Pareto chart
A Pareto chart sorts a problem's causes from largest to smallest, with a line of their running total, to show the few causes behind most of it.
Select any words here to ask your Maestro about them.
An online store has a hundred complaints spread across six causes. How many causes do you think it takes to remove 80% of them?
What it's for: deciding where to start. It sorts the causes of a problem (complaints, defects, returns) from largest to smallest and adds a line with the running total. Almost always, a few causes explain most of it: the 80/20 rule.
How to read it: find where the line crosses 80%. The causes to the left of that point are the ones worth fixing first. 80/20 is a tendency, not a law: sometimes it's 70/30.
It's a sorted bar chart; each bar is one cause's relative frequency, and the line adds up those percentages.
Practice it in When to use a bar chart? Sort the bars to compare.
How it's used
How to make one in Excel
One column of causes and one of how often each happened
- Sort the causes from largest to smallest.
- Work out each one's percentage of the total.=B2/SUM($B$2:$B$7)
- Work out the running total: each percentage plus all the ones before it.=SUM($C$2:C2), filled down.
- marked: Insert › Statistic Chart › ParetoSince Excel 2016 it does it for you: sorts, adds up and draws the line.
When to look closer
The most frequent isn't always the most expensive
Same complaints, different yardstick
- Late delivery: 46 complaints
- Damaged item: 22 complaints
- Wrong charge: 14 complaints
Sorting out each wrong charge costs $90 and each late delivery $8. Which do you think comes first if you rank by cost?
Ask your Maestro about Pareto chart
It answers from the free course page closest to this word, the way it answers while you study.
You: What does "Pareto chart" mean, in plain words?
Your Maestro: I'll explain it with a case of yours: it sticks better than a definition. Which problem at work would you sort this way?
Asking about: Answers from the page "If something goes up 50% and then down 50%, are you back where you started?"
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Related terms
- Bar chart
A bar chart compares amounts across categories: each bar is a category and its length is the number. Use it to see which branch sold the most.
- Frequency table
A frequency table counts how often each value shows up (absolute frequency). Relative frequency is that count over the total: 5 of 10 = 50%.
- Percentage
A percentage says how many parts out of every 100 something is. You get it by dividing the part by the total and multiplying by 100: 45 out of 180 customers is 45 ÷ 180 × 100 = 25%.