Pareto Chart Tool

Pareto chart is one of the most powerful tools used in problem-solving. When we are saddled with many things, it is important for us to prioritize. Pareto chart is used extensively in quality management to prioritize the various root causes and problems. This helps in focusing on eliminating the critical few. Pareto chart and technique is based on Pareto Law, which says that 80% of the problems are caused by 20% of the root causes. We should not be channelizing our efforts into trivial things. A pareto chart is an ordered histogram providing a visual representation of the findings.

Pareto charts: 

• Helps focus attention on the most critical issues.
•  Prioritizes potential cause of the problem.
•  Helps identify the critical few from the uncritical many.

We can take an example to understand how Pareto law is applied and how Pareto chart is created to identify the critical root causes of problems we are facing.

Let us examine the number of complaints which are received at a hotel which offers both lodging and boarding. The management has collected the various complaints and the number of times a particular type of complaint has occurred. Below is the sample data for the same.

We can create a visual histogram depicting the occurrences of various complaint types as below in excel.We can then create a Pareto Chart by prioritizing the occurrences of different complaints so that we can focus on the most frequently occurring complaints. The data is sorted in a descending order of occurrences as below.

We can now create a Pareto Chart (which is an ordered histogram) from the above prioritized data as below.

Conclusion

Pareto chart is a simple yet a very effective chart which allows prioritizing various elements and a visual representation of the findings. Pareto charts are easily created using Excel. Learn more about Pareto chart with our PMP prep course.