Pareto Analysis: Find the Few Causes That Matter

A Pareto analysis ranks the causes of a problem by how often they happen, or what they cost, so you can see which few causes make up most of it. It is named after the Italian economist Vilfredo Pareto, who showed in the 1890s that wealth in Italy and other countries was concentrated in the hands of a small share of the population.

Joseph Juran, the quality pioneer, applied the idea to quality problems in the 1940s and called it the principle of the "vital few and trivial many". The 80/20 split is a rule of thumb, not a law. The useful point is that causes are rarely equal.

How to do a Pareto analysis

1. Choose the problem. Complaints, callbacks, late jobs or returns: anything you can count.
2. Record each occurrence and its cause for a set period. Four weeks is usually enough.
3. Count each cause. Group similar causes, and keep an "other" category small.
4. Sort the causes from largest to smallest.
5. Add a running total as a percentage of the whole.
6. Draw the line. The causes that take the running total to about 80% are your vital few.

Worked example

A heating and plumbing firm logs 100 customer complaints over three months:

Three of the six causes make up 80% of complaints. Late arrival alone is 42%. Fixing late arrival, perhaps through more realistic booking slots and a text when the engineer sets off, would do more than tackling the other four causes together.

Make your Pareto table

Enter your causes and counts. The table sorts them and adds the running total for you.

Count or cost?

Ranking by count shows what happens most often. Ranking by cost can give a different order: one rare but expensive cause, such as a warranty claim, can outweigh many cheap ones. Where costs differ a lot, multiply each count by the average cost of that cause and rank again.

After the analysis

A Pareto chart shows where to look, not why it happens. Take the top cause and use the 5 Whys to find its root cause. After the fix, count again for another four weeks and redraw the chart. The order often changes, and the new top cause is your next project.