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The 80/20 Principle

The Pareto Principle or The Eighty20 Rule


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 recognised 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 per cent of something always is responsible for 80 per cent of the results, became known as Pareto's Principle or the 80/20 Rule.


What It Means


The 80/20 Rule means that in anything a few (20 per cent) are vital and many (80 per cent) 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. Project 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 risk management to the physical world.


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 per cent 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 per cent.


The Pareto principle is used in occupational health and safety to underline the importance of hazard prioritisation. Assuming 20% of the hazards will account for 80% of the injuries and by categorising hazards, safety professionals can target that 20 % of the hazards that cause 80% of the injuries or accidents.


Alternatively, if hazards are addressed in random order, then a safety professional is more likely to fix one of the 80% of hazards which account for some fraction of the remaining 20% of injuries.

Aside from ensuring efficient accident prevention practices, the Pareto principle also ensures hazards are addressed in an economical order as the technique ensures the resources used are best used to prevent the most accidents


Pareto's Principle, the Eighty20 Rule, should serve as a daily reminder to focus 80 percent of your time and energy on the 20 percent of your work that is really important. 


Don't just "work smart", work smart on the right things.

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