The Pareto principle is the idea that, in general for many events, ~80% of the effects come from ~20% of the causes. For example, it was observed by Vilfredo Pareto that 80% of the land in Italy was owned by 20% of the families in his time. In business, the Pareto principle is used as a rule-of-thumb: 80% of sales come from 20% of clients, 80% of customer complaints originate from 20% of products/services, 80% of production capability comes from 20% of staff, etc.
The key concept is that there are ‘vital’ elements (20% of something that has an 80% -huge- impact) and ‘trivial’ elements (the remaining 80%, which due to symmetry cause merely 20% of the effects). The main take-away, then, is to invest limited resources in the vital elements and not the trivial ones.
When applied to project management, quite a few phenomena can be explained: 80% of the value in a meeting will come from 20% of its time, 80% of managerial problems/stress come from 20% of employees, and 80% of the time and resources spent on a project will be from 20% of the stated work. If we then focus our limited resources on the vital 20% of each situation, we should see a greater return on our investment and reduce the amount of wasted resources (i.e. the resources spent on trivial, low-return activities).
Taking the example of meetings further: If you can identify the vital 20% of your meeting that will provide 80% of the meeting’s value (and/or take 80% of the meeting’s time), you should put that part of the meeting FIRST in the agenda. Focus on the part of the meeting that is truly important, and ensure that you obtain the 80% of value from it instead of having your meeting cut short due to lack of time.
This write-up was based on the following research:
* management.about.com/cs/generalmanagement/a/Pareto081202.htm
* www.envisionsoftware.com/articles/Pareto_Principle.html
* en.wikipedia.org/wiki/Pareto_principle
