Simply stated, a Pareto chart is a bar graph that represents problems or opportunities in order of descending magnitude or frequency.
Considered one of the seven key quality and improvement tools, it is named after Vilfredo Pareto, an Italian engineer, sociologist, economist, political scientist, and philosopher. He made several important contributions to economics, particularly in the study of income distribution. He is most well-known for his observation that 80% of the land in Italy was owned by about 20% of the population – now referenced as the “Pareto Principle” or “80/20” rule.
Pareto charts are used for a number of purposes, such as to analyze the frequency of defects in a process, to look at causes in a process, to figure out what the most significant problem in a process is, or to communicate data with others.
Here are seven simple steps for creating a Pareto chart:
- Decide what categories you will use to group items
- Decide what measurement is appropriate. Common measurements are frequency, quantity, cost and time.
- Decide what period of time the Pareto chart will cover: One work cycle? One full day? A week?
- Collect the data, recording the category each time, or assemble data that already exist.
- Subtotal the measurements for each category.
- Determine the appropriate scale for the measurements you have collected. The maximum value will be the largest subtotal from step 5. (If you will do optional steps 8 and 9 below, the maximum value will be the sum of all subtotals from step 5.) Mark the scale on the left side of the chart.
- Construct and label bars for each category. Place the tallest at the far left, then the next tallest to its right and so on. If there are many categories with small measurements, they can be grouped as “other.”