What is Pareto principle ? - Definition from WhatIs.com

The Pareto principle, also known as the 80/20 rule, is a theory maintaining that 80 percent of the output from a given situation or system is determined by ... Home Topics Businesssoftware ERP Paretoprinciple Sharethisitemwithyournetwork: By TechTargetContributor TheParetoprinciple,alsoknownasthe80/20rule,isatheorymaintainingthat80percentoftheoutputfromagivensituationorsystemisdeterminedby20percentoftheinput. Theprincipledoesn’tstipulatethatallsituationswilldemonstratethatpreciseratio–itreferstoatypicaldistribution.Moregenerally,theprinciplecanbeinterpretedtosaythataminorityofinputsresultsinthemajorityofoutputs. HereareafewexamplesoftheParetoprincipleinaction: 20percentofemployeesproduce80percentofacompany’sresults. 20percentofagivenemployee’stimeyields80percentoftheiroutput. 20percentofsoftwarebugscause80percentofthesoftware’sfailures. 20percentofacompany’sinvestmentsproduce80percentofitsinvestmentprofits. TheprincipleisnamedforVilfredoPareto,anItalianeconomist.In1906,Paretonotedthat20percentofthepopulationinItalyowned80percentoftheproperty.Heproposedthatthisratiocouldbefoundmanyplacesinthephysicalworldandtheorizeditmightindicateanaturallaw.  Inthe1940s,Pareto’stheorywasadvancedbyDr.JosephJuran,anAmericanelectricalengineerwhoiswidelycreditedwithbeingthefatherofqualitycontrol.ItwasDr.Juranwhodecidedtocallthe80/20ratiothe"TheParetoPrinciple."ApplyingtheParetoPrincipletobusinessmetricshelpstoseparatethe"vitalfew"(the20percentthathasthemostimpact)fromthe"usefulmany"(theother80percent). ApplicationsoftheParetoprinciple: AParetochartillustratestheParetoprinciplebymappingfrequency,withtheassumptionthatthemorefrequentlysomethinghappens,themoreimpactithasonoutcome.  Paretoefficiencyisabalanceofresourcedistributionsuchthatoneindividual’slotcannotbeimprovedwithoutimpairingthelotofanotherindividual. AParetoimprovementisassistancethatbenefitsoneindividualwithoutcausingimpairmenttoanother. AnotherapplicationoftheParetoprincipleisthe96-minuterule,whichmaintainsthatknowledgeworkersshoulddevotethemselvestotheirmostimportanttasksforthattimeperiodeachdaytoimproveproductivity.   Learnmore:UnderstandingtheParetoPrinciple(The80/20Rule)   ThiswaslastupdatedinAugust2013 ContinueReadingAboutParetoprinciple TheParetoprinciple--howtoapplyitandwhattoavoid RelatedTerms projectcharter Aprojectcharterisaformalshortdocumentthatstatesaprojectexistsandprovidesprojectmanagerswithwrittenauthorityto... See complete definition systemofsystems(SoS) Asystemofsystems(SoS)isthecollectionofmultiple,independentsystemsincontextaspartofalarger,morecomplexsystem. See complete definition Unfreeze,Change,Refreeze(KurtLewinChangeManagementModel) Unfreeze,Change,RefreezeorKurtLewin'sChangeManagementModelisamodeltounderstandandmanageorganizationalchange. 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