Vilfredo Pareto, a turn-of-the-century Italian economist, studied the distributions of wealth in different countries, concluding that a fairly consistent minority – about 20% – of people controlled the large majority – about 80% – of a society's wealth. This same distribution has been observed in other areas and has been termed the Pareto effect.
The Pareto effect even operates in quality improvement: 80% of problems usually stem from 20% of the causes. Pareto charts are used to display the Pareto principle in action, arranging data so that the few vital factors that are causing most of the problems reveal themselves. Concentrating improvement efforts on these few will have a greater impact and be more cost-effective than undirected efforts.
In most cases, two or three categories will tower above the others. These few categories which account for the bulk of the problem will be the high-impact points on which to focus. If in doubt, follow these guidelines:
Often, one Pareto chart will lead to another:
For the Pareto chart, the following overall statistics are calculated:
|Mean:||the average of all the values in the series, i.e. the average bar height.|
|Sum:||the sum of all the values in the series.|
|Total:||The number of items in that class (bar).|
|Percentage:||The percentage of the whole data set which that bar accounts for.|