Pareto Principle (80/20 rule)

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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 and quality control pioneer Joseph M. Juran.

Juran described the Pareto principle as the principle of 'the vital few and the trivial many' (Quality Control Handbook, 1951). 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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