3.+Pareto+Principle

3. Pareto Principle: Abby Aim: This is an idea typically used in business, but the idea began with one from an economical standpoint. The Pareto Principle “was named after the Italian economist Vilfredo Pareto, who observed that 80% of property in Italy was owned by 20% of the Italian population” (“Pareto Principle” 1). The general aim of the term is to convey that 20% of something can result in 80% gain/loss. That is one reason why it is used in business ideas commonly. The idea of the term is that 20% of the clients give 80% of the profits. This makes people think that “The value of the Pareto Principle in management is in reminding us to stay focused on the “20 percent that matters”. Of all the tasks performed throughout the day, one could say (based on Pareto’s Principle) that only 20 percent really matter” (“How the 80/20…” 1). This Principle helps companies focus on the bulk of what's important, but the idea can also create some problems. This Principle can help people, but it can also discourage others who doe not think that their time and efforts are used on 20% of what they are working for.

Audience: The Pareto Principle has a very large audience in business and economy and general. The idea “is often applied to data such as sales figures: "20% of clients are responsible for 80% of sales volume” (“Pareto Principle” 1). Many people who have looked into finance or work psychology have found this idea and have worked it to their advantage. If 20% of the clients make 80% of the profit then the 20% of the clients are more likely to get treated better since they amount to the bulk of the profit. It can go the other way as well though, showing that 80% of the people created 20% of the profit. The other audience has the idea that “ in any set of things (workers, customers, etc.) a few (20 percent) are vital and many (80 percent) are considered trivial” (“How the 80/20…” 1). in both sides this term shows a more technical side to looking at the situation. It gives a harsh reality to some, but to others can make perfect sense.

Cultural: Culturally speaking, the 80/20 Principle can lead to some thoughts that exclude different groups of people. It always excludes one group by saying that “80% of property in Italy was owned by 20% of the Italian population” (“Pareto Principle” 1). It is these ideals that can either give the focus to the more influential people, or ignore those who can still make a difference. When the term was first thought of, it gave a harsh truth to many people. Culturally speaking this truth is still around today. A small number of people have a large majority of the wealth, just like in Italy. Culturally, this term also applies to work ethic and how much people put into a work day. It is the idea that “it’s likely that 80 percent of your revenues will be the result of sales made by 20 percent of your sales staff. And 20 percent of your workers will cause 80 percent of your problems, while another 20 percent of your personnel will deliver 80 percent of your entire production” (“How the 80/20…” 1). This rule has been used for a long period of time, and many just accept the idea.

Historical: Seeing as the Principle has been around for around 100 years, it is no surprise that is will have historical meaning. The idea comes from “the very early 1900’s, an Italian economist by the name of Vilfredo Pareto created a mathematical formula describing the unequal distribution of wealth he observed and measured in his country: Pareto observed that roughly twenty percent of the people controlled or owned eighty percent of the wealth. In the late 1940s, Dr. Joseph M. Juran, a Quality Management pioneer, attributed the 80/20 Rule to Pareto, calling it Pareto's Principle” (“How the 80/20…” 1). This idea has been used by many, some even before it was formally recognized. The idea has lasted through time, and through different countries. The man who thought of this, Pareto had “made several important contributions to economics, sociology and moral philosophy, especially in the study of income distribution and in the analysis of individuals' choices” (“Pareto Principle” 1). He himself changed history through his thoughts and ideas, and these realizations are still applicable today. Some may not realize the impact he has had on the world, but he still has an impact. Without his realizations there may have not been any other formal combination of those ideas.

Works Cited: “How the 80/20 Rule Helps Us be More Effective”. //Pinnicle.com//. 2001. Web. 1 April 2015. “Pareto Principle”. //Gassner.com//. 2000. Web. 1 April 2015