Pareto Principle (80/20 rule)

Description of Pareto Principle (80/20 rule). Explanation.

Definition Pareto Principle (80/20 rule). Description.

The Pareto Principle (80/20 rule) states that for many phenomena 80% of consequences stem from 20% of the causes. The idea has rule-of-thumb application in many places.

Some of these applications include:

20% of any advertising campaign produces 80% of the response.
20% of the employees perform 80% of the work.
20% of the clients are responsible for 80% of all revenues / profits.

The principle was suggested by management thinker and quality control pioneer Joseph M. Juran.

Juran described the Pareto principle as the principle of 'the vital few and the trivial many' (Quality Control Handbook, 1951). He named it after the Italian economist Vilfredo Pareto, who observed in 1897 that 80% of property in Italy was owned by 20% of the Italian population.

The principle can be viewed as recursive, Tipton Cole has observed that the Pareto Principle applies to the residue of its first application, yielding a "96-36" rule.

Pareto Principle (80-20 rule) Forum (4)

Meta Pareto Principle
"The Pareto Principle has consistently proven to be right in 80% of the cases. There are of course exceptions, but for sure they do not amount to more than 20%... The pareto principle in action :-)"

80-20 Rule in Broadcasting
"When Brian Tracy's "Eat that frog" introduced me to Pareto principle some years back, I called for our marketing books and to my surprise only about 20% of advertising agencies placed adverts worth more than 80% of our revenue on our stations.
We altered our revenue drive strategy so that 20% from top management and best sales staff followed up on 20% big clients while other staff followed up on the 80% majority. Results were immediately impressive.
Agencies are also mainly interested in placing adverts adjacent to news and a few high audience shows, loosely relating to the Pareto principle!
Now it all sounds like common sense, but discovering the rule and using it to our advantage was like magic."

Using the 80/20 Principle for Workforce Effectiveness
"Can this principle be widely applied, and include a company workforce? In regard to performance and effectiveness of personnel, e.g. if the company's total workforce is 1000, can we attribute the achievements to only 200 people, what if the performance analysis revealed that the effective people is much less than this number?"

Danger of Pareto: Self Fulfilling Prophecy
"Although I agree with the Pareto principle, the danger is that we act to fulfill.
How can we in our organizations and daily life contradict? What is our attitude towards this? Maybe we often act in ways that aggregates?"

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