How to Combine Pareto Principle and Ishikawa Diagram

There are many stages to identify and resolve problems that occur in the company, but the most common are as follows: 

(1) identify quality problems that cause losses,

(2) identify priority problems and

(3) propose solutions and ways to implement them to correct the problems.

Two main techniques are part of the methodology: the Pareto principle and the fishbone diagram (or Ishikawa diagram).

Pareto chart

The Pareto principle (or Pareto analysis) is a technique that allows the company to select priorities when there are a large number of problems. According to this principle, the significant points of a group usually represent a small proportion of the total points of that same group.

The Pareto Law or Pareto Principle

The principle establishes that 20% of what is entered or invested is responsible for 80% of the results obtained. In other words, 80% of the consequences derive from 20% of the causes; this is also known as the “Pareto rule” or the “80/20 rule.”

The Pareto principle is used to define priorities in the correction of defects. Information about causes and effects is researched and placed in tables showing the share of each cause in total effects. Finally, the information is presented in a graph, called a Pareto chart, which is divided into classes. 

Importance of the Pareto principle

The Pareto principle teaches us that most of our problems (80%) come from a small source (20%) and most of our income (80%) comes from a handful of our clients (20%). As an entrepreneur or micro-entrepreneur, the principle suggests that 80% of your work time is trivial and that only a small portion of your daily time contributes to the growth of your business.

How do I use the Pareto Principle?

The Pareto principle applied to our daily activity consists of identifying which 20% produces 80% of our successes and which activities consume 80% of our time and give us 20% of achievements. Stop doing those jobs and save 80% of your time to dedicate it to the tasks that are really working (20%). Analyze your business well, 20/80 does not have to be exact, it can be 10/90 or 5/95.

Ishikawa’s diagram

Created by Karou Ishikawa, the Ishikawa diagram, also known as a fish diagram since it has the shape of a fishbone, is a graph whose purpose is to organize reasoning and discussion about the causes of a priority quality problem. Also known as an Ishikawa diagram or 4M diagram, the fishbone was developed for use in quality circles to study problems identified as priorities by Pareto analysis. The problems studied by means of the diagram are formulated as a question that has the following structure: “why does this problem occur?” or “what are the causes of this problem?”

Each of the identified causes is then classified according to the categories represented by the slanted lines. Factory problems generally have four types of causes, from which the 4M designation arose: workmanship, method, materials, and machines. Depending on the type of problem and the company, it is possible to use other organization criteria. The use of the Ishikawa Diagram is complemented in a good way by the Pareto Diagram which allows for prioritizing the relevant action measures in those causes that represent a greater percentage of problems and that are usually reduced in nominal terms.

Heron Nelson

Heron is a business blogger with a focus on personal finance and wealth management. With over 7 years of experience writing about financial topics, Heron has established herself as a trusted voice in the personal finance space. She has a deep understanding of financial concepts and strategies, and is able to explain them in a relatable and actionable way for her readers.