No one wants to waste energy. We do our best to increase efficiency - in the end, our subordinates, enterprises, and technology. It doesn’t matter at what price we achieve this. One of the simplest and most understandable methods for assessing effectiveness is the construction of a Pareto diagram.
The story of the "magic" proportion
At the end of the 19th century, a certain Wilfredo Pareto, who was studying economics, decided to investigate the structure of the distribution of material wealth among the British. The result stunned him: it turned out that 20% of the population of England own 80% of the wealth of the whole country. More in-depth studies have shown that the principle “the greater belongs to the minority” applies to the remaining 20% of wealth: 5% owns 50% of capital, and 10% - 65% of all material wealth. The amazed scientist began to test his theory on residents of other European countries, and came to the same results - the construction of the Pareto diagram gave the same frequency distribution.
However, he failed to generalize the obtained data and formulate a certain regularity. Therefore, the theory went unnoticed. They turned to her again in 1949. George C. Zipf, a professor at Harvard, discovered a pattern that only 80% of effort produces about 80% of the result. At the same time, the American Joseph Juran, dealing with the issue of defective products, again received the proportion of 80/20. Having published the results of his research, Juran formulated the law of “little that matters.” Thus, the Pareto law was rediscovered and received a clear statement.
However, in the United States, industrialists were not yet ready to accept the Pareto rule, and Juran left for lectures in Japan. There, business leaders agreed with the findings of the scientist, and the concept of “Pareto diagram in quality management” appeared. It should be noted that until the 70s of the twentieth century, this technique was used only in Japan. And only after almost 20 years, when products manufactured in Japan became a serious competitive threat to American goods, Juran was invited to the United States to get acquainted with the Pareto theory.
Pareto Law and Life
Having accepted the assertion that 20% of the efforts yield an 80% result, a person can completely rethink what is happening. Most of us think that the more gestures (efforts) we make, the more success we will achieve in life. We believe that all our acquaintances are equally important (and necessary) to us, that all clients bring equal income, and, accordingly, it is necessary to spend the same effort on contacts with everyone.
However, after thinking and studying the data of the Pareto diagram, we come to other conclusions. We redistribute our efforts and literally become freer and happier. Work does not seem so exhausting anymore, and communication with friends is painful. Studying the cause-effect relationships of our actions, we conclude that a very small part of the activity yielded a truly significant result. And everything else is superficial and unnecessary.
Pareto Law in Marketing
In the early 60s of the twentieth century, IBM employees discovered that computers spend the maximum amount of time processing the minimum number of operations. The identification of these time-consuming tasks has significantly increased the speed of the equipment. And this means that the Pareto chart, an example of which was taken as a basis by technicians from IBM, allowed to bypass competitors and increase sales.
In general, when managers accept the fact that a small number of customers bring maximum profit, the company begins to progress noticeably - both in terms of sales growth and from the point of view of increasing staff loyalty (after all, recognizing the fact that not every client is the same releases a lot of managers’s energy ) In addition, the study of the Pareto chart allows you to focus on those products and industries that will maximize revenue and allow the company to win in all competitive wars.
Accept and accept
As we have already noted, the most difficult thing is to accept for truth the fact that 80% of our actions do not bring the expected result. Company managers often require their managers to have absolutely the same attitude towards all customers, but analyzing the Pareto chart will give the usual result for sales: the bulk of customers provide active managers, but not enterprise income.
Therefore, they say that managers need to come to terms with the idea of "free time" subordinates. It is necessary to unify work with most customers, to develop common principles for communicating with them and serving their orders. This will allow you to focus on large customers and significantly increase sales.
Production Quality Analysis
In 1979, the Japanese Union of Engineers and Scientists added to the list of recommended methods for controlling the quality of enterprise products by analyzing the Pareto diagram. Practitioners developed two types of analysis: according to the results of activities and for the causes of problems.
The first is used when the task is to identify the main problems leading to undesirable results. The second is designed to find the main reason for the unsatisfactory performance of the company. In both cases, it is necessary to build a Pareto diagram for a clear understanding of the essence of the processes occurring at the enterprise and the efficient allocation of resources.
Actually, the analysis requires a little: clearly formulate the problem, identify all the factors of influence as much as possible, and, having collected certain statistical material, name the root causes of the problem. For clarity, all statistics are displayed in a chart. Next, it is necessary to take measures to eliminate (change) the negative elements of activity.
From theory to practice
Easy to say - apply the Pareto technique. But what steps should be taken, where to start, in order to really effectively analyze the situation? How to build a Pareto diagram ? Here you can not do without experience and intuition, but the beginner should not be afraid to analyze. At the first stage, you should understand which questions (problems, reasons) to study; how to classify them and what information to collect.
It is at this stage that inexperienced analysts have fears: have I taken everything into account, how much will the information collected be indicative, etc. But, applying the Pareto law to my activity, we recall that 80% of the activity will yield only 20% of the result. Therefore, do not be afraid, and at first you should record as much as possible all the causes of what is happening. Over time, you will learn to intuitively identify truly significant sources of problems.
Having decided on the collection of information, it is necessary to develop statistical accounting cards. Typically, these are questionnaires or tables in which data recorded at certain time intervals are entered. Then these data are generalized and plotted in the form of points. To accelerate, it is necessary to consolidate (combine) the most similar indicators even at the stage of processing the received information.
Transferring information to paper
To build a Pareto diagram, it is necessary to prepare a table in which to enter the ranked research results. In this case, take into account the frequency of the appearing sign. The data in the table should be entered in descending order (again, in order to speed up the process).
Preparation of the plane of construction of the diagram involves the application of two vertical scales of measurement and one horizontal. The left vertical axis determines the number of manifestations of a particular factor, and the right characterizes the percentage. On the horizontal axis, in the decreasing order of frequencies, all factors are applied. In the end, you should get a bar chart.
Then you should draw a cumulative curve - connect the points above the columns that determine the percentage value of the factor (focusing on the right axis) of the curve. Pareto chart is built! Next, you should analyze the result, identify the "little that matters" and optimize the enterprise.
Important
- Only a few parameters need to be improved; don't grab it all at once.
- First of all, it is necessary to deal with those resources (reasons) that have the greatest impact on the productivity of the company.
- Throughout the whole process of constructing a chart, an analysis should be made, trying to discard everything of little significance. Even without experience, the analyst intuitively understands what is really important and what is not.
Pareto law can be used everywhere
Modern theories claim that there is a universal methodology for assessing "everything and everything" - the Pareto chart. An example in an enterprise of any industry will not surprise anyone. Modern experts have transferred the 80/20 proportion to all areas of our lives.
In self-realization, for example, it is recommended to do what is given simply and easily. It is these minimal efforts that can give maximum results. Time management suggests analyzing your daily work and identifying “useless” actions. You will be really surprised to find a lot of free time.
It is even more interesting to apply the Pareto law in personal life. Having looked through the contact list on the phone, you can easily identify those 20% of the necessary and interesting people who help you grow. Psychologists recommend getting rid of the remaining 80% of connections. And what can we say about the things that surround us in everyday life! The opinion that a thing that is not in demand during the year will never come in handy is not new.
Use the Pareto law - and life will become more interesting and colorful!