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# Pareto Chart - Part 1

Quality Tools > Tools of the Trade > 8: Pareto Chart - Part 1

In the 18th century, in Italy, there lived an economist called Vilfredo Pareto. What Pareto noticed that brought him fame, at least in the 20th century, was that not only 80% of the wealth of the country was held by 20% of the people, but also that 80% of the wealth held by that 20% was held by 20% of the 20% (or 4% of the population).

What, in fact, Pareto had discovered was one of those universal laws that can be applied in a seemingly endless set of circumstances, including, as the quality guru Joseph Juran pointed out, in situations of quality and reliability. The law is often called the 80/20 law, although Juran named it the Pareto Principle.

## The Pareto Chart

The Pareto Chart is, at its simplest, an ordered Bar Chart, with the highest bar on the left, as in the diagram below. It lets you see both the absolute and relative size of a set of numbers. If there are a large number of items being measured (typically more than half a dozen), the smaller ones can be combined into an 'others' bar, which is always placed as the last bar on the right.

## Prioritising the action

When you have a lot of possible problems to address, it is usually impractical or inadvisable to try and fix them all at once. By the principles of continuous improvement, if you change a number of things together, it is difficult or impossible to find out what change caused what improvement or whether some changes are actually detrimental.

It thus makes sense to fix one or so things at once. So how do you decide what to fix first? The obvious answer might be the thing that is causing the most defects. This might often be the right answer, but it need not always be so. It depends on what you decide 'important' means. The overall cost of defects may be more important than their number. In many circumstances, the cost has a weighting effect and the total failure cost is the number of defects multiplied by the cost of each defect. As the Pareto Chart below indicates, the way you prioritise the action may have a dramatic effect on the order of the bars and consequently how you approach the problem.

## Finding the right Pareto Chart

Note all Pareto Charts are equal. If you want to address a major problem, then the highest bar should be significantly higher than any of the other bars. Then fixing this one problem will have a major effect on the overall problem. Notice the difference between the two Pareto Charts below. The concave, or 'spiky' Pareto clearly allows you to prioritise the action. To find the right concave Pareto, you may need to kiss a number of convex frogs. Thus, for example, measuring customer problems may show little differences over different products, but is noticeably different across geographic regions (is the product suitable for all climates?).

Convex Pareto                           Concave or 'spiky' Pareto

Next time: Pareto variations

This article first appeared in Quality World, the journal of the Institute for Quality Assurance

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