CHAPTER 4 The Pareto Principle o Principle
The Pareto Principle, often referred to as the 80/20 rule, is indeed a fascinating concept that originated from the observations made by Italian economist Vilfredo Pareto in 1906. He initially noticed that 80% of the land in his area was owned by 20% of the people. Over time, he expanded his study and found that this ratio seemed to hold true in various aspects of life and business.
Some common examples of the Pareto Principle include:
1. Income and Work: Approximately 80% of your income is generated by 20% of your efforts or work tasks. In other words, a small portion of your activities is responsible for the majority of your earnings. 2. Business and Customers: Many businesses find that about 80% of their revenue comes from 20% of their customers. This highlights the significance of focusing efforts on retaining and serving the most valuable clients. 3. Employee Value: In the workplace, it's often observed that approximately 80% of an employee's value to their employer is derived from 20% of their contributions or tasks. Identifying and emphasizing these high-impact activities can lead to greater job effectiveness. The Pareto Principle underscores the idea that a disproportionate amount of outcomes or results often come from a relatively small portion of inputs or efforts. Recognizing this principle can be valuable for individuals and organizations in prioritizing their efforts and resources more effectively to achieve desired outcomes. 27
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