Page 288 - Project+

FIGURE 10.2 Fishbone diagram

Pareto Chart

You have probably heard of the 80/20 rule. Vilfredo Pareto, an Italian economist and
sociologist, is credited with discovering this rule. He observed that 80 percent of the
wealth and land ownership in Italy was held by 20 percent of the population. Over the
years, others have shown that the 80/20 rule applies across many disciplines and

areas. As an example, generally speaking, 80 percent of the deposits of any given
financial institution are held by 20 percent of its customer base.

The 80/20 rule as it applies to issues says that a small number of causes (20 percent)
create the majority of the problems (80 percent). Have you ever noticed this with your
project or department staff? It always seems that just a few people cause the biggest
headaches. But I’m getting off-track.

Pareto charts are displayed as histograms that rank-order the most important factors
—such as delays, costs, and defects, for example—by their frequency over time. Pareto’s

theory is that you get the most benefit if you spend the majority of your time fixing the
most important problems. The information shown in Table 10.1 is plotted on an
example Pareto chart shown in Figure 10.3.

TABLE 10.1 Frequency of failures

Item Defect Frequency Percent of Defects Cumulative Percent

A 800 33 33

B 700 29 62
C 400 17 79

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