Meaning of Pareto Diagram

The Pareto diagram is a graphical method of organizing data on a Cartesian plane , which allows you to easily analyze and establish an order of priorities, discriminating between the fundamental problems (which are vital and few) and the trivial ones, which are many and of minor importance.It is a vertical bar graph that provides answers categorized in descending order, widely used in process statistics.

The origin of the Pareto diagram dates from 1909, when sociologist and economist Vilfredo Pareto published the result of his research on the distribution of wealth, in which he observed that 20% of the population concentrated 80% of wealth.

Pareto Diagram

In the 30s the General Motors Corporation learned about Pareto's work on the distribution of wealth, which he applied to his "quality control manual" assimilating the concept of poor distribution of quality losses to the unequal distribution of wealth, showing examples of cumulative curves.

These curves were titled with the name Pareto or principle of unequal distribution, which made a distinction between the vital few and the many trivial, stating that a few causes are responsible for causing most of the problems.

The 80-20 relationship can be detected in a variety of fields: 80% of absenteeism in a company is caused by 20% of employees, for example; or 80% of organizational problems are due to 20% of the possible causes, among many other examples.

Preparation of a Pareto diagram

Data selection and time period to analyze
Grouping of data by categories following a specific criteria
Tabulation of the data in descending order to calculate the frequency
Graphical representation with bars
Delineation of the cumulative curve
Diagram Analysis

Diagrams or graphs allow you to briefly describe the characteristics of a collective or variable behavior, representing categorical data and providing more visual information than circular or bar charts.