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.

 

Learn more:
Understanding the Pareto Principle (The 80/20 Rule)

 

This was last updated in August 2013

Continue Reading About Pareto principle

SearchCompliance

  • information governance

    Information governance is a holistic approach to managing corporate information by implementing processes, roles, controls and ...

  • enterprise document management (EDM)

    Enterprise document management (EDM) is a strategy for overseeing an organization's paper and electronic documents so they can be...

  • risk assessment

    Risk assessment is the identification of hazards that could negatively impact an organization's ability to conduct business.

SearchSecurity

  • spam trap

    A spam trap is an email address that is used to identify and monitor spam email.

  • honeypot (computing)

    A honeypot is a network-attached system set up as a decoy to lure cyber attackers and detect, deflect and study hacking attempts ...

  • cracker

    A cracker is someone who breaks into someone else's computer system, often on a network; bypasses passwords or licenses in ...

SearchHealthIT

SearchDisasterRecovery

  • risk mitigation

    Risk mitigation is a strategy to prepare for and lessen the effects of threats faced by a business.

  • call tree

    A call tree is a layered hierarchical communication model that is used to notify specific individuals of an event and coordinate ...

  • Disaster Recovery as a Service (DRaaS)

    Disaster recovery as a service (DRaaS) is the replication and hosting of physical or virtual servers by a third party to provide ...

SearchStorage

  • storage virtualization

    Storage virtualization is the pooling of physical storage from multiple storage devices into what appears to be a single storage ...

  • erasure coding

    Erasure coding (EC) is a method of data protection in which data is broken into fragments, expanded and encoded with redundant ...

  • continuous data protection

    Continuous data protection (CDP), also known as continuous backup, is a backup and recovery storage system in which all the data ...

Close