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Index » Business & Commerce » Business Administration

The Pareto-Principle and ... Benchmarking

T h e p a r e t o - p r i n c i p l e o r t h e 8 0 / 2 0 - r u l e w a s b o r n a f t e r o b s e r v a t i o n s o f M r P a r e t o t h a t m a n y t h i n g s i n l i f e w e r e u n e q u a l l y d i s t r i b u t e d . A f a m o u s e x a m p l e w a s “ t h a t 2 0 p e r c e n t o f t h e p e o p l e o w n e d 8 0 p e r c e n t o f t h e w e a l t h . ” T h i s r u l e i s v e r y p o w e r f u l b e c a u s e y o u c a n u s e i t i n m a n y a r e a s . O n e e x a m p l e i s w h e n d e a l i n g w i t h p r o j e c t s ; y o u k n o w t h a t 8 0 p e r c e n t o f t h e w o r k i s c a u s e d b y t h e ( l a s t ) d e t a i l s ( 2 0 p e r c e n t ) . S o i n p r o j e c t m a n a g e m e n t i t i s c o m m o n p r a c t i c e t o u n c o v e r r i s k s a s s o o n a s p o s s i b l e . T h e t h o u g h t b e h i n d t h i s i s t h a t i f y o u c a n s o l v e t h e g r e a t e s t r i s k s y o u c a n s o l v e e v e r y t h i n g . A l s o t h e a r g u m e n t i n f a v o r o f s t a n d a r d i z a t i o n i s t h a t 2 0 p e r c e n t o f t h e d e t a i l s o r e x c e p t i o n s c a u s e 8 0 o f y o u r r e s o u r c e s . T h u s t h e m o r e y o u a r e a b l e t o s t a n d a r d i z e , t h e m o r e y o u c a n b e n e f i t f r o m c o s t s a v i n g s . T h i s w i l l o n l y b e t h e c a s e i f y o u s e l l “ N O ” t o y o u r c u s t o m e r s , w h i c h i s s o m e t h i n g v e r y d a r i n g . T h e q u e s t i o n w i t h , n o t o n l y , t h e s e t w o c a s e s i s o n e w h e r e y o u m a y a s k : “ H o w d o w e k n o w w h e t h e r w e h a v e r e a c h e d t h e 8 0 p e r c e n t l e v e l ? ” S o m e p r o j e c t s a r e “ n e a r l y f i n i s h e d ” d u r i n g a l o n g t i m e . “ W e a r e n e a r l y t h e r e . ( t h a t ' s w h a t y o u s a i d l a s t m o n t h . . . ) ” T h e p r o b l e m m i g h t b e i n t h a t c a s e t h a t t h e 8 0 p e r c e n t l e v e l i s n o t m e a s u r e d . A b e n c h m a r k c o u l d v e r y w e l l s e r v e t o g r a s p t h i s 8 0 p e r c e n t l e v e l . F o r e x a m p l e , i f y o u a r e t o r e d e s i g n y o u r o r g a n i z a t i o n y o u m a y g o f o r a b e s t p r a c t i c e . T h i s i s a s t a n d a r d t h a t h a s b e e n i n t h e m a r k e t . I t i s n o t i n n o v a t i v e – b e c a u s e p r e v i o u s l y u s e d - - b u t i t s e t s a m e a s u r a b l e d i r e c t i o n . I f y o u c h o o s e s o , y o u n e e d t o b e s u r e w h e t h e r t h i s s t a n d a r d r e a l l y i s t h e b e s t f i t . T h i s f i t a n a l y s i s i s s o m e t h i n g y o u m i g h t a s k y o u r m a n a g e m e n t a d v i s o r t o p r e p a r e f o r y o u . I f i t i s w e l l s e l e c t e d t h e l a s t 2 0 p e r c e n t w i l l f i n i s h o n t i m e . © 2 0 0 6 H a n s B o o l

Author: Hans Bool

Author Bio:

Hans Bool

Hans Bool has worked for many companies in many countries in different (mainly) management positions.

Recently he started Astor White. A company that offer a new approach in management advice and consulting.

This article can be searched using: project management, risk management, small business administration, performance management

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Index >> Privacy >> Terms & Conditions

The Pareto-Principle and ... Benchmarking

Hans Bool

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