Pareto Chart

© Operational Excellence Consulting. All rights reserved.
Pareto
Chart

© Operational Excellence Consulting. All rights reserved. 3
About this document
• The purpose of this document is to provide guidelines for
the application of the Pareto Chart.
• The Pareto Chart shows the relative importance of a set
of measurements, and thus provides a prioritization tool
so that process improvement activities can be organized
to “get the most bang for the buck”.
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Purpose of Pareto Chart
• The purpose of the Pareto Chart is to show the relative
importance of a set of measurements
• The Pareto Principle should serve as a daily reminder for
us to focus 80% of our time and energy on the 20% of
our work that is really important. It is not just “work
smart”, but work smart on the right things!
• When to use the Pareto Chart
To differentiate the ‘vital few’ from the ‘trivial many’
After improving a process, to show relative change in a measured
item, e.g. defect rate, lead time, customer complaints, etc.
Sorting a set of measurements to emphasize their relative sizes

Examples of Pareto Principle
• 80% of your profits come from 20% of your customers
• 80% of your sales come from 20% of your products
• 80% of your sales are generated by 20% of your sales
personnel
• 80% of your warehouse space is occupied by 20% of
your stocks
• 80% of your problems are created by 20% of your staff
• 80% of your production is generated by 20% of your staff

Example: Use of Pareto Chart to compare
‘Before’ and ‘After’ a process improvement
Restaurant Complaints
Before After
33% Reduction
in Wait Time

How to construct a Pareto Chart with the
Excel template (1)
• We have provided you an Excel template to make the
Pareto Chart construction as quick and easy as possible.
• Step 1: Read the instructions.
Pareto Chart
Instructions:
1) Fill in all green areas with Title, Data (Category & Frequency), and Time Period.
2) Note the "All other" category. Use this category to ensure all data are tallied.
3) Always have at least 2 Categories in addition to "All other" (see Note below).
4) View the chart. (You may need to adjust the chart size to have the categories print correctly)
Note: Hotel Complaints data is for demonstration purposes only.
Note: You may unprotect this worksheet should you wish to modify it: select Tools,
then Protection, then Unprotect Sheet

The Pareto Chart of ‘Hotel Complaints’ is
automatically generated…
Wait Time
for
Reservatio
ns
Room
Cleanliness
Room
Service
Delivery
Time
Staff
Attitude
Checkout
Process
Concierge
Responsive
ness
Mini Bar
Room
Decoration
All other
Frequency 31 18 11 8 5 4 2 1 1
Cum % 38% 60% 74% 84% 90% 95% 98% 99% 100%
% of Total 38% 22% 14% 10% 6% 5% 2% 1% 1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
5
10
15
20
25
30
35
CumulativePercent
Occurences
Hotel Complaints
Pareto Chart
March 2014Time Period:

Pareto Chart – Tips & Tricks
1. Get as much information as possible from the Pareto chart.
Collect various viewpoints and classification.
2. Draw a Pareto chart based on cause or problems, not
symptoms.
3. As an alternative, use the vertical axis to represent
monetary units.
4. Do not have too many or too few items on the horizontal
axis. Recommended items = 6 to 10.
5. Shade the items (e.g. use a different color) that are taken
up. It is not necessary to focus on the highest bar.
6. The legend for the Pareto chart should be clear.
7. Item under “All other” should not be too many.

About Operational Excellence
Consulting
• Operational Excellence Consulting is a management training and
consulting firm that assists organizations in improving business
performance and effectiveness.
• One of our unique strengths is going beyond a tools-focused
approach to seamlessly integrate people, processes, technology
and continuous improvement initiatives to suit the specific needs
and situations of our clients.
• We provide corporate learning programs and management advisory
services to assist our clients to achieve breakthrough in business
performance and effectiveness. Our aim is to support our clients in
designing, managing and executing lasting beneficial change.

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