Pareto Law: 20/80

Law Pareto (Pareto principle) - one of the most interesting and most often used in practice formulas.It is an empirical (freely used in practice).The rule designed economist and sociologist Vilfredo Pareto, also known as "Pareto Law 20/80" is a formula: "20 percent effort for 80 per cent of the results, while the remaining 20 per cent of the result can be obtained by applying a 80 percent effort."This name proposed by Joseph Juran.As a universal social and economic principle of Pareto Law was first used by Englishman Richard Koch.

most often the law is used to evaluate the effectiveness of one's activities and the optimization of its results.It states that by selecting the key levers of influence, you can get the most results, putting minimal effort.

Pareto chart clearly shows the causes of the problems arising in the course of any activity and, consequently, helps to eliminate them.

Practical application

For example, a firm engaged in the provision of services, there are ten people.According to the Pareto principle, two out of ten employees account for about 80% of the profits of the enterprise, while the remaining eight - only 20. If your organization is in a demanding staff cuts, the director must analyze each performance.With proper optimization, the reduction shall be subject to Eight people from giving 20 per cent of the result.

Pareto law can be applied in different fields: 20% of visitors to the restaurant for 80% profit institutions;20% of orders the company provides 80% of the total turnover, 20% of Internet resources visited by 80% of users, and so on.It is also effective in principle in political science and IT-technology (used with increasing processor performance).

conclusions resulting from the law of Pareto

  • Only 1/5 of the activities of an individual, group or company is really effective;the remaining 4/5 can be assigned to someone else, or even considered unnecessary.
  • 80% of our actions will not give the desired results.
  • in any activity / process there are hidden factors.
  • massive negative implications due to the small number of destructive factors.
  • great success achieved performance only a small part of the people or activities.
  • really important factors is very small, and side - a lot.

these findings can be applied in almost all spheres of human activity.Even in studies: about 20% of the time will be understood by 80% of the material and vice versa. on the principles

Naturally, the Pareto - not a panacea, and this proportion is not universal.Very seldom is exactly the same ratio of 80/20 in numerical proportion to reality.We have the correlation of 70/30 or 60/40.However, the situation where 50 percent of the factors give 50 percent of the result is extremely rare.Circumstances affecting the result, almost one hundred percent of the cases are not equal, and their number is considerably less than the side.