The Pareto chart is a great Six Sigma tool based on the Pareto principle named after Vilfredo Pareto, an Italian economist. The Pareto principle can be used to divide just about everything up into an 80/20 ratio.
An example of the 80/20 principle is exemplified in what Vilfredo Pareto observed himself back in 1906 — that 80 percent of the property in Italy was owned by 20 percent of the population.
Another example of this principle would be a non-profit charity receiving 80 percent of their donations from 20 percent of the donors.
Pareto Charts in Six Sigma
A super useful tool to use in Six Sigma is a Pareto chart, because these charts visually show you where to apply your efforts. When applying DMAIC, one can usually see exactly where the effort is needed. The Pareto chart would be used when you want to break the ratio determined into more specific, granular information.
Let’s take the non-profit example to show what type of specifics we could gather. So out of the donors that gave the least of amount of donations, where did those donors live? By determining this, perhaps one could increase marketing efforts to that exact population, and generate more donations.
In a company, 80 percent of the important tasks are done by 20 percent of the staff. If a Pareto chart is done, one can pinpoint exactly which tasks are crucial to the smooth running of the company. Not all tasks are created equal — it is the unity of necessary tasks that make the wheels spin at a company, and the lack of doing these tasks correctly would start a free-falling bender headed for disaster.
So the bottom line is when you want to get specific and pinpoint your efforts within an organization, a Pareto chart is the right tool of choice (once you have utilized DMAIC) to pinpoint specific data.
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