## Pareto Chart

You have probably heard of the 80/20 rule. Vilfredo Pareto is the person credited with discovering this rule. He observed that 80 percent of the wealth and land ownership in Italy was held by 20 percent of the population. Over the years, others have shown that the 80/20 rule applies across many disciplines and areas. As an example, generally speaking, 80 percent of the deposits of any given financial institution are held by 20 percent of its customer base.

Let's hope that rule doesn't apply to project managers, though, with 20 percent of the project managers out there doing 80 percent of the work!

The 80/20 rule as it applies to quality says that a small number of causes (20 percent) create the majority of the problems (80 percent). Have you ever noticed this with your project or department staff? It always seems that just a few people cause the biggest headaches. But I'm getting off track.

Pareto charts are displayed as histograms that rank-order the most important factors— such as delays, costs, and defects, for example—by their frequency over time. His theory is that you get the most benefit if you spend the majority of your time fixing the most important problems. The information shown in Table 11.1 is plotted on an example Pareto chart shown in Figure 11.3.

 Item Defect Frequency Percent of Defects Cumulative Percent A 800 .33 .33 B 700 .29 .62 C 400 .17 .79 D 300 .13 .92 E 200 .08 1.0

FiGuRE 11.3 Pareto chart

Defect Frequency

1000

100%

Cumulative Percent

100%

The problems are rank-ordered according to their frequency and percentage of defects. The defect frequencies in this figure appear as black bars, and the cumulative percentages of defects are plotted as circles. The rank-ordering of these problems shows you where corrective action should be taken first. You can see in Figure 11.3 that problem A should receive priority attention because the most benefit will come from fixing this problem.