Pareto chart

The Pareto Chart shows the relative frequency of defects in rank-order, and thus provides a prioritization tool so that process improvement activities can be organized to 'get the most bang for the buck', or 'pick the low-hanging fruit.'

Pareto charts are extremely useful for analyzing what problems need attention first because the taller bars on the chart, which represent frequency, clearly illustrate which variables have the greatest cumulative effect on a given system.

In the 1940s, Pareto’s theory was advanced by Dr. Joseph Juran, an American electrical engineer who is widely credited with being the father of quality control. It was Dr. Juran who decided to call the 80/20 ratio the "The Pareto Principle." Applying the Pareto Principle to business metrics helps to separate the "vital few" (the 20% that has the most impact) from the "useful many" (the other 80%). The chart illustrates the Pareto Principle by mapping frequency, with the assumption that the more frequently something happens, the more impact it has on outcome.

Because the values of the statistical variables are placed in order of relative frequency, the graph clearly reveals which factors have the greatest impact and where attention is likely to yield the greatest benefit.