Monday, September 30, 2013

Pareto's law in Project Management

CAPM Test Question/PMP Test Question regarding Pareto's Law
12. What is Pareto's Law?
A.     80% of the effects come from 20% of the causes
B.     Work expands so as to fill the time available for its completion.
C.     Anything that can go wrong will go wrong.
D.     Never attribute to malice that which can be adequately explained by stupidity.
Answer: A - Pareto's Law says that 80% of the effects come from 20% of the causes. Vilfredo Pareto, an Italian Economist, observed in his country that twenty percent of the people owned eighty percent of the wealth. The poor were lucky then - today it's more like 10/85. Management thinker Joseph Juran (1904 - 2008!) was the one who actually came up with this concept as it applies to business and named it after Pareto.

We’ll go through the other ones since they’re kind of fun to know:

B, "Work expands so as to fill the time available for its completion" is Parkinson's Law. That's another good one to know.

C, is Murphy's Law. Sometimes it may seem like "Anything than can go wrong will", but it isn't necessary a good philosophy to have!

D, "Never attribute to malice that which can be adequately explained by stupidity." is Hanlon's Razor. This isn't in the project manager's handbook for good reason. It's easier to work with a team when you have a healthy respect for them. Nevertheless, you can keep this in the hip pocket for an opportune time.


Key Takeaway: This is a handy heuristic to help you focus your attention on the most important things a project entails, allowing him/her to manage key risks and satisfy the most important stakeholders. Other examples: 20% of your customers will cause 80% of you problems. 20% of items in inventory represent 80% in sales. And so on.

One application I'm sure you'll find interesting is that 80% of beer is drunk by 20% of consumers. That's why most beer commercials are concentrated on football and tawdry men's magazines. It just makes sense for those companies to focus on their heavy consumers.

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