What Is the Pareto Principle & Its Significance

Duration: 4-5 minutes

Pareto Principle 80/20 Rule: What is the Pareto Principle

The Pareto Principle is also referred to as the 80/20 rule. It generally states that 80% of your results come from just 20% of your effort or cause. It means the 80% of results come from 20% of the work. The thought was given by an Italian economist and sociologist, Vilfredo Pareto. He made the observation during the early years of the 20th century.

You can apply this principle in various aspects of your life or any field that you work in.

What does the Pareto 20/80 rule indicate

There are just so many hours in your day. And as an HR, you always have a lot to do. So, how exactly can you get the most out of everything or every task that you do?

That is when this 80/20 rule comes into play. Imagine somebody telling you that you do not have to put in the maximum amount of time in doing something; instead, you can just put 20% of your energy into doing it and try to do as much as possible in that. It doesn''t get just your work done but also increases your efficiency—in terms of time, number of tasks, and the quality of work done.

Plus, the best part is you''re getting it all done without actually exhausting all your energy.

So, all in all, you can say that it indicates one can do much more by giving only 20% of his energy to the proper working of a task without getting overwhelmed and still get 80% of the results out of it.

And let''s be honest. No matter how hard we try perfection, we can never get a 100% result for anything. So, why not try Pareto 80/20 rule.

Advantages of the Pareto Principle

Pareto Principle has several advantages.

• You can use it to identify the minimum number of factors which are most effective in helping you achieve 80% of outcome for your task.
• You can prioritize your tasks and projects based on their relative importance in the scheme of things as drawn from it.
• You can use it to plan your human resources strategically and do more with less.
• You can always count upon its help in time management.
• You can even use it to help your staff learn and improve on a continuous basis.

Disadvantages of the Pareto Principle

Anything that has certain advantages is bound to have some disadvantages. Let''s go through then as well. So, here are some of the cons of Pareto Principle:

• You can''t use it blindly without assessing your situation well. Because sometimes due to overgeneralization, you may apply it to your project. But the split may not work out for you because the dependency on the operations to get the right outcome for your project was different.
• You will have to check the context of your situation as every problem and project is different. In case you use it without knowing all the factors involved, you are faced with a loss of time and resources and you still do not get the right outcome. That will also force you to take all the factors into consideration to know what went wrong. This will result in extra analysis time along with the hours that you''ll have to dedicate to it again to get it right this time. Sometimes the success of a project depends on multiple factors. While the Pareto Principle just takes two factors into consideration and that is the result and the cause. If it''s not the case for you, you may need to check again. Because in that case, the 80/20 rule may not apply to you or your situation.

Example of the Pareto Principle: What is 80-20 rule examples

First of which is the example that Vilfredo Pareto considered while defining this rule. Vilfredo Pareto lived in Italy, and in the 20th century he observed that 80% of the land in Italy was owned by 20% of the country''s population. And that''s how he stated this rule.

Other examples that we can look at are for instance, 20 percent of the criminals cause 80 percent of the crimes, 80 percent of the traffic accidents are caused by 20 percent of people, or 20% of a company''s employees are responsible for 80% of its growth.

Why is the 80-20 rule often called the Pareto Principle

It is called the Pareto Principle because a person named Vilfredo Pareto formulated this principle based on his observation. Hence, it is named after him.