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Topics: Pareto distribution, Pareto principle, Vilfredo Pareto Pages: 3 (1107 words) Published: October 17, 2014
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 – First, 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....
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