Decision Making goes far back in 1906 : rhymes with Potato...



Tool #4 for our decision making series, this tool helps prioritize decisions so that decision makers know which ones will have the greatest influence on their overall goals and which ones will have the least amount of impact. This tool is widely used in many different applications such as risk assessment, impact analysis and root-cause analysis What is the history of this tool? 🤔🤔


In 1906,

the economist Vilfredo Pareto (Rhymes with Potato) illustrated in his research a stunting discovery: 80% of the land in Italy was owned by just 20% of the people. "The Pareto Principle is the observation (not law) that most things in life are not distributed evenly," Better Explained writes on its website.

20 percent of the input creates 80 percent of the result 20 percent of the workers produce 80 percent of the result 20 percent of the customers create 80 percent of the revenue 20 percent of the bugs cause 80 percent of the crashes 😲

So how would you begin using the pareto analysis?


According to the website Mind Tools, the six steps to conducting a Pareto analysis are:



👉Identify and list problems: Write a list of all of the problems that you need to resolve.


👉Identify the root cause: For each problem, identify its fundamental cause.


👉Score the problems: The scoring method use will depend on the sort of problem that needs to be solved. If the problem revolves around a business trying to improve profits, then the scoring might center on how much each problem is costing them. Or, if they are trying to boost customer satisfaction, they might score the problems on the number of complaints that would be eliminated if the problem were solved.




👉Group the problems: Group the problems by the root cause. Add the scores: Add up the scores for each cause group. The group with the top score is should be the highest priority, while the one with the lowest score should be the lowest priority. Action: Start tackling the causes of the problems. Deal with the top-priority problem, or group of problems, first.




People discover that 20% of the root causes will attribute to 80% of the outcome, this is something that has presented itself quite evidently in many different applications. The most important point to take away is to quickly identify the 20% to eradicate 80% of the problems.


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