Pareto law: 20/80

The Pareto law (the Pareto principle) is one of the most interesting and most frequently used formulas in practice. It is empirical (freely used in practice). The rule developed by economist and sociologist Wilfred Pareto, also known as the "Pareto Law 20/80", is the formula: "20 percent of efforts provide 80 percent of the result, the rest 20 percent of the result can be obtained with 80 percent of the effort." This name was suggested by Joseph Juran. As a universal socio-economic principle, the Pareto Act was first used by the Englishman Richard Koch.

Most often, this law is used to assess the effectiveness of someone's activities and optimize its results. It says that by correctly selecting the key levers of influence, you can get the most of the result, with minimal effort.

The Pareto graph graphically depicts the causes of problems that arise in the course of an activity and, accordingly, helps to eliminate them.

Practical use

For example, ten people work in a service company. According to the Pareto principle, two out of ten employees provide approximately 80% of the company's profits, and the remaining eight - only 20. If the organization is in conditions requiring staff reduction, the director must analyze the performance of each. With competent optimization, people from the eight, who give 20 percent of the result, must undergo reduction.

The Pareto law can be applied in various areas: 20% of restaurant visitors bring 80% of the profit to the establishment; 20% of company orders provide 80% of the total turnover, 20% of Internet resources are visited by 80% of users and so on. Also, the principle in political science and IT-technologies is effective (it was used with increasing processor performance).

Conclusions resulting from the Pareto law

• Only 1/5 of the activities of an individual, a group of people or a firm is truly effective; The remaining 4/5 can be entrusted to someone else or generally considered unnecessary.
• 80% of our actions will not give the desired results.
• In any activity / process there are hidden factors.
• Large negative consequences are due to a small number of destructive factors.
• Great success is ensured by the high productivity of only a small part of people or areas of activity.
• Indeed, there are very few significant factors, and many are side effects.

These conclusions can be applied in almost all spheres of human activity. Even in studies: approximately 20% of the time 80% of the material will be assimilated and vice versa. Relativity of the principle

Naturally, the Pareto law is not a panacea, and this proportion is not universal. Very rarely, the ratio 80/20 exactly coincides in a numerical relationship with reality. There are correlations of 70/30 or 60/40. However, the state of affairs when 50 percent of the factors give 50 percent of the result is extremely rare. The circumstances influencing the result are almost unequal in almost a hundred percent of the cases, and their number is much less than the side effects.