Pareto Chart: What, When & How to Make It 2023

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What Is a Pareto Chart?

A Pareto chart is a bar chart named after Italian economist Vilfredo Pareto. It’s used for analyzing problems or causes by time, cost, or frequency of occurrence. It also helps determine the most significant or pressing issues.

The Pareto principle, or the 80-20 rule, “is a phenomenon that states that roughly 80% of outcomes come from 20% of causes,” according to Asana. A Pareto chart depicts a relationship between two numbers, where a relative change in one quantity results in a proportional relative change in the other quantity. These quantities, their changes, and their relationship to other quantities are shown in a Pareto diagram like the one below.

For example, when assessing a product’s quality, the Pareto chart above depicts

  • The number of occurrences for a particular failure type
  • The percentage that each failure type has among all failure occurrences

With this information, production and quality managers can determine which failure(s) to address first — namely, those that are occurring the most frequently.

How to Read a Pareto Chart

The length of the bars are shown in units at the left vertical axis, and they typically represent frequency of occurrence, but can also be another unit of measure.

Notice how the bars are arranged. The longest bar appears on the left along the horizontal axis, and each bar gets progressively shorter. When arranged this way, the raw data and its meaning become more apparent. Here, we can see what the most common cause of tardiness is all the way down to the least common cause.

The right vertical axis can represent the cumulative percentage of the grand total number of occurrences, or other total with a maximum of 100%. The line graph shows the running total as it adds the value of each bar and compares it to the cumulative percentage at the right vertical axis.

The Pareto principle (or 80-20 rule) is a generalization and does not distribute at an exact 80:20 ratio. However, it provides an accurate direction or trend that can be quickly shown in a Pareto chart.

Pareto Chart Use Cases

Pareto charts and the principle behind them are useful for a variety of applications:

  • Quality control: Show that most product quality issues stem from a smaller percentage of defects
  • Sales: Maximize total sales by better leveraging bigger customer accounts
  • Customer support: Convey that most complaints come from a smaller number of customers
  • Finance: Trace how the most funding comes from a small percentage of investors
  • Marketing: Visualize how a greater percentage of traffic is generated by a smaller number of posted articles
  • Project management: See how more effort is spent on a few key tasks to maximize productivity

Pareto charts are particularly useful in project management for prioritizing the most impactful or pressing tasks. For example, a project manager may use a Pareto chart to:

  • Determine the 20% of tasks that will bring the most impactful results, and prioritize those accordingly
  • Allocate more time to the 20% of tasks that take the longest time to complete
  • Prepare for the 20% of risks with the highest negative impact

The chart can be helpful when you want to assess a problem with a broad range of causes, so you can identify specific factors. As visual tools, Pareto charts are a great way to effectively communicate data and ideas to stakeholders.

How to Build a Pareto Chart

  1. Group the causes or factors into specific categories.
  2. Choose the appropriate measurement, i.e., frequency, quantity, or cost.
  3. Define the time period for the chart, such as hour, day, or week.
  4. Use the data collected and compute the subtotals for each category.
  5. Adjust the scale of your left vertical axis to accommodate the largest subtotal from the different categories.
  6. Construct your bars progressively from tallest at the left to shortest on the right.
  7. Compute the percentage of each subtotal category, dividing them by the total of all categories that represent 100% (as indicated by the right vertical axis).
  8. Compute the cumulative sums from left to right, and draw the line chart representing the sums against the percentage of the right vertical axis.

A Pareto chart is a useful tool for identifying the most significant challenges or causes an organization faces. As a visual tool, it helps effectively and convincingly communicate data to others.

Recommended Project Management Software

If you’re interested in learning more about top-rated project management software, the editors at project-management.com actively recommend the following:

1 Wrike

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Wrike is the most powerful work management platform on the market, enabling teams to plan projects and collaborate in real time. Our award-winning software is trusted by 20,000+ companies across the globe, including Sony, Estée Lauder, and Siemens.

Wrike’s customizable features include Gantt charts, request forms, dashboards, cross-tagging, time tracking, and proofing. Integrate with 400+ apps from the likes of Microsoft, Google, and Salesforce. Automate repetitive tasks and achieve 50% faster planning. Work from anywhere with 100% access to your files via our mobile and desktop apps.

Whether you’re a small startup or an established brand, Wrike has the solution for you. Paid plans start at $9.80/user/month. Join our community of 2.3 million — start your free two-week trial today.

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2 Smartsheet

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Smartsheet is a leading work execution platform that has real-time work management features, collaboration and automation tools. Users are presented with a familiar and easy-to-use spreadsheet-like interface. However, it has enterprise-grade capabilities that even Fortune 500 companies like Cisco, Bayer, HP, and PayPal are confident to adopt in their business. Strong project management features enable teams to utilize different views of real-time data, and switch easily from Gantt, card, grid and calendar views. Smartsheet has automatic update requests, and can be used for waterfall and agile projects, product launch, sprint planning, and more. The resource management feature provides users the visibility who is busy, and who is not, in real-time. They can also attach files, share sheets, get notified, view the activity log, export, email, and print.

Learn more about Smartsheet

3 monday.com

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monday.com Work OS is an award-winning no-code work management platform that helps teams manage projects and workflows more efficiently.

Used by 152,000+ customers worldwide, this fully customizable software lets you plan, manage, and track every project in one place. monday.com offers time-saving and easy-to-use features such as automations, time tracking, document sharing, and real-time collaboration. Multiple board views such as Gantt and Kanban help you structure and navigate tasks and projects the way you prefer, and dashboards give a high-level overview of your progress.

In addition, integrations with apps such as Outlook, Microsoft Teams, Gmail, and Excel, allow you to easily continue working with your favorite tools from within the platform. monday.com also offers dedicated solutions, such as monday dev and monday sales CRM, designed to answer the needs of specific industries.

Learn more about monday.com

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