AND NOW, LADIES AND GENTLEMEN, THE WINNER – THE ONE AND ONLY – TRUE EMPEROR OF ALL MANAGEMENT THEORIES IS: THE PARETO PRINCIPLE
Unfortunately Vilfredo Pareto cannot be with us to receive his award. Given his absence we feel that an explanation of our choice is required.
The one commodity that managers lack more than any other is time. Any theory that will save you time and help direct your efforts to where they will have the greatest impact has to be a winner.
The Pareto Principle separates the important few from the unimportant many. It shines a light on those few processes and people that cause you most of your problems. Sort out the 20% causing problems and watch your ‘to-do’ list shrink.
Pareto also identifies where to devote your energies in terms of developing positive factors. Use it to identify the 20% of products that generate 80% of your sales. This information can guide your decisions regarding the allocation of scarce resources. It can identify the 20% of your customers that generate 80% of your income. It is these people that you never want to upset. Pareto also helps you identify the 20% of your staff who are the real stars of your team and who should be recognised and rewarded.
The Pareto Principle is extremely elegant in its simplicity and has shown over the years that it can be applied to virtually any situation. A true all-rounder. Of course the split may not be exactly 80/20 but it will be in that ball park. Try it out on a range of issues and prove for yourself how all pervasive the ratio appears to be.