Pareto Analysis
Pareto Analysis, often known as the 80/20 rule, is a decision-making technique used to identify the most significant factors contributing to a problem or outcome. It’s based on the principle that roughly 80% of effects come from 20% of causes.
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pie
title Pareto Distribution - 80/20 Rule
"Vital Few (20% Causes)": 80
"Trivial Many (80% Causes)": 20Purpose
The goal is to focus resources and efforts on the issues that will have the greatest impact when resolved.
How It Works
- Identify Problems or Causes: List all contributing factors to a particular outcome (e.g., defects, delays, support tickets).
- Measure Frequency or Impact: Quantify how often each factor occurs or how much impact it has.
- Rank in Descending Order: Sort the causes from most to least significant.
- Calculate Cumulative Impact: Work out the cumulative percentage each cause contributes to the total.
- Identify the “Vital Few”: Typically, the top 20% of causes are responsible for 80% of the effect. These are the priorities for action.
Application Example
If analysing recurring production issues, a Pareto chart might reveal that just a handful of root causes (e.g. a specific dependency, a misconfigured environment) account for the majority of incidents. By focusing on these, teams can reduce issues significantly with minimal effort compared to addressing all problems equally.
Tools
This analysis is often visualised using a Pareto chart—a bar graph combined with a line graph showing cumulative percentage. It helps in communicating findings clearly and driving consensus on where to allocate effort.
Benefits
- Enhances decision-making by focusing on high-impact areas.
- Improves efficiency in resource allocation.
- Supports continuous improvement initiatives by highlighting recurring issues.
Pareto Analysis helps align efforts with measurable outcomes, making it easier to prioritise what matters most.