To solve a problem, we must understand it.
A lot of effective time and project management is understanding the root causes that lead to quality problems, or to increased time on a project. A Pareto Analysis is an approach for identifying, classifying and visualizing the causes driving a problem or variable. For example, what factors contribute the most to our late product deliveries? What are the most important sources of defects in our new manufacturing process? What are our most common customer complaints?
A Pareto Chart presents this analysis in the form of a graphic that communicates the frequency of specific variables compared to each other. Together, the variables add up to 100%, shown by a cumulative curve.
A Pareto Analysis is a math-based exercise in root cause analysis and critical thinking, which involves the following steps:
- Identify the outcome, problem or master process that you are interested in. Examples: time it takes to complete a process, total number of errors in products or a process that create project delays or the number of “downtime” days in a manufacturing process.
- Identify the factors that contribute to the outcome, problem or master process. How do you know what the factors are? Examples are engineering metrics, surveys, input from workers engaged in the process and monitoring data.
- Register the number of incidents or numerical values associated with the contributing factors. For example, if you are trying to reduce project expenses (problem), list all the types of expenses (factors), and then add up the value of each type of expense. Alternatively, maybe, you are looking at WHO is incurring the expenses, rather than what the expenses are FOR. In that case, you might tabulate the expense count of value by person, rather than expense type.
- Plot the enumerated count for each variable on a frequency chart, so you can visually see which factors have the most impact. For a step-by-step look at how to build a Pareto Chart in Excel®, check out this Pryor Excel® blog post.
The Pareto Chart that results from this process should give you a good sense of what factors are having the most impact on your process of problem. If a picture is worth a thousand words, the Pareto Chart will tell you which of those words is most important in moving you forward.