# Pareto Chart Mistakes

pareto analysis shows where effort can be focused for maximum benefit. Pareto analysis uses Pareto charts which combine a bar graph with a cumulative line graph to illustrate the 80/20 rule.

### Common Pareto Chart Mistakes

#### 1. Stopping Your Pareto Analysis Too Soon

A common Pareto chart mistake is to stop at too high a level. It may take two or more levels of Pareto charts to narrow the focus to an actionable level. How can you tell if you've stopped too soon? In the next step of the problem solving process, root cause analysis, your "fishbone" diagram will turn into a "whalebone" diagram covering many walls. By taking the "big bar" of folded flaps above down one more level, we get a clear insight into where to improve: production line number three.

Double the power of Pareto's 80-20 rule by applying the 4-50 rule. Look at the 20% within the 20% (4%) that represents over half of the problem. You can do this by drawing another Pareto chart using just the data representing your big bar. In the example below the blue bar represents the 4% of the business that is causing over 50% of the problem.

#### 2. Using a Parflato chart instead of a Pareto Chart

Another common Pareto chart mistake involves using a "parflato" chart. If the left bar or two on your Pareto chart are not significantly bigger than the other bars on the chart then you have a "perflato" chart. A flat Pareto chart means that the 80/20 rule does not apply.

Try organizing your data by another attribute (e.g subtotal by geography, cost, or time of day instead of by error type) and see if you can get a Pareto chart that helps you better focus your efforts.

For example, one client created a Pareto chart of insurance claim errors by error code and found no one code that accounted for a significant amount of errors. They then created a Pareto chart of errors by insurance company and found that one company was the source of most of the errors. Once they approached the company with compelling data it was easy to convince them their process needed fixing.

#### 3. Not Comparing Pareto Charts to Show Before and After Improvement

Teams often want to "declare victory" after identifing root cause and implementing countermeasures. The only way to know if the change really improved the process is to compare Pareto charts before and after: