Pareto Principle

What is Pareto Principle?

 

The ‘Pareto Principle states that in most events, 20% of the causes lead to 80% of the effects. This ratio is also referred to as the ‘80/20 Rule’. It is also called the ‘Principle of Factor Sparsity’ as well as the ‘Law of the Viral Few’.

 

It is used in companies to concentrate their efforts on the most profitable 20% areas of the company and advance them so that it leads to a profit for the remaining 80% of the company too.

 

Similarly, it is also applied in reducing the risks of 20% of the most hazardous areas of the company so that the remaining 80% is also safeguarded as a result of the precautions taken.

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