Pareto Principle (80/20 rule)

Description of Pareto Principle (80/20 rule). Explanation.

Definition Pareto Principle (80/20 rule). Description.

The Pareto Principle (80/20 rule) states that for many phenomena 80% of consequences stem from 20% of the causes. The idea has rule-of-thumb application in many places.

Some of these applications include:

• 20% of any advertising campaign produces 80% of the response.

• 20% of the employees perform 80% of the work.

• 20% of the clients are responsible for 80% of all revenues / profits.

The principle was suggested by management thinker Joseph M. Juran. He named it after the Italian economist Vilfredo Pareto, who observed in 1897 that 80% of property in Italy was owned by 20% of the Italian population.

The principle can be viewed as recursive, Tipton Cole has observed that the Pareto Principle applies to the residue of its first application, yielding a "96-36" rule.

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Compare also: Root Cause Analysis

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End of description Pareto Principle (80/20 rule). An explanation.