.

The 80/20 Principle Book for Success

“80/20 Principle: The Secret to Success by Achieving More with Less” is a great book if you want to effectively apply the 80/20 principle in your life.

You’re closer to success and productivity than you think, and this is a well-informed read regarding this principle. You can become so much more productive and efficient after finishing this book as the author, Richard Koch displays a clear knowledge of what the 80/20 principle is all about and why it’s so significant. By giving this book a read, you’ll realize why your strategy isn’t working in your career, and why you need to integrate the 80/20 rule instead.

>> “The 80/20 Principle Book for Success” on Amazon <<


The review of the book in our blog provides you with straight answers for:

  • The 80/20 Principle and Priorities
  • The 80/20 Principle and Relationships
  • The 80/20 Principle and Wealth
  • The 80/20 Principle and Effort
  • The 80/20 Principle and Wealth
  • The 80/20 Principle and Happiness

>> “The 80/20 Principle Book for Success” review <<

The Pareto Principle or 80/20 Rule – Video

Getting things done with the Pareto Mindset - "Ideas are cheap, execution is everything" - Chris Sacca

The Pareto Principle or 80/20 Rule – Blog Content

  • How To Create a Pareto Chart in Google Sheets in 2 Macro-Steps
  • How To Create A Pareto Chart In Excel In 2 Simple Steps
  • How To Do A Pareto Analysis In Excel In 5 Simple Steps
  • How To Automate a Pareto Analysis In Excel In 1 Click
  • Optimize Easily Your Well-Being With The 80/20 Rule Approach
  • The Powerful 80/20 Principle: The Secret Of Achieving More With Less
  • Wellness 101: Pareto Your Time And Energy To Be The Best Of Yourself
  • 1 Easy And Smart Way Of Getting Things Done
  • The Powerful 80/20 Rule | Pareto Law | Pareto Rule By Ray Dalio

Pareto Analysis: Table Of Contents

Table of Contents

How to build a Pareto Chart in Google Sheets in 2 Easy Steps

This easy step-by-step tutorial shows how to build a Pareto Chart in Google Sheets. Download now the Free Google Sheets Pareto Chart template for immediate use.

Create a Pareto Chart in Excel in 2 steps – Easy Tutorial

The tutorial shows how to create a Pareto Chart in Excel in 2 simple steps after explaining the basics of the Pareto Principle or 20 80 rule.

Optimize Easily your Well-being with the 80/20 rule Approach

Happiness, the feeling of positivity, really is the foundation of productivity. - Miguel McKelvey Everyone deserves to have a happy and fulfilled life. Take control now of your well-being by applying the simple yet...

Time Management: 1 Simple Eisenhower Matrix to Get it Right

The Eisenhower Matrix or Urgent-Important Matrix is a highly effective time management tool that uses 4 quadrants to prioritize tasks and increase productivity

Why Your Best Time management Tool is Useless? 1 explanation

The Best Time Management Tools provide optimal task planning. That’s a great start, but that’s not enough. Learn here how to make your ambitions come true.

How to do a Pareto Analysis in Excel in 5 simple steps – Easy tutorial

This tutorial explains how to do a manual Pareto Analysis in Excel in 5 simple steps. A Pareto Analysis is particularly useful to focus on what really matters as the Pareto principle states that, for many events, roughly 80% of the effects come from 20% of the causes.

1 Easy and Smart Way of Getting Things Done

Getting things done is a prerequisite to productivity. Ray Dalio explains how to enhance productivity with the 20/80 Rule in his brilliant post. Achieving more by doing less is even better. Some say it is an easily...

3 Tricks To Turn The Shiny Object Syndrome To Your Advantage

The shiny object syndrome is bad for productivity. Focus is key. Execution is everything. How do you stay focus and execute with all these new ideas in mind?

The Powerful 80/20 Rule | Pareto Law | Pareto Rule by Ray Dalio

The famous American hedge fund billionaire Ray Dalio made this brilliant post about the 20/80 Rule, which is also sometimes called the Pareto Rule or Pareto Law:The 80/20 Rule The 80 20 Rule states that you get 80...

Wellness 101: Pareto Your Time & Energy To Be Your Best-Self

Pareto your time and energy so you’re always the best of yourself. Mood, Motivation, and Ability vary across the day: Pareto your time for the best outcome.

The Powerful 80/20 Principle: How to Achieve More with Less

The Powerful 80/20 Principle: The Secret of Achieving More with Less. A new perspective on the Pareto Principle.

Work Smarter – Get Help Right Now From an Excel VBA Expert

No time to learn VBA for your Excel project? Get it done: Ask a Microsoft Excel VBA Expert. Live Excel Help, Online Excel Assistance, Overnight Project Delivery

Pareto Analysis & Productivity Tools

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