Strategic Cost Reduction: How to Trim the Federal Budget using the Pareto Principle

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JH3 is a big fan of the 80/20 principle:

The 80/20 rule provides the foundation for a relatively simple exercise for executives. It involves answering the following questions:

* Which 20% of the products or services generate 80% of the profitability?
* Which 20% of the customers generate 80% of the profitability?
* Which 20% of the geographies generate 80% of the profitability?
* Which 20% of the assets generate 80% of the profitability?

These are powerful and revealing questions, yet few companies today are able to answer these questions given the way their accounting and information systems are set up.

I wonder if the same approach could be applied to the Federal Budget. Obama, are you listening?

The pareto questions might look something like this:

- Which 20% of our costs take up 80% of the budget?
- Which 20% of our services impact 80% of the tax-paying public?
- Which 20% of our geographies require 80% of our aid?
- Which 20% of our public generate 80% of our tax revenues?

Betcha these could be eye-openers!

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This page contains a single entry by Christian Sarkar published on November 29, 2008 11:40 PM.

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