Articles

The universal Nature of the Pareto Principle

The Pareto principle popularly referred to as the 80-20 rule is nothing but a mathematical formula that was discovered by an Italian economist Vilfredo Pareto to describe the unequal distribution of wealth in his country. This led to the conclusion that twenty percent of the people owned eighty percent of the wealth. It is a effective tool used for management purposes.

Where The Name Came From

After Pareto made his observation and discovered a formula, a similar phenomena was observed by many others who were working in their own expertise. Dr. Joseph Juran, who was a quality management pioneer, recognised a universal principle called the "vital few and trivial many". In an early lack of precision on Juran's part made his idea to appear like he was applying Pareto's rule for a broader body of work. Therefore the name Pareto principle struck as it sounded better than all other's similar principles.

Meaning

According to this rule, it means that in anything a few (i.e 20 percent) are vital and many (80 percent) are trivial. In Pareto's case it was like 20 percent of people owned 80 percent of the wealth whereas in Juran's case it is 20 percent of the defects that causes 80 percent of the problems. Project managers know very well that 20 percent of the work (i.e first 10 percent and the last 10 percent) consume almost 80 percent of their time, and also the resources. It is possible to apply this 80/20 rule to almost anything, like from the science of management to the physical world. This is the reason it is called to be an important managerial tool.

How it helps

It is helpful to the managers by way of making them to concentrate over the most important 20 percent of their work that makes them achieve success in the rest 80 percent of that work. If by some problems something from your schedule has to slip, it is important to make sure that it is not the part of that 20 percent which really matters.