Definition of '80-20 Rule'
A rule of thumb that states that 80% of outcomes can be attributed to 20% of the causes for a given event. In business, the 80-20 rule is used to help managers identify problems and determine which operating factors are most important and should receive the most attention based on an efficient use of resources. Resources should be allocated to addressing the input factors have the most effect on a company's final results.
Also known as the "Pareto principle", the "principle of factor sparsity" and the "law of the vital few."
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