Purpose
A pareto chart is a tool used during current state analysis that helps visualize the frequency of observed issues. This enables the project team to quickly identify the most frequently occurring issues, reach consensus on which issues to address, and make the most impact towards achieving their SMART goal. Additionally, this visualization communicates to organizational stakeholders that a thorough analysis was completed to identify root causes.
Chart Elements
The chart contains both a bar graph and line graph. The bars represent the number of time an issued occurred. The line represents the cumulative percentage that each issue occurs in relation the other issues.
Creating a Pareto Chart
Use the following steps to create a pareto chart.
- Clearly identify issues to gather data
- Define date range for data collection
- Collect the number of times each issue occurred during the defined timeframe
- Input each issue name and collected count into the Pareto Chart template. The template will automatically organize the data by frequency, in descending order in the chart.
Analysis
Bar graph
The bar graph is organized in descending order, with the most frequent issue on the left side and least frequent on the right. Volume is graphed on the left side of the chart, along the line graph's y-axis.
Line graph
The line graph visualizes the total contribution of each issue on the problem with the largest individual contribution from the most frequently occurring issue. The corresponding percentage for the most frequently occurring issue can be seen along the right side of the chart, on the line graph's y-axis. As each additional issue is added, the line increases in cumulative percentage until 100% is reached with the addition of the final, and least frequent issue.
80/20 Rule
Vilfredo Pareto, the creator of the pareto chart, developed the 80/20 rule: this stipulated that roughly 80% of the losses come from 20% of the causes.
When analyzing the pareto chart, focus on issues displayed on the left-most side that total up to 80% of the cumulative problem. These issues are referred to as the "vital few". The other 20% of cumulative issue occurrences are referred to as the "trivial many". Addressing the trivial issues will not have a significant impact towards addressing your problem or achieving your SMART goal.
