The trained PMP or Project Management Professionals are required to resolve project and management issues. However, projects have constraints in terms of money, resources, and time. The PMP is the person who investigates issues in project management and finds the best solutions to frequent problems and significant issues using minimal resources. Towards this end, the Pareto chart is among the seven most-used quality tools in management that deal with efficiency.
When preparing for the PMP exam, look for the best PMP Prep course as they always cover questions related to PMP best practices, tools, and techniques. The other six tools are the 'Ishikawa' or cause-and-effect diagram, the histogram, the check sheet, the flowchart, the scatter diagram, and the control chart.
Did you know? The Pareto Principle is the 80-20 rule in Project Management Courses which postulates that 80% of the problems are caused by 20% of the root or source causes.
The Pareto Principle
Vilfredo Pareto, an economist, in 1896, when working at Lausanne University, found that 20% of the population in Italy held 80% of the land. The Management Expert M Juran later refined this finding into what is now called the 80-20 Principle or Pareto Principle. The Pareto principle postulates that 20% of the root causes are responsible for causing 80% of the problems. This is not an absolute ratio but is a general rule that proves very useful in Project Management. Let's now get to the Pareto chart.
You can also implement a 5 whys root cause analysis process to find the main problem.
PMP programs define the Pareto chart as a histogram using which the discrete observations are divided into various categories and the "vital few" observations and elements that are used to find the solution with the maximum efficiency or impact. Hence the 80-20 principle-based Pareto Chart is, in reality, a tool used by PMPs for prioritization. Similarly, the PMP uses a risk assessment tool and the Probability Impact versus Probability Risk Matrix when assessing risks. Then the high-risk issues are dealt with on priority while the low-risk issues are monitored and put on a watch list. Thus, in management, addressing 20% of the root causes or risks on a priority basis can impact 80% of the issues and solutions.
Check out the steps involved in risk management for improved project execution.
So, how does the Pareto Chart work? The Pareto chart in PMP's daily chores highlights the most important factors that usually cause the most frequent reasons for the problems, frequent defects, and customer complaints. It could be a line graph representing the defect percentage cumulative or a bar chart with the bar width being the defect frequency. The bar chart normally has the bar heights descending from left to right or highest to the lowest bar. Thus, the Pareto Chart separates the root causes and the problems while prioritizing in decreasing order the opportunities in mutually exclusive categories. The high-priority issues are solved first, and the low priority causes are monitored closely.
Let us start by studying the essential factors to draw the Pareto chart.
You can make a Pareto chart and diagram only if you can
Here is how the customer complaints Pareto diagram PMP chart of a garments store would look like:
Pareto charts are used for task prioritization of various factors in project management. Namely,
Providing a rank or focusing on the most important issues includes
Here is how to draw up a Pareto chart that can be used over various situations.
Here is an example of the resulting table, often referred as a Pareto Table.
Making the Pareto chart for any data in Excel involves two steps.
Firstly, select the column data with the list of data categories and a column for the numbers. The chart will then group the same data into the list of categories while summing up the numbers corresponding to the data.
When it comes to drawing a statistics chart with the given data, here is how you can draw the Pareto chart.
Know more about the Pareto chart tools, how to use them for analysis diagrams, and the uses of Pareto charts in project management.
Here are the main reasons for using Pareto charts and their analysis.
The limitations are few and are stated below.
When analysing an issue to draw its Pareto chart, it is essential to identify the root cause of the problem.
Root causes are identified in a problem through methods like fishbone diagrams, brainstorming, or the 5 Whys approach.
Here's briefly an example using the 5-Whys approach to a person coming to work late.
|The 5-Whys||Reply||Cause Numbers|
|Why are you late for work?||I woke up late today.||CN 1|
|Why were you late in waking up?||Yesterday, I went to sleep late.||CN 2|
|Why were you late in going to sleep?||I watched a late-night movie.||CN 3|
|Why were you watching a late-night movie?||I had to return the movie the next day.||CN 4|
|Why did you need to return the movie the next day?||I had borrowed the movie from a video library.||CN 5 (or the Root Cause)|
Addressing the root cause resolves the problem through a lasting solution. Similarly, all complex problems can be broken down into smaller lists of causes and prioritized on the Pareto Principle.
The Pareto Chart analysis has two methods to read the charts depending on what you need to know about.
Also check – Complete Project Management Tutorial
Pareto charts are most useful when analyzing bulk data (For example, when analyzing the data of an industry's manufacturing line). The Pareto Chart lists the issues on the X-axis and the frequency of occurrence or the number of occurrences of each issue on the Y-Axis or the bar's height. The line graph atop the bar graph generally shows the occurrence percentage of each category.
Some of its other uses are
Using Pareto Charts helps you prioritize and rank issues based on the occurrence frequencies. Once you know the order in which you should resolve them, you have applied Pareto's 80-20 rule, or a Pareto Chart helps determine the issues needing your immediate attention and resources to resolve. To learn more about Pareto charts and their impact on project management, try out the Knowledgehut best PMP Course today.
You can make a Pareto chart and diagram only if you can:
The Pareto Principle is also called the 80-20 rule in online course for project management which postulates that 80% of the problems are caused by 20% of the root or source causes.
Root causes are identified in a problem through fishbone diagrams, brainstorming, or the 5 Whys approach.
In the Pareto Count method, you use a Pareto chart, diagram, and analysis to find the most frequently occurring category. In the Pareto Cost method, you use the category having the most expensive specified cost factors for your analysis and can pinpoint its specific impact and details.