Characteristics of a Pareto chart

Pareto Chart

Overview

By conducting Pareto analysis, major problems can be identified and tackled first, thus eliminating the biggest cause of the problem.

A Pareto chart is essentially a bar chart showing how often different categories of events/incidents take place. The most common is ordered to the left, and the least common is ordered to the right. It also includes a line showing the cumulative frequency (adding each column’s value to the previous ones in turn). A Pareto chart follows the 80/20 principle developed by Vilfredo Pareto, an Italian economist in the early 20^th century.

The 80/20 principle asserts that for many events, roughly 80% of the effects come from 20% of the causes. This then allows you to focus on where improvement projects are needed most and will have the biggest impact.

Characteristics of a Pareto chart

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  On the X axis you have the area of interest (categories) e.g. as ward names.
  
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  On the left Y axis you have the number of events e.g. number of falls.
  
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  On the right Y axis you have the cumulative frequency.
  
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  Essentially, a Pareto chart is a bar and line graph combined. The bars display the number of events per area of interest whilst the line displays the cumulative % of events.
  
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  Categories contributing to 80% of the problems are often referred to as the ‘vital few’ whereas the others are labelled the ‘useful many’.
  

Key points about a Pareto chart

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  They work best with 30 observations across the categories. Smalls numbers of data can be misleading due to random change.
  
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  The classification by categories is only a guide to where to focus attention of your improvement project.
  
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  Identifying categories where 80% of the problems are occurring is not the only thing to consider when deciding where to focus improvement efforts.
  
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  Pareto charts don’t explain what sort of variation is being observed. To distinguish random (common cause) and non-random (special cause) variation you need to use either a run chart or control charts.
  

Link to Using data for improvement