Scribd
Upload
79 views4 pages

Pareto Analysis Using The 80:20 Rule To Prioritize: Brainstorming 5 Whys Cause and Effect Analysis Root Cause Analysis

Pareto Analysis is a technique for prioritizing problems by identifying their root causes. It uses the 80/20 rule - that 20% of causes often result in 80% of problems. To use it, one lists problems, identifies root causes, scores problems by impact, groups by cause, and totals scores to prioritize fixing the highest scoring cause. In an example, a service center manager identified staff training as the top priority cause of many customer complaints, allowing him to focus on training first for biggest impact.

Uploaded by

Didik Ardianto
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
79 views4 pages

Pareto Analysis Using The 80:20 Rule To Prioritize: Brainstorming 5 Whys Cause and Effect Analysis Root Cause Analysis

Pareto Analysis is a technique for prioritizing problems by identifying their root causes. It uses the 80/20 rule - that 20% of causes often result in 80% of problems. To use it, one lists problems, identifies root causes, scores problems by impact, groups by cause, and totals scores to prioritize fixing the highest scoring cause. In an example, a service center manager identified staff training as the top priority cause of many customer complaints, allowing him to focus on training first for biggest impact.

Uploaded by

Didik Ardianto
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Pareto Analysis

Using the 80:20 Rule to Prioritize

Imagine that you've just stepped into a new role as head of department.
Unsurprisingly, you've inherited a whole host of problems that need your
attention.

Ideally, you want to focus your attention on fixing the most important problems.
But how do you decide which problems you need to deal with first? And are
some problems caused by the same underlying issue?

Pareto Analysis is a simple technique for prioritizing possible changes by


identifying the problems that will be resolved by making these changes. By
using this approach, you can prioritize the individual changes that will most
improve the situation.

Pareto Analysis uses the Pareto Principle – also known as the "80/20 Rule" –
which is the idea that 20% of causes generate 80% of results. With this tool,
we're trying to find the 20% of work that will generate 80% of the results that
doing all of the work would deliver.

Note:
The figures 80 and 20 are illustrative – the Pareto Principle illustrates the lack
of symmetry that often appears between work put in and results achieved. For
example, 13% of work could generate 87% of returns. Or 70% of problems
could be resolved by dealing with 30% of the causes.

How to Use the Tool

Step 1: Identify and List Problems

Firstly, write a list of all of the problems that you need to resolve. Where
possible, talk to clients and team members to get their input, and draw on
surveys, helpdesk logs and suchlike, where these are available.

Step 2: Identify the Root Cause of Each Problem

For each problem, identify its fundamental cause. (Techniques such as


Brainstorming, the 5 Whys, Cause and Effect Analysis, and Root Cause Analysis
will help with this.)
Step 3: Score Problems

Now you need to score each problem. The scoring method you use depends on
the sort of problem you're trying to solve.

For example, if you're trying to improve profits, you might score problems on
the basis of how much they are costing you. Alternatively, if you're trying to
improve customer satisfaction, you might score them on the basis of the number
of complaints eliminated by solving the problem.

Step 4: Group Problems Together By Root Cause

Next, group problems together by cause. For example, if three of your problems
are caused by lack of staff, put these in the same group.

Step 5: Add up the Scores for Each Group

You can now add up the scores for each cause group. The group with the top
score is your highest priority, and the group with the lowest score is your
lowest priority.

Step 6: Take Action

Now you need to deal with the causes of your problems, dealing with your top-
priority problem, or group of problems, first.

Keep in mind that low scoring problems may not even be worth bothering with -
solving these problems may cost you more than the solutions are worth.

Note:
While this approach is great for identifying the most important root cause to
deal with, it doesn't take into account the cost of doing so. Where costs are
significant, you'll need to use techniques such as Cost/Benefit Analysis, and use
IRRs and NPVs to determine which changes you should implement.
Pareto Analysis Example

Jack has taken over a failing service center, with a host of problems that need
resolving. His objective is to increase overall customer satisfaction.

He decides to score each problem by the number of complaints that the center
has received for each one. (In the table below, the second column shows the
problems he has listed in step 1 above, the third column shows the underlying
causes identified in step 2, and the fourth column shows the number of
complaints about each column identified in step 3.)

Score
# Problem (Step 1) Cause (Step 2)
(Step 3)
Phones aren't answered Too few service center
1 15
quickly enough. staff.
Staff seem distracted and Too few service center
2 6
under pressure. staff.
Engineers don't appear to
be well organized. They Poor organization and
3 4
need second visits to bring preparation.
extra parts.
Engineers don't know what
time they'll arrive. This
Poor organization and
4 means that customers may 2
preparation.
have to be in all day for an
engineer to visit.
Service center staff don't
5 always seem to know what Lack of training. 30
they're doing.
When engineers visit, the
customer finds that the
6 Lack of training. 21
problem could have been
solved over the phone.
 

Jack then groups problems together (steps 4 and 5). He scores each group by the
number of complaints, and orders the list as follows:

1. Lack of training (items 5 and 6) – 51 complaints.


2. Too few service center staff (items 1 and 42) – 21 complaints.
3. Poor organization and preparation (items 3 and 4) – 6 complaints.

As you can see from figure 1 above, Jack will get the biggest benefits by
providing staff with more training. Once this is done, it may be worth looking at
increasing the number of staff in the call center. It's possible, however, that this
won't be necessary: the number of complaints may decline, and training should
help people to be more productive.
By carrying out a Pareto Analysis, Jack is able to focus on training as an issue,
rather than spreading his effort over training, taking on new staff members, and
possibly installing a new computer system to help engineers be more prepared.

Key Points:

Pareto Analysis is a simple technique for prioritizing problem-solving work so


that the first piece of work you do resolved the greatest number of problems.
It's based on the Pareto Principle (also known as the 80/20 Rule) – the idea that
80% of problems may be caused by as few as 20% of causes.

To use Pareto Analysis, identify and list problems and their causes. Then score
each problem and group them together by their cause. Then add up the score for
each group. Finally, work on finding a solution to the cause of the problems in
group with the highest score.

Pareto Analysis not only shows you the most important problem to solve, it also
gives you a score showing how severe the problem is

You might also like