Pareto analysis is named after Vilfredo Pareto, an Italian economist. In 1897, he presented a formula that showed that income was distributed unevenly, with about 80% of the wealth in the hands of about 20% of the people.

The Pareto Principle, also known as the 80-20 Rule, states that in any thing a few (20 percent) are vital and many (80 percent) are trivial; i.e. if one focuses their efforts on the vital 20% in any project, you will get the most for your money. The  Pareto analysis operates in area of quality improvement as well and suggests that  80% of problems usually stem from 20% of the causes.

A Pareto Chart is a simple and powerful tool to guide you to the root cause of a problem.  It is a special type of bar chart that displays the number of occurrences on the left vertical axis and the category of occurrences on the horizontal axis. The graph is accompanied by a line graph showing  the cumulative totals of each category from left to right.

The Pareto Chart is one of the ‘Seven Basic Tools of Quality Control" in Project Management. It helps highlight the important factors among a group of factors. In quality control, it is often used to represent the most common sources of defects or the highest occurrence of defects. It is particularly helpful in the measure and control phases of Six Sigma methodology.

A Pareto Chart is a also a effective tool managers use, to manage and effect outcomes in manufacturing environments. With this chart you will quickly see the weakest areas in your Project. On the other hand you also identify your strongest. This allows you to put maximum effort in areas where you need the most improvement.

In a nutshell, a Pareto Chart is a valuable tool for managing your business. Whether it's customer complaints or laziness in closing the accounting records for the month, you have areas in your business that need improvement. Obviously, if you manufacture widgets or something else, you may  want to use this quality tool on your manufacturing process. However, you can also use it to help you improve any process in your business.