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A Pareto chart is a vertical bar graph whose heights reflect the frequency or impact of problems so it can be determined which problems should get immediate attention. The bars on the graph are arranged in descending order of height from left to right. This means the categories represented by the tall bars on the left are more significant than the shorter bars on the right. Pareto charts graphically summarize and show the relative importance in the differences among groups of data. The charts distinguish the "vital few" from the "trivial many."
In the Beginning
Vilfredo Pareto, an Italian economist, in 1897 postulated that 20 percent of the population in most countries controlled 80 percent of society's wealth. Subsequently, the same principle has been observed and applied in other areas and has become known as the Pareto Principle, or the 80/20 Rule.
The Pareto Principle also operates in quality improvement in business and government. It states that 80 percent of the problems stem from 20 percent of the causes. This can be shown graphically. Pareto charts are typically used to prioritize problems and to concentrate efforts on resolving those issues. It is seen as a cost-effective way to manage time, personnel and resources.
Counts and Costs
The Pareto chart is a good tool to use when the process being investigated produces solid data in terms of specific counts and costs. (The data cannot be given in percent yields or error rates, for example.) A Pareto chart can: Break big problems into smaller pieces, identify the most significant factors, show where to focus efforts and allow for efficient use of limited resources. When looking at the final bar graph, often two or three categories will tower above the others. Those categories will show the areas to focus improvement efforts.
Issues to Address
Choose the problem areas or categories by brainstorming or use existing data to seek out the problem areas. Then collect and put the data in order before putting it into graph form. The Florida Department of Health has a comprehensive online lesson in presenting and analyzing a Pareto chart. The chart will help answer basic questions: What are the most pressing issues facing our team or business? What 20 percent of sources are causing 80 percent of the problems? Where should we focus efforts to achieve the greatest improvements?
A graduate of Syracuse University, Rick Stanley has spent more than 30 years working as a writer and editor at metropolitan newspapers in Florida and New York State. He has also served as a media consultant for a major U.S. company.