Pareto...

Good Day friends...

Nothing much for my recent write-ups as I was so busy away for couple of days and yet I'm left with insufficient time to commit myself with the blogging. Neither to that, time is so much occupied with so many managerial task of my own and last but not least I would be gladly to share one of my presentation article which was demanded by my Boss in time for our Management Meeting late tast week. Well, that shall explain why I was deterioted from blogging daily as I used to be. Lets share the presentation shall we...

Pareto Principle• A principle, suggested by a business management thinker, Joseph M. Juran
• Put forward & named after an Italian economist Vilfredo Pareto (1848- 1923) in his Manual of Political Economy (1906, trs. 1972).,
• Specifies an unequal relationship between inputs and outputs.
• The principle that states 20% of invested input is responsible for 80% of the results obtained.
• Also defined as, 80% of consequences stem from 20% of the causes.
• Referred to as the "Pareto rule" or the "80/20 rule“ or Pareto Law.
• Serves a relationship between inputs (20%) and outputs (80%) is not balanced.
• Efforts of 20% of a corporation's staff => could drive 80% of the firm's profits.
• 80% of output <= come from only 20% of your time at work.

Pareto's Application
How can we put the 80-20 principle to good use?
• The Pareto principle is great to increase focus.
• Don't try to do more. Just do more of the right things.
- 20% effort ó 80% positive output
• Time management is the rule that can be very effective.
- give maximum concentration to those specific 20 percent tasks that contribute to 80% of seek results .
• manufacturing – quality control, six sigma
• management - baseline for ABC-analysis and XYZ-analysis,
• human resources - resource optimization (80% resources ó 20% operations
• dramatic business - 20% of customers, activities, products or processes ó 80% of contribution to profit

So how do you know if you're working on the twenty
percent that really matters?
1. It makes you feel good because you are doing what you always wanted or you know it'll help with your goals.
2. You are doing the tasks that you'd like to procrastinate, but know that it is essential.
3. You delegate tasks to others that you aren't good at.
4.You are doing something that uses your creativity

Hints that you aren't utilising your time effectively:
1. You are doing things that other people want you to do.
2. You are doing things that you aren't good at.
3. You are doing things you don't enjoy doing (provided that it doesn't also contribute to your goals).
4. You are doing things that always take you a lot of time and energy.

With a little effort, and the application of the 80-20 rule, we can save a lot of
– our emotional energy
– physical energy
to concentrate on stuffs that really matters and enrich our life.

Interpretation of a Pareto ChartLeft vertical axis of the Pareto:-
•has "counts" or "cost" depending on the data used.
•Each vertical bar represents the contribution to the total from a given "problem" area.
•Bars are placed on the graph in rank order, that is the bar at the left has the highest contribution to counts or cost.
•Right vertical axis has percent demarcations.

A cumulative line:-•Used to add the percentages from each bar, starting at the left (highest cost or count) bar.
•Which bars contribute the most problems, and with the cumulative line, determine how much of the total problem will be fixed by addressing the highest few.
•to check if Pareto is working well
- steep with a lot of arch to it, implies 1st few problem areas => high % of the
total problems.
- straight line => contribution from each successive bar (after the first) is about even (bars with same height), no problems stand out as being more bothersome.

Pareto Analysis & Statistic

Purpose of the Pareto:-•is to distinguish the "vital few from the trivial many."
•only a few bars on the left side of the Pareto that account for most, say 80%, of the problems (areas should be addressed)

Pareto chart statistics:
For the Pareto chart, the following overall statistics are calculated:
Mean: the average of all the values in the series, i.e. the average bar
height.
Sum: the sum of all the values in the series.

Pareto Analysis1.A break point in the cumulative percentage line occurs where the slope of the line begins to flatten out.
2.The factors under the steepest part of the curve are the most important.
2.One can always improve & redo the Pareto analysis which had no clear change in slope line/factors that make up at least 60% of the problem in order to discover the factors that have risen to the top .
3.the bars are all similar sizes or more than half of the categories are needed to make up the needed 60%, try a different breakdown of categories that might be more appropriate.

Pareto's Principle, the 80/20 Rule,
should serve as a daily reminder to focus 80 percent of your time and energy on the 20 percent of you work that is really important.


Don't just "work smart", work smart on the right things.

No one is said to be at his/her crazy mind while he/she is just having his/her own way to a creative & innovative ideas by thinking out of the box.