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Inbox optimisation certainly helps productivity.
My system is as follows:
1) Keep Inbox sorted "By Conversation" so that all messages group - just like a forum.
2) Move all sent items to Inbox as soon as they're sent.
3) Only keep threads in Inbox that have something still pending on them.
4) Under my Inbox I have 3 folders "2008" or general closed threads, "IT" for threads relating to IT equipment issues (not part of my job, but I'm the go to guy), "Personal" for private stuff and jokes or humour from anyone.
5) Use Autoarchive to move offline all messages from these three folders once they're 3 months old. Do not use Autoarchive on Inbox itself.
6) Use coloured flags exactly like twistedmosaic uses his sub folders. I use RED for complaints and emergencies (I'm Quality and Regulatory manager of a healthcare company), use GREEN for "don't forget about this, but it's not urgent", use other colours to categorise things into "nag a colleague", "chase a supplier" etc.
7) Try to keep Inbox to about 50-70 threads max.
8) Try to keep coloured flags to ~20.
One productivity thing I'd advocate to anyone is "learn to use tasks and appointments correctly". Our Customer Service manager needed to be FORCED to use tasks rather than blocking out times in her calendar, and what happened is she'd get past the time she'd booked and no longer have a reminder to do stuff - by using tasks you get a constant reminder that you've missed a deadline...
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Overhead, the Albatross hangs motionless upon the air,
And deep beneath the rolling waves,
In labyrinths of Coral Caves,
The Echo of a distant time
Comes willowing across the sand;
And everthing is Green and Submarine
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