Pareto charts are an extremely valuable tool used to help support the measure phase of project management processes. This methodology was created back in the 19 century and directly aligns with lean six Sigma practices. A Pareto analysis consists of ranking opportunities in order to decide the cadence they should fall in. In this article, we will explore 10 steps for creating the perfect Pareto charts.
What Is The Purpose of a Pareto Chart?
Pareto charts show bars that resemble the frequency or impact of problems. The bars are typically arranged in order of importance from left to right. Tall bars signify greater importance, while short bars resemble less vital activities. These bar charts are used to help those on the project team decipher what is the most important to least important.
Understanding The 80:20 Rule
Pareto charts are also used to resemble high priorities as well as big opportunities. These bar charts use the 80:20 principle. This means that 80% of a result is created from 20% of causes. These bullet points will help you better understand this concept:
- 80% of the profit comes from 20% of the franchises.
- 80% of the franchises contribute to 20% of the profit.
- 80% of employee complaints come from 20% of these issues.
- 80% of the cleanup time is spent on 20% of the total surface area.
The 80:20 rule helps project managers identify what part of the project will result in bigger gains. By creating a Pareto chart, project managers are helping their teams make more informed decisions. This is because project members will be able to identify the most important aspects of a project that require ultimate focus.
Not only that, but Pareto charts are easy to read, so that team members who are less data-savvy can still understand what is being communicated. Pareto charts help you to easily see the frequency of an event as well as how much of an impact this event will have on the final outcome of a project.
Why Should I Use This Practice?
For economists on the team, Pareto charts have many benefits. These include but are not limited to:
- Having the ability to view a project in smaller, bite-size pieces
- Easily identifying significant activities, so that project team members know where to focus their efforts
- For teams with a limited amount of resources, they will be able to better allocate what is available to them
With the help of this chart, team members will be able to improve their efforts and determine the importance of individual data.
Factors a Pareto Chart Can Help With
- What are the largest problems that our business is facing?
- What 20% of problems are causing 80% of the solutions?
- What should we focus on in order to improve our current metrics?
Plotting a Pareto Chart
When working to create your Peratoo chart, you will want to organize the data by defect type, count counts of defects, and cumulative percentage. In the Pareto chart above, you can see that the data is ready to be organized. The graph will help to show you which 20% of the defects are causing 80% of the problems.
How to construct a Pareto Chart?
The following steps will walk you through how to best construct a Pareto chart:
First and foremost, you will want to define the graph’s classification. You must obtain this information by creating check sheets and log sheets for your team.
The next step is to create a time interval to help you analyze the data. This interval needs to be an accurate representation of how long it would take to perform the typical activity.
Next, you will want to define the number of total occurrences. This can consist of cost, defect count, and other categories that will help you arrive at the grand total.
Now, it is time to solve for the percentage of each category. You will do this by dividing the category total by the grand total. Then, you will multiply this number by 100.
Next, it is time to rank order each of your categories.
In this step, you will solve for the cumulative percentage. In order to solve for this number, you will add the percentage for each category to that of any previous category.
Now, it’s time to construct a chart that is scaled from zero to the grand total. You will want to label your chart appropriately, depending on your specific project.
In this step, you will label the horizontal access with all of your category names. Remember, this will be specific to your individual project.
Next, we will draw in bars to label each category. You will want to be sure that the height of the bar is aligned with the left vertical axis.
The final step is to connect a line to highlight the total percentage from each column on your chart. This percentage line will be made to reflect the right vertical axis.
We hope this article helped you create a Pareto chart to easily see which 20% of project activities create 80% of the problems in your project. This chart will be of great use to you as a project manager, as well as to your project team. Key stakeholders can also view this chart so that they feel informed throughout the process.
Understanding the information in this article is an essential part of project management and a vital part of the PMP exam. Improve your project management skills or prepare for the PMP Certification exam by taking a quality online PMP exam prep course.