Pareto Analysis Content from the guide to life, the universe and everything

Pareto Analysis

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The Pareto principle, sometimes called the 80/20 rule, states that 80% of problems are caused by 20% of the causes. For example: 80% of lost hours at work are attributed to 20% of the staff; 80% of faults in a manufacturing process can be attributed to 20% of the defects, and so on.

The principle was named, by Dr. Juran, after the Italian economist Pareto, who noted that most of the country's wealth was owned by a small number of people.

The value of the principle is that it allows us to identify (and therefore act upon) the vital few causes which account for most of the problems. This way we can prioritise time and resources in a manner which maximises the impact on the problem.

Use of the Pareto principle requires us to act on the basis of hard facts, rather than opinions, and allows us a clear view of the gains we should achieve as a result of eliminating each problem.

It should be noted that Pareto analysis may be applied a number of times to the same data, thus giving visibility to different aspects of the problem.

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