Pareto's Principle - The 80-20 Rule
ABOUT Management: Your
Guide to Management.: F. John Reh,
How the 80/20 rule can help you be more effective:
In 1906, Italian economist Vilfredo Pareto created a mathematical formula to
describe the unequal distribution of wealth in his country, observing that
twenty percent of the people owned eighty percent of the wealth.
In the late
1940s, Dr. Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto,
calling it Pareto's Principle. While it may be misnamed, Pareto's Principle
or Pareto's Law as it is sometimes called, can be a very effective tool to
help you manage effectively.
Where It Came From
After Pareto made his observation and created his formula, many others
observed similar phenomena in their own areas of expertise. Quality
Management pioneer, Dr. Joseph Juran, working in the US in the 1930s and 40s
recognized a universal principle he called the "vital few and trivial many"
and reduced it to writing.
In an early work, a lack of precision on Juran's part made it appear that he
was applying Pareto's observations about economics to a broader body of
work. The name Pareto's Principle stuck, probably because it sounded better
than Juran's Principle.
As a result, Dr. Juran's observation of the "vital few and trivial many",
the principle that 20 percent of something always are responsible for 80
percent of the results, became known as Pareto's Principle or the 80/20
You can read his own description of the events in the
For Quality Leadership
article titled Juran's Non-Pareto Principle.
What It Means
The 80/20 Rule means that in anything a few (20 percent) are vital and
many(80 percent) are trivial. In Pareto's case it meant 20 percent of the
people owned 80 percent of the wealth.
In Juran's initial work he identified
20 percent of the defects causing 80 percent of the problems.
Managers know that 20 percent of the work (the first 10 percent and the last
10 percent) consume 80 percent of your time and resources.
You can apply the
80/20 Rule to almost anything, from the science of management to the
You know 20 percent of you stock takes up 80 percent of your warehouse space
and that 80 percent of your stock comes from 20 percent of your suppliers.
Also 80 percent of your sales will come from 20 percent of your sales staff.
20 percent of your staff will cause 80 percent of your problems, but another
20 percent of your staff will provide 80 percent of your production. It
works both ways.
Italian sociologist, economist and
(July 15, 1848 - August 19, 1923)
read about Pareto on Wikipeida - The free online encyclopedia
How It Can Help You
- The value of the Pareto Principle for a manager is that it reminds you to
focus on the 20 percent that matters.
- Of the things you do during your day,
only 20 percent really matter.
- Those 20 percent produce 80 percent of your
results. Identify and focus on those things.
When the fire drills of the day
begin to sap your time, remind yourself of the 20 percent you need to focus
on. If something in the schedule has to slip, if something isn't going to
get done, make sure it's not part of that 20 percent.
There is a management theory floating around at the moment that proposes to
interpret Pareto's Principle in such a way as to produce what is called
- The theory's supporters claim that since 20 percent of
your people produce 80 percent of your results you should focus your limited
time on managing only that 20 percent, the superstars.
- The theory is flawed,
as we are discussing here because it overlooks the fact that 80 percent of
your time should be spent doing what is really important.
- Helping the good
become better is a better use of your time than helping the great become
Apply the Pareto Principle to all you do, but use it wisely.
Manage This Issue
Pareto's Principle, the 80/20 Rule, should serve as a daily reminder to
focus 80 percent of your time and energy on the 20 percent of you work that
is really important.
Don't just "work smart", work smart on the right