Strategy & Planning
Pareto Chart (80/20)
Rank causes by size and find the vital few that account for most of the effect.
- Time: 15 to 30 min
- With: Quality, operations or any team with count data
- You get: A ranked chart and the vital few to attack first
How to use this worksheet
- Collect counts or costs per category for one period: defects by type, complaints by reason, revenue by customer.
- Enter each category and its value. Use real data, not estimates, and make the categories mutually exclusive.
- The chart sorts the bars and shows the cumulative percentage. The items up to the dashed line at 80% are the vital few.
- Pick the first one or two and work on them. Collect data again after the change to check the effect.
Data
One row per category.
Prompts
Ask yourself
- Are the categories mutually exclusive?
- Is frequency the right measure, or should you weigh by cost?
Pareto chart
Before you finish
- Categories do not overlap.
- Data covers a long enough period.
- You compared frequency with cost impact before choosing.
About Pareto
The Pareto principle is named after Vilfredo Pareto, who observed that roughly 80% of Italy's land was owned by 20% of the people. Joseph Juran applied it to quality as "the vital few and the useful many".
The 80/20 split is a rule of thumb, not a law. What matters is that causes are rarely equal, so working on the biggest few gets you most of the gain.
Recommended reading
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- The 80/20 PrincipleRichard Koch
Comprehensive exploration of the Pareto Principle applied to business, life, and productivity. The modern classic on the topic.
- The 4-Hour WorkweekTim Ferriss
Modern application of the 80/20 rule to productivity and lifestyle design, making it accessible to a wider audience.