How Does Employee Engagement affect Financial Performance of a Company ?
Experts say that the engagement, involvement and satisfaction of the employees should be the biggest concern of the organisations. When they are actively engaged, it can directly affect the productivity and financial standing of the company. While it may not directly add to your profits but it certainly helps in several indirect ways. There are […]
Tips for Team Building in Corporates
Teams are formed when individuals with a common taste come together on a common platform to achieve a predefined target. In corporates, individuals work in teams to share the workload and responsibilities. Team work is no longer just a topic to read in management classes, it is essential for the motivation of the team members […]
Measuring Acquisition Equity
Acquisition equity is the potential monetary value of acquisition for the organization. It provides the stage for customer equity data to be encapsulated in the financial database of organization. Measuring acquisition equity is indigenous and simple process to implement, the only hurdle is the collection data before this calculation is made. Computation comprises of following […]
How Changes in Interest Rates Affect Bonds ?
Interest rates are one of the most important factors while determining the bond value. All other factors like payments, number of periods etc are standard i.e. the numbers supplied to us are the numbers that have to be used in the formula for calculating present value. However, this is not the case with interest rates. […]
The Resource Curse: The Problem with Commodity Dependence
A large number of developing countries across the world are dependent upon commodities. About 135 of these developing countries were surveyed, and it turned out that more than 94 of these countries are commodity dependent. This means that primary commodities like food grains, oil, etc. account for more than 60% of their total exports. Prima […]
The Pareto Principle was an observation of a famous Italian economist named Vilfredo Pareto. He was trying to analyze the distribution of income amongst the population of Italy. That is when he observed that 80% of the income generated went to 20% of the population. He then began observing this 80/20 principle across nature. He observed that it seemed to be universally correct. This principle was named as the Pareto Principle in his honor.
The implications of the Pareto Principle are profound. The Pareto Principle states that doing 20% of the things right will give you 80% of the results you desire. It is a process of segregating the vital few from the trivial many and working on the vital few to get the best results. The words “vital few” and “trivial many” were at the center of the Pareto philosophy.
Pareto analysis is a six sigma quality tool. It uses the Pareto Principle to find out solutions to business problems. As every manager would know, once you are put in charge of a certain department or work area, there are multiple problems that show up. In fact sometimes these problems are so many in numbers that it can be overwhelming for a manager to make any sense of the data that he/she may have at hand.
Thus managers use Pareto Principle and segregate the:
So on and so forth....
Figure: Pareto Analysis Lays More Emphasis On Cumulative Frequency To Segregate The Most Important Factors
Since the problem that every manager has to solve are unlimited. However the resources that he has in his hands are very much limited, resources need to be put to the best use. For this reason it is important that the resources be used to solve problems that will give the most benefit or reduce the maximum number of hassles.
Thus too ensure that the processes of an organization are defect free, one must first conduct a Pareto analysis, find out the most important causes, the chief factors that cause variation and correct them.
Pareto analysis is strongly recommended by management scientists who rely on data for decision making. They believe that the data is overwhelmingly in support of the validity of the Pareto principle.
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What the Current Wave of Protectionism and Populism mean for the Future of Globalization and Free Trade
February 12, 2025
