Pareto Analysis

A statistical technique in decision-making used for the selection of a limited number of tasks that produce significant overall effect.

What is Pareto Analysis?

Pareto Analysis, named after economist Vilfredo Pareto, is a decision-making technique based on the Pareto Principle, also known as the 80/20 rule. It asserts that roughly 80% of outcomes result from 20% of causes. This analysis is often used to prioritize efforts by focusing on the most significant factors that lead to a desired outcome. By identifying and addressing the vital few causes that contribute the most to a problem or goal, organizations can allocate their resources more effectively and efficiently. Pareto Analysis involves collecting data, organizing it in a Pareto chart, and visually displaying the cumulative impact of different factors. This visual representation helps stakeholders clearly see which issues have the most substantial impact and where to concentrate their efforts for maximum results. By harnessing the power of Pareto Analysis, companies can make informed decisions, improve processes, and drive overall performance by targeting the critical few areas that can yield the most significant benefits.