While there are several different ways to conduct a Pareto analysis, they tend to revolve around the same guiding principles. According to the website Mind Tools, the six steps to conducting a Pareto analysis are:
Identify and list problems: Write a list of all of the problems that you need to resolve.
Identify the root cause: For each problem, identify its fundamental cause.
Score the problems: The scoring method use will depend on the sort of problem that needs to be solved. If the problem revolves around a business trying to improve profits, then the scoring might center on how much each problem is costing them. Or, if they are trying to boost customer satisfaction, they might score the problems on the number of complaints that would be eliminated if the problem were solved.
Group the problems: Group the problems by the root cause.
Add the scores: Add up the scores for each cause group. The group with the top score is should be the highest priority, while the one with the lowest score should be the lowest priority.
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Action: Start tackling the causes of the problems. Deal with the top-priority problem, or group of problems, first.
For those that want a graphical representation of the problems, the Project Excellence Network advises to divide each problem’s score by the grand total of all of the scores to get a percentage. Decision makers should then draw a chart with a horizontal axis and two vertical axes. The left vertical axis should be marked in increments from zero to the grand total of all the problem scores. On the other side, the right vertical axis should be marked in increments from zero to 100 percent.
Next, leaders should construct a vertical bar diagram, with the highest percentage score on the left and lowest on the right. According to the Project Excellence Network, the height of each bar should correspond with the value on the left axis and the percentage of the total on the right axis.
Finally, to figure out what percentage of the total problems will be solved when more than one are addressed, a line graph should be added to the top.
“Beginning at the left zero point, plot a line showing the cumulative percentage total reached with the addition of each problem classification,” the Project Excellence Network writes on its website. ” The line should end at the 100 percent mark on the right axis.”