Pareto's Principle~~Pareto's Principle~~ 20/80 Rule 20/80 Rule

Daily reminder that 20% of your work is really Daily reminder that 20% of your work is really important in any given moment; therefore, important in any given moment; therefore,

focus 80 % of your time, energy and talents focus 80 % of your time, energy and talents that 20 percent.that 20 percent.

Don't just "work smart", work smart on Don't just "work smart", work smart on the “right things”.the “right things”.

How It Can Help YouHow It Can Help You• The value of the Pareto Principle is that it reminds us The value of the Pareto Principle is that it reminds us

to focus on the 20% that matters. to focus on the 20% that matters.

• Of the things we do, only 20% really matters, in any Of the things we do, only 20% really matters, in any given moment.given moment.

• Those 20% produce 80% of the results. Those 20% produce 80% of the results.

• Identify and focus on those things. Identify and focus on those things.

• When the crisis drills of the day begin to sap our time, When the crisis drills of the day begin to sap our time, energy and patience remind yourself of the 20 % you energy and patience remind yourself of the 20 % you need to focus on. need to focus on.

• If something in the schedule has to slip, make sure If something in the schedule has to slip, make sure it's it's notnot part of that 20% part of that 20%

The Superstars! The Superstars!

• 20 % of people 20 % of people produce 80 % of the produce 80 % of the results.results.

• Therefore, helping Therefore, helping the the good become good become betterbetter is a better use is a better use of time than helping of time than helping the great become the great become terrific!terrific!

The Vital Few: What It Means The Vital Few: What It Means

• The 80/20 Rule means that in The 80/20 Rule means that in anything anything a few a few (20 %) are vital and many (80 %) are trivial. (20 %) are vital and many (80 %) are trivial.

• In Pareto's case it meant 20 % of the people In Pareto's case it meant 20 % of the people owned 80 % of the wealth. owned 80 % of the wealth.

• In Juran's work he identified 20 % of the In Juran's work he identified 20 % of the defects (error types) causing 80 % of the defects (error types) causing 80 % of the problems. problems.

Where It Came From Where It Came From • The original observation The original observation

was in connection with was in connection with income and wealth. income and wealth.

• Pareto noticed that 20% Pareto noticed that 20% of the population owned of the population owned 80% of Italy's wealth.80% of Italy's wealth.

• After Pareto made his After Pareto made his observation, he created observation, he created a formula.a formula.

• Many others observed Many others observed similar phenomena in similar phenomena in their own areas of their own areas of expertise.expertise.

• Quality Management Quality Management pioneer, Dr. Juran, in pioneer, Dr. Juran, in the 1930s recognized a the 1930s recognized a Universal Principle he Universal Principle he called the “Vital Few & called the “Vital Few & Trivial Many".Trivial Many".

• As a result, the principle As a result, the principle that 20 percent of that 20 percent of something always are something always are responsible for 80 responsible for 80 percent of the results.percent of the results.

• You can apply the You can apply the 80/20 Rule to almost 80/20 Rule to almost anything, from the anything, from the science of management science of management to the physical world. to the physical world.

Let’s Take a Look!Let’s Take a Look!• 20% of stock takes up 80% of space.20% of stock takes up 80% of space.

• 20% of your suppliers provide 80% your 20% of your suppliers provide 80% your stock.stock.

• 20% of staff account for 80% sales. 20% of staff account for 80% sales.

• 20% staff will cause 80% of problems AND20% staff will cause 80% of problems AND

• Another 20% staff will provide 80% of Another 20% staff will provide 80% of production. production.

• It works both ways. It works both ways.

The principle is reflected in the The principle is reflected in the Human Gestation period. The Human Gestation period. The

embryonic period constitutes 20% embryonic period constitutes 20% of the whole, with fetal growth of the whole, with fetal growth taking up the rest of the time.taking up the rest of the time.

20% of carpet accounts for 80% 20% of carpet accounts for 80% of wear. of wear.

20% of the time spent on a 20% of the time spent on a project accounts for 80% project accounts for 80% of the results.of the results.

The sizes of human settlements. The sizes of human settlements.

(few cities, many hamlets/villages)(few cities, many hamlets/villages)

• The values of oil reserves in oil fields. (a few large The values of oil reserves in oil fields. (a few large fields, many small fields) fields, many small fields)

Sizes of meteorites. Sizes of meteorites. (a few large, many small)(a few large, many small)

MicrosoftMicrosoft noted by fixing the top noted by fixing the top 20% of most reported bugs, 80% of the 20% of most reported bugs, 80% of the

errors & crashes were eliminated.errors & crashes were eliminated.

Mundane …WMundane …We wear our 20% e wear our 20% most favorite clothes about 80% of most favorite clothes about 80% of the time.the time.

Perhaps, we spend 80% of the time with 20% of Perhaps, we spend 80% of the time with 20% of our friends.our friends.

Global Income DistributionGlobal Income Distribution

• Distribution of global income is very uneven. The Distribution of global income is very uneven. The richest 20% of the world's population controls 82.7% richest 20% of the world's population controls 82.7% of the world's income.of the world's income.

• World Gross Domestic Product Population Income World Gross Domestic Product Population Income • Richest 20% controls 82.70% of the world’s incomeRichest 20% controls 82.70% of the world’s income• Second 20% controls 11.75% Second 20% controls 11.75% • Third 20% controls 2.30% Third 20% controls 2.30% • Fourth 20% controls 1.85% Fourth 20% controls 1.85% • Poorest 20% controls 1.40% Poorest 20% controls 1.40%

United Nations Development Program Report

WealthWealth

20% of criminals account for 20% of criminals account for 80% of the crimes!80% of the crimes!

If we take the ten wealthiest individuals in the world, we see that If we take the ten wealthiest individuals in the world, we see that the top three, Warren Buffett, Carlos Slim Helú, & Bill Gates, the top three, Warren Buffett, Carlos Slim Helú, & Bill Gates, own as much as the next seven put together.own as much as the next seven put together.

Customer ServiceCustomer Service

• Focusing one's Focusing one's attention on those attention on those 20% of clients that 20% of clients that contribute to 80% of contribute to 80% of the income. the income.

• 20% of clients take 20% of clients take up the majority of up the majority of one's time & may one's time & may cause the most cause the most difficulty. difficulty.

Quality ControlQuality Control• It is one of the key It is one of the key

tools used in total tools used in total quality control & Six quality control & Six Sigma. Sigma.

• The purpose is to The purpose is to optimize the good.optimize the good.

• Minimize the defects. Minimize the defects.

• 20% of causes are 20% of causes are responsible for 80% responsible for 80% of after effects. of after effects.

RevenueRevenue

• 20% of time (effort) accounts for 80% of results. 20% of time (effort) accounts for 80% of results.

• 20% of clients are 20% of clients are responsible for 80% responsible for 80% of sales. of sales.

Results EffortResults Effort

Cause and ConsequencesCause and Consequences

• 20% of causes are 20% of causes are responsible for 80% responsible for 80% of consequences. of consequences.

• 80% of consequences 80% of consequences flow from 20% causes. flow from 20% causes.

Bell Curve RelationshipBell Curve Relationship

• All Life Fits a Bell Curve!All Life Fits a Bell Curve!

Bell Curve Quiz ScoresBell Curve Quiz Scores

• 20% will earn a C out of the 80% who take the quiz. 20% will earn a C out of the 80% who take the quiz. • 20% will earn a B out of the 80% who take the quiz.20% will earn a B out of the 80% who take the quiz.• 20% will earn an A of the 80% who take the quiz.20% will earn an A of the 80% who take the quiz.• 40% will fail the quiz!40% will fail the quiz!• Some instructors who ‘grade on the curve’, force the Some instructors who ‘grade on the curve’, force the

scores to fit the Model. scores to fit the Model.

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GradeGoal ??

Medications and ErrorsMedications and Errors

• 20 % of Medications account for 80% of Errors.20 % of Medications account for 80% of Errors.• 20% of Types of defects account for 80% of Errors.20% of Types of defects account for 80% of Errors.• 20% of Effort account for 80% of the Results. 20% of Effort account for 80% of the Results.

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MedicationErrorFreeGoal?

Adaptability to ChangeAdaptability to Change

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ResponseGoal

Later Late Immediate Early LaggardsLater Late Immediate Early Laggards

Comers Comers Comers Comers

Balk, it Reluctant Embrace, Step Back, Destroy Balk, it Reluctant Embrace, Step Back, Destroy

will not 1will not 1stst no then + spin, but open, Momentum no then + spin, but open, Momentum

work. will try. help others will do it.work. will try. help others will do it.

come around,come around,

Innovators.Innovators.

Workload EfficiencyWorkload Efficiency

• 20% of the staff completes 80% of the 20% of the staff completes 80% of the workload.workload.

• Don't just "work smart", work smart on the Don't just "work smart", work smart on the “right things”.“right things”.

• Train Up!Train Up!• Better to help the Good become Better to Better to help the Good become Better to

Create and Empower more Superstars!Create and Empower more Superstars!

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EfficiencySUPERSTARS!

Collaborative ProcessCollaborative Process• Identify Shared GoalsIdentify Shared Goals

• Clarify Common ValuesClarify Common Values

• Identify Underlying Issues & CausesIdentify Underlying Issues & Causes

• Determine Stakeholder Impact & Determine Stakeholder Impact & ResponseResponse

• Correct Any Knowledge ImbalanceCorrect Any Knowledge Imbalance

Time to Plant, Grow, Harvest & Time to Plant, Grow, Harvest & ReplantReplant