Bad Pareto Analysis and the 80/20 Rule | Learning Tree Blog

# Pareto Analysis and the 80/20 Rule

On my projects, we use Pareto analysis to show us the relatively small number of causes that may produce the majority of problems or defects we are encountering. The 80-20 principle comes in to say that 80% of the problems are due to 20% of the causes.  We never have enough time to address everything, so Pareto analysis allows us to prioritize what we will spend out time on and deal with.

A Pareto diagram is a type of histogram. Histograms are a vertical bar chart showing us how often a particular aspect of a situation has occurred. The height of each column illustrates the relative frequency of the occurrence. Histograms help us figure out what is causing problems in a process or on a project. When you are using Pareto analysis, remember to keep focused on finding the biggest bang for the buck!

Here is an example of a simple Pareto diagram:

A Pareto diagram is a tool typically used as part of your quality control activities on a project. As you can see in the above example, a Pareto diagram is a relatively simple bar graph used to arrange information in such a way that priorities for process improvement or dealing with defects or problems can be established. Another way to think of it is as a histogram view of data ordered by frequency of occurrence. You can focus your subsequent analysis and actions on the causes creating the greatest number of defects first to maximize the time you have on hand to deal with what’s causing you pain.

Here are some interesting examples of the 80/20 rule:

• 20% of the time expended produced 80% of the results
• 80% of your phone calls go to 20% of the names on your list
• 20% of the streets handle 80% of the traffic
• 80% of the meals in a restaurant come from 20% of the menu
• 20% of the paper has 80% of the news
• 80% of the news is in the first 20% of the article
• 20% of the people cause 80% of the problems
• 20% of the features of an application are used 80% of the time

And now for a little history… the 80/20 theory was first developed in 1906 by Italian economist Vilfredo Pareto, who observed an unequal distribution of wealth and power in a relatively small proportion of the total population. Joseph M. Juran is credited with adapting Pareto’s economic observations to business applications.

Happy problem identification and here’s to a quick, focused solution that adds value to your project and its product!

Susan Weese

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