One of the most amazing phenomenon I have ever known is the Pareto Principle. What is so remarkable about this rule is its universality – it applies to almost anything in the physical and biological world. It goes like this:
“In any population which contributes to a common effect, a relative few (20%) of the contributors account for the bulk (80%) of the effect.”
The above general law was formulated by an American, Dr. Joseph Juran in the late 1940s, and it was Juran himself who inaccurately christened it “The Pareto Principle”, a.k.a. the 80/20 Rule, or the principle of “vital few, trivial many”.
The principle had its genesis in 1906 when an Italian economist Vilfredo Pareto observed that in his country 20% of the people owned 80% of the wealth. Vilfredo Pareto was to learn later, to his surprise, that the distribution of property was the same in all countries of Europe.
It was however Dr. Joseph Juran who gave flesh to Pareto’s seminal work. The good doctor came up with the phrase “vital few (20%), trivial many (80%)” to describe the awesome universal law he discovered, thereby transforming Vilfredo Pareto’s wealth-specific statistical observation to something akin to a theory of everything. Thus –
- 20% of your stock takes up 80% of warehouse space
- 80% of your stock comes from 20% of your suppliers
- 20% of your sales staff produce 80% of your sales
- 20% of your staff will cause 80% of your problems
- 20% of criminals account for 80% of the crime
- 20% of motorists account for 80% of accidents
- 20% of marriages account for 80% of divorces
- 20% of streets account for 80% of the traffic
- 20% of defects account for 80% of the problems
- 20% of customers account for 80% of the profits
- 20% of your clothes are worn by you 80% of the time
The list goes on and on, covering all fields of knowledge.
Slicing and dicing the formula, we arrive at the following very interesting insights–
- We achieve efficiency by focusing our efforts on the 20% which matters
- We can manage effectively by seeing to it that the vital 20% gets done
- We get the most bang for the buck by allocating time, resources and energy on the crucial 20%
among others.
Most writers split hairs by saying that the Pareto Principle is a mere observation, not a law. For our purposes however it is better to keep things simple and utilitarian by regarding the principle as the law of the universe as regards statistical distribution of anything. The prevalence of the phenomena suggest the existence of such a deep-lying law underneath. The observed facts are manifestations of the law: Things are unevenly distributed in the ratio 20/80.
We can use the Pareto Principle as an intellectual tool. What’s the problem here? Seek out and identify the crucial 20% and you have solved 80% of the problem. Pressed for time? Do the vital 20% first, the remaining 80% can be safely deferred or ignored. Want to make an impact? Make sure the important 20% is accomplished with aplomb.
The challenge lies in seeking out and identifying that vital 20%.
More on the Pareto Principle:
http://management.about.com/cs/generalmanagement/a/Pareto081202.htm
http://www.mindtools.com/pages/article/newTED_01.htm
http://betterexplained.com/articles/understanding-the-pareto-principle-the-8020-rule/
http://www.buzzle.com/articles/pareto-principle-effective-time-management.html
http://www.juran.com/downloads/Non-Pareto%20Principle-Mea%20Culpa_JMJuran%2094.pdf