Pareto Diagram

Objective
To identify the vital few issues that exist within an organization versus the trivial many. The number of occurrences of each issue must be tracked and reported.
 

What is a Pareto Diagram?
A Pareto Diagram is used to identify the vital few issues that exist within an organization versus the trivial many. The number of occurrences of each issue must be tracked and reported. This tool arranges items in the order of the magnitude of their contribution, thereby identifying the “vital few” (the factors that warrant the most attention) from the “trivial many” (factors that, while useful to know about, have a relatively smaller effect). The Pareto Diagram is focused around the Pareto principle, also known as the 80/20 rule, which states that for many events, roughly 80% of the effects come from 20% of the causes. Using a Pareto Diagram helps a team concentrate its efforts on the factors that have the greatest impact.
 

1. Order categories according to magnitude of effect (e.g., frequency of error/issue).
2. Write magnitude of contribution (e.g., frequency of error/issue) next to each category and determine the grand total. Then calculate the percentage of the total that each category represents.
3. Working from the largest category to the smallest, calculate the cumulative percentage for each category with all the previous categories.
4. Draw and label left vertical axis with the unit of comparison (e.g., “number of occurrences of error/issue,” from 0 to grand total).
5. Draw and label the horizontal axis with the categories largest to smallest from left to right.
6. Draw and label the right vertical axis “Cumulative Percentage” from 0 to 100 percent, with the 100 percent value at the same height as the grand total mark on the left vertical axis.
7. Draw a line graph of the cumulative percentage, beginning with the lower left corner of the largest category (the “0” point).
8. Analyze the diagram to indicate the cumulative percentage associated with the “vital few.”