Pareto's law (the 80/20 rule)

Tareq al-Suwaidan presents Pareto's law — the 80/20 rule — as a law that began as a theory confirmed by studies, named after the Italian thinker Pareto ^{1 2}.

He states that twenty per cent of decisions produce eighty per cent of effectiveness, twenty per cent of time eighty per cent of output, twenty per cent of customers eighty per cent of sales — indeed four per cent of customers yield sixty-four per cent of purchases — twenty per cent of employees eighty per cent of the work, and likewise twenty per cent of employees cause eighty per cent of the problems (needs_source: the figures as stated in the lesson) ^{2 3 4 5}.

He recounts that Jack Welch of General Electric applied a yearly 20/70/10 division of the staff: the productive twenty per cent are honoured, promoted and never allowed to consider leaving; the ordinary seventy are trained with limited raises; and the weakest ten per cent are dismissed every year — some thirty-five to forty thousand employees annually (needs_source) ^{6 7}. His practical conclusion is that the leader concentrates his time and mind on the effective twenty per cent and hands the eighty per cent to management ⁸.