By a show of hands, who here knows the 80/20 rule? Anyone? OK, a few of you. It’s a simple concept that is amazingly consistent. It goes something like this…
- 80% of your defects are a result of 20% of the causes.
- 80% of your revenue comes from 20% of your customers.
- 80% of your productivity will come in 20% of your working hours.
…and so on. It’s not always perfect, but the gist of it is that there are usually a lot of little things and one or two big things that drive results. And, in theory, it makes sense. But how do you show it? Enter the Pareto Chart. Named for Vilfredo Pareto, helps to illustrate this in your problem solving exercises. Let’s take a look at an example.
Let’s look at the pieces of the chart:
- The vertical bars represent discrete data. Each bar is a single cause of the overall effect being examined (in this case, reasons for late arrival). You can see the count at the bottom of the chart. Data elements are always listed left to right in decreasing order.
- The blue line represents the cumulative percentage, increasing from left to right.
- The left axis is the discrete count of incidents for each cause data point.
- The right axis is the cumulative percentage of the causes, compared to total events.
OK, so what does it mean? Well, it’s a simple way to show that most of your issues are caused by one or two main culprits. Building a chart like this will help you safely ignore a whole lot of little things and focus on the big ones. In this case, most of the “late arrivals” are caused by alarm issues. No need to worry about traffic or hot water issues. Just deal with the big ticket items, and your results will change dramatically.
Simple? Yup. A bit elementary? Indeed. Powerful? Sure can be. Especially if you need to align your stakeholders and resources on a few efforts. Visually aides are always useful in this regard especially if there is someone really passionate about traffic or hot water at the table. Pareto charts can help you get them focused, move away from emotional debate, and get your efforts on the right track.