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July 6, 2014

How to Use the Pareto Principle for Productivity at Work

Back in 1906, Italian economist, Vilfredo Pareto, was completing a study on wealth. From his study, he was able to determine that 80% of land in Italy was owned by 20% of the population. At a later point in time, business management consultant, Joseph M. Juran, began noticing a similar phenomenon relating to different parts of the traditional business cycle. He named the phenomenon the Pareto Principle.80-20

The Pareto Principle is a widely accepted rule of thumb used by managers when viewing business metrics and assessing productivity. In a manufacturing environment, the rule as stated would be, “80% of the items are produced by 20% of the workers.” This means that it only takes 20% of the workers to achieve maximum efficiency and boost production totals. If managers could determine which workers make up the 20%, they could make decisions designed to increase productivity, such as better training for hiring employees and improving capacity. The goal would be to get other workers to the 20% level.

A non-manufacturing business could look at the principle this way—80% of the sales are made by 20% of the salespeople. Since each salesperson has the same products and tools to sell, the salesperson’s ability to sell is the critical element. Using the principle, you might want to go out on sales calls with members from the 20% group to identify the unique sales methods they use to create sales. You can teach these methods to the 80% group and create a stronger sales force.

The Pareto Principle can be applied to every area where a cause and effect relationship exists. At work, the idea is to always look for better ways to do things. The answers usually lie with the workers who are already doing it right—the 20% that is producing the 80% of the results you need.

 

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