Pareto principle is basically a reminder that inputs and outputs are never equal and it also tells us that 80% of the consequences come from 20% of the causes, which shows that inputs and outputs are not balanced. This principle was named after a very famous and intelligent Italian economist and sociologist, Mr. Vilfredo Pareto. The Pareto principle is also known as the Pareto Rule or the 80/20 rule. This rule is not applicable to each and every situation because this is just an observation and not a law. This observation mainly reflects that in actual life nothing is distributed equally to everybody.
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Pareto Principle examples
- 20 percent of criminals commit 80 percent of crimes.
- 20 percent of drivers are the reason for 80 percent of all traffic road accidents.
- 80 percent of pollution comes from 20 percent of all industries.
- 20 percent of a company’s good represents 80 percent of sales.
- 20 percent of employees are responsible for 80 percent of the results.
- 20 percent of students have grades 80 percent or higher.
- 20 percent of marketing efforts represent 80 percent of the results.
- 20 percent of posts generate 80 percent of traffic.
- 80 percent of the quality failures originate from 20 percent of the tasks.
- 80 percent of the financial advisor’s revenue should come from the top 20 clients.
All these reasons are proof that the Pareto Principal valid in most of the real-life scenarios though it is not considered as a scientifically proven law still we can see from the above-mentioned examples that this principle exist and it shows that inputs and outputs are never balanced.
Advantages of the Pareto Principle
- Pareto Principle helps us in analyzing the situation correctly so that we can easily resolve the issues and problems which we are facing.
- It provides us solutions for the following situations- decision-making, time management, problem-solving et cetera.
- The Pareto chart gives a detailed explanation regarding the defects that are compulsory to solve.
- It gives us direction by explaining the measures and actions which should be taken to resolve the problem.
- It also helps us in determining the cumulative impact of defects.
- The most important usage of the Pareto principle is that it assists us in knowing the main and actual cause of defects that we are facing.
- The detailed chart of the Pareto principle helps us in knowing the effects and causes of the situation from top to bottom i.e. in sequence so that we can analyze the whole scenario and get to know the outcomes.
Disadvantages of the Pareto Principle
- The Pareto principle only shows us the qualitative data and not the defect.
- It focuses more on the past through past scenarios prepare us for the future still it does not guide us correctly because the situation keeps on changing and the solution is not applicable for all future problems.
- This principle cannot be helpful in each and every case. It will only be useful for a few cases.
- The main drawback of this principle is that the root cause cannot be analyzed because it requires a tool that is a root cause analysis tool that determines the root cause of the problem.
In conclusion, the Pareto principle is very helpful because it gives us the real picture of the problem faced by us in detail. You can also use this principle to solve all your problems which you face in real life and in business.