Recommended Technique: The 80/20 Rule

Business analysts and project managers frequently use the 80/20 rule, or Pareto analysis, to show the relatively small number of causes that may produce the majority of problems or defects the project team is encountering. The 80-20 rule tells you that 80% of the problems are due to 20% of the causes.

Basically, a Pareto diagram is a type of histogram. Histograms are vertical bar charts showing how often a particular aspect of a situation has occurred. The height of each column illustrates the relative frequency of the occurrence. Histograms help you figure out what is causing problems in your process or project. When you are using Pareto analysis, remember to keep focused on finding the biggest bang for the buck!

Here is an example of a simple Pareto diagram:

A Pareto diagram is typically used as part of your quality control activities on a project. This relatively simple bar graph used to arrange information in such a way that priorities for process improvement or dealing with defects or problems can be established. Another way to think of it is as a histogram view of data ordered by frequency of occurrence. You can focus your subsequent analysis and actions on the causes creating the greatest number of defects first to maximize the time you have on hand to deal with what’s causing you pain.   

Here are some interesting examples of this "80/20 rule":

• 20% of the time expended produced 80% of the results
• 80% of your phone calls go to 20% of the names on your list
• 20% of the streets handle 80% of the traffic
• 80% of the meals in a restaurant come from 20% of the menu
• 20% of the paper has 80% of the news
• 80% of the news is in the first 20% of the article
• 20% of the people cause 80% of the problems
• 20% of the features of an application are used 80% of the time

And now for a little history… the 80/20 theory was first developed by Italian economist Vilfredo Pareto, who observed an unequal distribution of wealth and power in a relatively small proportion of the total population. Joseph M. Juran is credited with adapting Pareto's economic observations to business applications.

Happy New Year!

Susan