Using Pareto Chart for PMP From Data to Decisions

Project management is made effective with several tools. I would like to discuss one tool among them in this blog. Decision-making is vital to the success of any project. A Pareto chart is a tool to help in appropriate decision-making. All the data of the project is put together in a specific format. This process allows project managers to find all the factors affecting their projects; this also helps them to make informed decisions that increase the effectiveness of the project.

Modern project management makes the sophisticated process live through such useful tools. Let’s see in detail.

What is a Pareto Chart?

Many of us know the word chart; we used to get information in form of diagrams or tables. Visual learning gives a clear understanding. To make project management effective, a Pareto Chart is often a bar graph that reveals the frequency or effect of problems.

The chart works on the Pareto Principle, which states that 80% of effects in a project come from 20% of the causes. This project principle was coined by Vilfredo Pareto. The chart was developed by Joseph Juran. This chart helps project managers focus on the most critical issues that need addressing. In 2006, Leland Wilkinson, a computer scientist and a famous statistician, developed an algorithm for developing acceptance limits for the bar chart. Nowadays, Pareto charts can be created using spreadsheets and some online generators. Because of its effectiveness, it remains among the top tools for quality maintenance in project management.    

Pareto Chart Components

A Pareto Chart diagram requires specific vital components:

1. Bars 

The bar graph represents problems or causes for issues involved in the projects. The higher the bar, the more severe the issue. The bars start with the highest from the left and move with fewer priority issues towards the right.

2. Line Graph

The line graph is used to show the cumulative percentage, and this line helps to see the significance of each category. The cumulative percentage represents the frequency of the issue that is more are less than the fixed data. 

3. X-axis 

Since the graph has an x and y axis, the X axis represents the categories being analyzed.

4. Y-axis 

The y-axis data shows the frequency of issues or defects involved in each category.

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Data Required for Chart

Pareto Chart requires the following data is essential:

1. Categories of Problems

The motive of the chart is to visualise the frequency or impact of different problems. So it is important to identify the various issues or categories that need analysis.

2. Frequency of Occurrence

The frequency of issues in the projects should be collected.

3. Impact Assessment 

Find the major impact of each problem on the project’s success.

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How to Make a Pareto Chart?

Let’s take a software development organisation that uses the Pareto Chart for their project to improve the quality of the software. These are the steps to make the chart and processes to overcome the issues. 

1. Identify and List Problems

In the software development process, the reasons for a time delay are gathered as data from the developers and testers in the project. These two are essential factors to correct in the upcoming process of the project.

Time delays are caused by unexpected scope changes, lack of resources, poor communication, and bugs in code. These data are collected with frequency cumulative percentages.

2. Sort Data

After collecting the data, arrange them from higher to lower frequency or impact. This helps to concentrate on the top priority first.

Let's imagine data as lack of resources - 12, unexpected scope change - 22, poor communication - 5, and bugs in code - 18.

It should be sorted as follows:

This helps in creating a Pareto chart with top priority on the left.

3. Calculate Cumulative Totals

The cumulative totals of each issue should be found. The frequency is divided by total frequency multiplied by 100. In this example case, total frequency is 57. 

Unexpected scope change cumulative percentage is (22/57)*100, which is 38.59%, likewise to every data.

Create the Chart

With help of spreadsheet or graphing tools or software to plot the data chart can be created, 

Preto diagram   

Pareto chart, line chart for cumulative percentage

These charts show how any problem’s aggregate values change over time or when and how it changes.

Also Read: What is PMP in Health Care?

How to Do Pareto Analysis?

Pareto analysis is a straightforward process:

1. Classification

Categorise the data into distinct groups that can be drawn as bars in graphs or where improvements need to be made.

2. Fix the Measurement Point 

Any one of the measurement points, like time, quality, production quantity, or cost of production, should be fixed.

3. Data Collection

Gather complete relevant data about the problems from the project. Over certain frequent times like one whole day, week, or in one work cycle to confirm the issues during the process.

4. Pareto Analysis 

Once project managers know the reason for the issues, they should develop strategies to address the most critical issues first.

5. Action Plan

Once project managers know the reason for the issues, they should develop strategies to address the most critical issues first. This ensures the issues will be eradicated in the upcoming work cycle.

6. Data Driven Decisions

Pareto Chart is a tool that allows you to make data-driven decisions. The actions taken are based on the output of the process. Since the Pareto principle of 80/20 is used, all actions are performed based on the data in the Pareto diagram only.

Utilising a Pareto Chart, project managers make decisions by focusing on the areas that will yield the most significant improvements. By taking steps to vital causes, teams can increase project outcomes and make resource allocation easier.

Also Read: What is PMP Application Process?

Why is the Pareto Chart Required for PMP?

The Pareto Chart is essential for PMP for several reasons:

1. Focus on Priorities

The information in the Pareto chart helps to identify and set the goals for the project. Once the goal is set, the project managers can assign the job and resources accordingly. Without a proper goal, the project delay can happen and reduce the credibility of the organisation. The project manager skips the task that is not urgent and is a priority to avoid the project delay. Moving from top priority to least can increase the efficiency of a project.

2. Improved Communication

Pareto charts can also be used to analyse communication issues that occur within teams. This process of identification helps to mark the most impactful problems. Based on the chart report, key areas where the issues occur can follow work progress to improve team communication practices. Increasing communication fosters improved collaboration and understanding within teams.

3. Easy Interpretation

A Pareto chart is a visualisation chart that includes a bar graph. The simple graphical representation makes it easier for everyone to understand. This chart doesn’t require training to improve the knowledge of the interpretation of the Pareto diagram.  

4. Eradicate Problems

The chart is marked to keep everyone informed about problems at the frequency and the points where the issues are raised.

Knowing these details is a matter of making any changes to eradicate the problems involved. 

5. Improved Decision Making

The project managers use the Pareto chart for analysis and make important decisions. The chart helps to mention the correct allocation of resources, which process to change, and how to reduce delay; this improves the output of the project.

All these benefits make the Pareto chart a resourceful tool in project management. PMP courses cover these Project management tools to improve the standard of project management professionals. 

Different Industries Where Pareto Chart is Useful

Pareto Chart has extended the support across various industries apart from project management, like:

1. Manufacturing

In the manufacturing industry, the quality control team uses the Paretoro chart to analyse the point of frequent issues and range of defects. Most vital points, like resources and efforts taken to rectify the errors, are marked in the chart. These factors help in improving manufacturing by reducing defects.

Reducing defects ultimately improves the quality of products manufactured. This chain reaction results in increased customer satisfaction.

2. Healthcare

Healthcare centres consider patient care as the ultimate point. They introduce different processes and tools to increase patient care. Healthcare centres use Pareto charts to mark medical errors or patient complaints by analysing these factors in order to provide good patient care.

Also, healthcare centres can mark some critical points like patient satisfaction and safety to improve the standard of healthcare. By rectifying or reducing the frequency of defects, healthcare centres can address the patient’s needs more precisely.

3. Marketing Businesses

Not alone marking the repeated defects, the most valued customer or most marketed item can be marked with a Pareto chart. Marketing can increase sales by finding the most required item or valuable customers. 

The chart can show the peak sales and poor sales times to identify changes in the market and make a customer analysis.

4. Software Development Industries

In the software development industry, developers use the Pareto chart to identify critical and frequent bugs in the process. The chart can show the vulnerabilities and time consumed for the process. By finding the bug possibilities early, the developers can reduce the chance of bugs in the software.

Any organisation can improve their quality using the Paretoro chart tool and principle of Pareto.

Also Read: How to Use PMP Cheat Sheet?

In Nutshell

It's obvious that Pareto Chart is a valuable tool for Project management; by using this, project managers make data-driven decisions. This diagram helps to understand the most significant issues; by following this, organisations can increase efficiency. Not alone efficiency, it also optimises resources and ultimately achieves better project outcomes. 

To develop a structured and practical approach that benefits project management, learn the tools and strategies available for PMP. A proper PMP course can provide knowledge of tools and techniques for project management. Completing the course and getting a PMP certification can open gates for opportunities worldwide.