Pareto Principle (80/20 Rule)

Vilfredo Pareto was an economist who is credited with establishing what is now widely known as the Pareto Principle or 80/20 rule. When he discovered the principle, it established that 80 percent of the land in Italy was owned by 20 percent of the population. Later, he discovered that the pareto principle was valid in other parts of his life, such as gardening: 80 percent of his garden peas were produced by 20 percent of the peapods.

Some Sample 80/20 Rule Applications

• 80 percent of process defects arise from 20p ercent of the process issues.
• 20 percent of your sales force produces 80 percent of your company revenues.
• 80 percent of delays in schedule arise from 20 percent of the possible causes of the delays.
• 80 percent of customer complaints arise from 20 percent of your products or services.

(The above examples are rough estimates.)

Related References

Pareto Chart