Use Pareto Analysis in Your Life

Use Pareto Analysis in Your Life

Pareto noticed that 80% of Italy’s land was owned by 20% of the population. He then carried out surveys on a variety of other countries and found to his surprise that a similar distribution applied almost universally.
A chart that gave the inequality a very visible and comprehensible form, was contained in the 1992 United Nations Development Program Report, which showed the distribution of global income to be very uneven, with the richest 20% of the world’s population controlling 82.7% of the world’s income.
The distribution pattern appears in several different aspects relevant to entrepreneurs and business managers. Some examples are given below:

  • 80% of a company’s profits come from 20% of its customers
  • 80% of a company’s complaints come from 20% of its customers
  • 80% of a company’s profits come from 20% of the time its staff spend
  • 80% of a company’s sales come from 20% of its products
  • 80% of a company’s sales are made by 20% of its sales staff

This phenomenon observed across a vast spectrum of activities came to be known as the Pareto’s Principle.
I found it’s applicability in our organization.

Examples:

If you suspect that things are not okay in the Canteen- just do a thorough check of liquor!
If you suspect that things are not okay in the ration supply- just do a thorough check of meat!

How can we use it in our daily lives?

If you find the kids are tending to catch infections- check water hygiene & whether they are cleaning their hands properly.
If you are tending to put on weight- just check sugar intake.
The possibilities of using the principle are numerous. It is a very useful principle to know for all of us, not just business & operations managers! Please identify the applicability of the principle in your daily chores and use it for more effective living!

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2 Comments

  1. Dear Sir, Please help me to understand the applicability of Pareto’s Principle in life to get recommendation from SSB.

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