Consulting Case Interview Practice Questions

Answer: a - Pareto's Law says that 80 percent of the effects come from 20 percent of the causes. Vilfredo Pareto, an Italian economist, observed in his country that 20 percent of the people owned 80 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.

Key Takeaway: This is a handy heuristic to help focus your attention on the most important things involved in running a business.

Other examples: 20 percent of your customers will cause 80 percent of your problems. 20 percent of items in inventory represent 80 percent in sales. And so on.

One application I'm sure you'll find interesting is that 80 percent of beer is drunk by 20 percent 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.