Pareto Principle: Content and Basics of Application

The phenomenal opening of the famous Italian sociologist and economist Wilfredo Pareto was made as a result of an analysis of the distribution of wealth in Italy, during which Pareto found that 80% of all wealth belongs to 20% of the population. It is curious that around this time the American employee, the future "father of the theory of quality management" Joseph Juran, also came to the conclusion that such a relationship has some regularity, but he formulated his conclusion on the basis of monitoring the yield of peas, where 20% of bushes were given 80% of the harvest. Actually, the very term "Pareto principle" belongs to him, he gave such a name in honor of Wilfredo Pareto.

The Italian scientist extended the action of this principle to other areas of activity, but he acquired his main importance as the Pareto principle in management, which consists in that 80% of the productive activity is spent by people only 20% of the time. Due to this numerical expression, the Pareto principle is also referred to as the "80/20 rule". In the philosophical sense, this means that the causal efficiency is distributed as follows: 20% of the causes give the same 80% of the result obtained, and vice versa, 80% of the reasons, only 20% of the result. At first glance, this ratio looks paradoxical, it's hard to imagine that 80% of the working time, for example, is spent almost without any result. However, the subsequent statistical analysis of the proportion showed its high reliability. Due to the fact that such a principle could be applied to assess the quality of work, reflected the Pareto principle , the effectiveness of various orders in a fairly wide range of activities.

The analysis of the proportion allows us to determine the main directions, where it can show itself most effectively. There are two such directions.

First, the Pareto principle encourages the search for the very 20% of the reasons that give 80% of the success.

Secondly, the 80/20 rule motivates the search for reasons why most of the time spent does not work.

However, to use this principle in practice should be rather circumspect, as it is necessary to selectively approach the choice of the object of research. Otherwise, such a straightforward abuse of the principle may lead to incorrect conclusions. Rational application of the principle provides for its inclusion in any analytical system that allows a comprehensive assessment of the necessary objects and phenomena. For example, if you work at a place where your wages are determined by management once or for all, or for some long period, then you are just the same 80% that gives only 20% of efficiency. The reason here lies in the fact that, no matter how you work, your productivity will not be stimulated by the growth of wages.

Applying the Pareto principle is very useful in modern management. The rationale for this conclusion is that only 20% of the working time we use for significant, the remaining 80% is spent on activities that do not benefit either the company or the employee himself. Moreover, in many cases this "useless time" is laid, in various kinds, production procedures (bureaucracy, incorrect clerical logistics, violation of ties with partners, etc.). The sense of using the principle and the conclusion, which naturally follows from this application, is that it is necessary to concentrate the entire potential of the company on those 20%, which form 80% of the effective result.

The 80/20 principle can be successfully used in business, for which it is necessary to critically examine its structure, partnerships and, if necessary, develop a new strategic development model. Approximately the same way you can approach the application of the rule in marketing, services, investment.

It should be borne in mind that when researching any activity, manifestations of this proportion can be seen almost everywhere, right up to family-household relations. Therefore, the most important in deciding whether to use the Pareto rule or not , determine what is the priority and the most important for you.