Browse Definitions:
Definition

Pareto principle

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 20 percent of the input.

The principle doesn’t stipulate that all situations will demonstrate that precise ratio – it refers to a typical distribution. More generally, the principle can be interpreted to say that a minority of inputs results in the majority of outputs.

Here are a few examples of the Pareto principle in action:

• 20 percent of employees produce 80 percent of a company’s results.
• 20 percent of a given employee’s time yields 80 percent of their output.
• 20 percent of software bugs cause 80 percent of the software’s failures.
• 20 percent of a company’s investments produce 80 percent of its investment profits.

The principle is named for Vilfredo Pareto, an Italian economist. In 1906, Pareto noted that 20 percent of the population in Italy owned 80 percent of the property. He proposed that this ratio could be found many places in the physical world and theorized it might indicate a natural law.

In the 1940s, Pareto’s theory was advanced by Dr. Joseph Juran, an American electrical engineer who is widely credited with being the father of quality control. It was Dr. Juran who decided to call the 80/20 ratio the "The Pareto Principle." Applying the Pareto Principle to business metrics helps to separate the "vital few" (the 20 percent that has the most impact) from the "useful many" (the other 80 percent).

Applications of the Pareto principle:

A Pareto chart illustrates the Pareto principle by mapping frequency, with the assumption that the more frequently something happens, the more impact it has on outcome.

Pareto efficiency is a balance of resource distribution such that one individual’s lot cannot be improved without impairing the lot of another individual.

A Pareto improvement is assistance that benefits one individual without causing impairment to another.

Another application of the Pareto principle is the 96-minute rule, which maintains that knowledge workers should devote themselves to their most important tasks for that time period each day to improve productivity.

This was last updated in August 2013

1 comment

Send me notifications when other members comment.
Pareto principle equation or formula or distribution inequality
Cancel

SearchCompliance

• cyborg anthropologist

A cyborg anthropologist is an individual who studies the interaction between humans and technology, observing how technology can ...

• RegTech

RegTech, or regulatory technology, is a term used to describe technology that is used to help streamline the process of ...

• conduct risk

Conduct risk is the prospect of financial loss to an organization that is caused by the actions of an organization's ...

SearchSecurity

• application whitelisting

Application whitelisting is the practice of identifying applications that have been deemed safe for execution and restricting all...

• security

Security, in information technology (IT), is the defense of digital information and IT assets against internal and external, ...

• insider threat

An insider threat is a malicious hacker (also called a cracker or a black hat) who is an employee or officer of a business, ...

SearchHealthIT

• HIPAA Privacy Rule

The Standards for Privacy of Individually Identifiable Health Information, commonly known as the HIPAA Privacy Rule, establishes ...

• HIPAA business associate agreement (BAA)

Under the U.S. Health Insurance Portability and Accountability Act of 1996, a HIPAA business associate agreement (BAA) is a ...

• telemedicine

Telemedicine is the remote delivery of healthcare services, such as health assessments or consultations, over the ...

SearchDisasterRecovery

• data recovery

Data recovery restores data that has been lost, accidentally deleted, corrupted or made inaccessible. Learn how data recovery ...

• disaster recovery plan (DRP)

A company's disaster recovery policy is enhanced with a documented DR plan that formulates strategies, and outlines preparation ...

• fault-tolerant

Systems with integrated fault tolerance are designed to withstand multiple hardware failures to ensure continuous availability.

SearchStorage

• data deduplication

Deduplication retains one unique data instance to reduce storage and bandwidth consumed by remote backups, replication and ...

• byte

In most computer systems, a byte is a unit of data that is eight binary digits long. Bytes are often used to represent a ...

• Secure Digital card (SD card)

SD cards use flash memory to provide nonvolatile storage. They are more rugged than traditional storage media and are used in ...

SearchSolidStateStorage

• flash file system

Flash file systems are designed specifically for memory devices. A well-designed flash device and flash file system ensure ...

• IOPS (input/output operations per second)

IOPS measures the maximum number of reads and writes to non-contiguous storage. It is not an actual benchmark since vendor ...

• eMMC (embedded MultiMediaCard)

An embedded MultiMediaCard (eMMC) is a small storage device made up of NAND flash memory and a simple storage controller.

SearchCloudStorage

• RESTful API

A RESTful application program interface breaks down a transaction to create a series of small modules, each of which addresses an...

• cloud storage infrastructure

Cloud storage infrastructure is the hardware and software framework that supports the computing requirements of a private or ...