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PARETOCHARTTOOL

Introduction

Settingprioritiesisoneofthemainmanagementfunctionsofanorganization.Ifthemanagersdonotprioritizetheirtasksandorganizationalobjectives,theorganizationwillheadtowardsthewrongdirectionandeventuallycollapse.

Therefore,managementisrequiredtoprioritizetheirtasksandfocusonthepriorityitemsthatwillhaveahighimpactontheorganization.

ParetoCharttoolisoneofthemosteffectivetoolsthatthemanagementcanusewhenitcomestoidentifyingthefactsneededforsettingpriorities.Paretochartsclearlyillustratetheinformationinanorganizedandrelativemanner.

Thisway,themanagementcanfindouttherelativeimportanceofproblemsorcausesoftheproblems.Whenitcomestoprioritizingthecausesoftheproblem,aParetochartcanbeusedtogetherwithacauseandeffectdiagram.

OncetheParetochartiscreated,itshowsyouaverticalbarchartwiththehighestimportancetothelowest.Theimportanceofeachparameterismeasuredbyseveralfactorssuchasfrequency,time,cost,etc.

TheParetoPrinciple

ParetochartsarecreatedbasedontheParetoprinciple.Theprinciplesuggeststhatwhenanumberoffactorsaffectasituation,fewerfactorswillbeaccountableforthemostoftheaffect.

Thisisalmostthesameas80/20theorythatyoumayhaveheardof.Itsaysthat80%oftheimpactismadeby20%ofcauses.

ThePracticalImportance

Whenateamworkstogetherinalargeandcomplexproject,itcanbequitetrickytounderstandtheimportanceofcertainissues.Paretochartscanshowtheteamafewimportantthingsthatreallymatterthemost.

MostteamsuseParetochartsovertimeinordertoidentifywhetherthesuggestedsolutionreallyanswerstheproblem.Ifthesolutioniseffective,therelativeimportanceoftheidentifiedfactorshouldtakealesservalueovertime.

CreatingaParetoChart

Step1

Firstofall,listdowneverythingyouneedtocompare.Thiscanbealistofissues,items,oralistofproblemcauses.

Step2

Decideonthestandardmeasurestocomparethelistitems.Youneedtoconsiderorganizationalobjectivesandcurrenttrendsinordertodeterminethemeasures.Somemeasuresare:

FrequencyHowoftenitoccurs

CostHowmanyresourcesarebeingutilizedoraffected

TimeHowlongittakes

Step3

Selectatimeframeforthedatacollectionprocess.

Step4

Now,wedosomesimplemathwiththedatawecollected.Takeeachlistitem andrecorditagainstthemeasurementselected.Then,determineitspercentageinthecontextandallitemoccurrences.

Asanexample,ifthelistofitemcontainscausesbehindlatecomerstooffice,thetallyingtablewilllooklikebelow.

CauseForLateComing Occurrences %Count

RoadTraffic 32 44

RainorSnow 3 4

NotFeelingGood 6 8

LatePublicTransportation 4 6

PersonalCommitments 8 11

WorktillLateNight 20 27

Total 73 100

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Step5

Now,rearrangethelistandlisttheitemindecreasingorder.Inourexample,listitfromthehighestnumberofoccurrencestotheleastnumberofoccurrences.Then,recordthecumulativepercentagewhenyoutravelfromthetopitemtothebottomitem.

Referthefollowingexample:

CauseForLateComing Occurrences %Count Cumulative%

RoadTraffic 32 44 44

WorktillLateNight 20 27 71

PersonalCommitments 8 11 82

NotFeelingGood 6 8 90

LatePublicTransportation 4 6 96

RainorSnow 73 100 100

Step6

Createabarchart.Thelistitemsshouldbedisplayedalongthe'Y'axisfromhighesttothelowest.Leftverticalaxisshouldbethemeasurethatyouselected.

Inourexample,itshouldbethenumberofoccurrences.Selecttherightverticalaxisasthecumulativepercentage.Eachitemshouldhaveabar.

Step7

Now,drawalinegraphforcumulativepercentages.Thefirstpointofthelineshouldbeonthetopofthefirstbar.YoucanusespreadsheetsoftwaresuchasMicrosoftExcelforthisstep.

Itoffersmanytoolsforcreatingandanalyzinggraphs.Now,youshouldhavesomethinglikethis.

Step8

Analyzeyourchart.Younowneedtoidentifytheitemsthatappeartohavethemostimpact.Identifythebreakpoint inthegraph.

Ifthereisnobreakpoint,accountthecauses/itemsthathave50%ormoreimpact.Inourexample,thereisavisiblebreakpoint.

Therearetwocausesbeforethebreakpoint,RoadtrafficandWorktillLateNight.Therefore,thetwocausesthathavethemostaffecttoourproblemareRoadTrafficandWorktillLateNight.

Conclusion

Paretochartscanbereallyusefulwhenusedinthepropercontext.Thishelpsthemanagementtoprioritizetasks,risks,activitiesandcauses.

Therefore,Paretochartsshouldbeusedasmuchaspossiblewhenitcomestodaytodayprioritization.

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