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What is Pareto Principle (Principle 80/20)
Pareto Principle or Principle 80/20 is a simple analytical technique, a tool that helps to simplify and focus the management and decision making. It is named after the Italian economist and sociologist Vilfredo Pareto who in the late 19th century found out that in Itanly is 80 % of the wealth in the hand of 20 % of the people.

Pareto Principle (also called Principle 80/20) is named after the Italian economist and sociologist Vilfredo Pareto who in the late 19th century found out that in Italy 80 % of the wealth is in the hands of 20 % of the people. Over time it became clear that the principle also applies in the life of the organizations and in the management practice. Pareto Principle is a simple analytical technique, a tool that helps to simplify and focus the management and decision making, for example as follows:

  • 80 % of business revenue comes from 20 % of customers
  • 20 % of products generate 80 % profit
  • 20 % of possible causes generate 80 % of problem situations, such as in the production

Generally, the Pareto Principle can be expressed as follows: 20 % of causes generate 80 % of results.

Practically, this means that while managing, planning and decision making is necessary to focus primarily on those critical 20 %, which can reach 80 % of potential effect. Thus the management is done with the greatest effect. Pareto Principle can be used in practice in all fields and areas.

In the field of Quality Management the Pareto Principle was applied by Joseph M. Juran.

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Last update: 03.07.2015

Comments

Kanwal Liaquat 11 months

Such a great inforamtive data regarding pareto principle

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The Pareto principle its simply a tool of the Italian economist and sociologist. It simply deals with the management and decision-making remove pop ups process. It is necessarily focused on the critical percentage and reach the potential effect.

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Abdul Waheed 7 months

It's been the analytical technique tool and you can use it to simplify the values and take a decision after the discussing with the team.buttetowing

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we talked about this matter in class these days and i need to be able to write a paper on this. free fire

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First You got a great blog .I will be interested in more similar topics. i see you got really very useful topics, i will be always checking your blog thanks.

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Horea Kaii 4 months

It exist an outdated network designer rule that’s called “The 80/20 rule”. It says that 80% of the network traffic should be internal and 20% should be external. Today it’s more like 20/80 . Hahaha! Anyways, I had not heard of the pareto principle prior to to doing a search on time management google i tried quite a few sites but they didn’t really explain the 80 20 concept to me.
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