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How to Use Pareto Analysis to Make a Major Impact

pareto analysis

Pareto Analysis helps leaders focus on changes that will make the biggest impact. 

Being a manager often feels like chasing your own tail. You’re putting out fires, solving problems, and generally trying to ensure that your team is making a positive impact on the organization’s objectives. 

But sometimes you can’t quite keep your head above water. You have way too many pressing challenges on your plate, which means you can’t even figure out where to get started.

Unfortunately, any leader will tell you that this is a common scenario. But here’s the good news: There’s a tool that you can use streamline your approach and figure out which tasks will have the biggest payoff for your team.

It’s called Pareto Analysis, and we’re digging into everything you need to know about this prioritization technique. 

So…What Is Pareto Analysis?

Pareto Analysis is based on the Pareto Principle, which was originally established by the economist Vilfredo Pareto in the early twentieth century, who observed that 80% of Italy’s wealth belonged to only 20% of the population.

From there, the definition expanded to express that 80% of consequences come from 20% of causes—which is why you’ll often hear Pareto Analysis referred to as the 80/20 rule.

For example, maybe 20% of your team members produce 80% of the work. Or, perhaps 20% of your customers generate 80% of your company’s total revenue.

Put simply, the Pareto Principle represents this inequality, and today managers use it to identify the most important root causes, tasks, or problems (think of these as 20% causes) that can be addressed and have a disproportionately large impact (an 80% result). 

“Using Pareto Analysis is a key tool for managers so they don’t experience fatigue when faced with a long list of problems,” shares Justin Harris, Executive and Management Coach. “I tell clients to be open to the imbalance that you won’t solve everything at once so you need a process to solve the most important issues first.”

How to Use Pareto Analysis: 6 Steps to Follow 

It makes sense, right? But, when you’re the one staring at a long list of problems that need to be solved for your own team, it doesn’t seem so simple to use. Everything feels like an important or pressing issue—so how can you really tell what actions will produce the greatest results?

Pareto Analysis has detailed steps that you can follow to identify these key problems or tasks. For clarity, let’s set this up with an example.

Imagine that a fellow manager recently left the organization, and now you’re stepping in to take over a project that’s way behind schedule. Everything is in a state of chaos, and you don’t know how to start getting things back on track. 

As Business News Daily explains, Pareto Analysis involves taking the following steps: 

Step #1: Pinpoint and list the problems

Think of this as your therapeutic chance to get all of those pesky problems out on paper. What challenges are you currently up against? What are people on the team complaining about? Jot them all down.

Using our example of the late project, here’s what those problems might be:

  • Lack of clarity about who’s responsible for what
  • Missing assets and resources from other teams
  • Scattered and siloed information and conversations
  • Zero accountability for missed deadlines

Step #2: Identify the root causes of each problem

Problems don’t just happen—there’s an underlying root cause that’s leading to that issue. Now is the time to figure out exactly where the problem is coming from.

Here’s what that might look like using the above problems: 

Problem Root Cause
  • Lack of clarity about who’s responsible for what
  • Poor project organization
  • Missing assets and resources from other teams
  • Poor project organization
  • Scattered and siloed information and conversations
  • Poor project organization
  • Zero accountability for missed deadlines
  • Team culture of disrespect

Step #3: Score the problems

Not all problems carry equal weight for you and your team, which is why this scoring system exists. In this step, you’ll assign a score to each of the problems to indicate their importance.

Exactly what that scoring system looks like is up to you. However, make sure you establish some sort of repeatable criteria you can use to ensure you’re doing this fairly. For example, perhaps your scores will be based on:

  • The number of dollars that problem is costing
  • The number of complaints you’ve received about that problem
  • The number of team members impacted by that problem

Really, you have free reign to come up with whatever criteria works best for you and your specific circumstances. For our example, we’ll assign a score based on the number of people who have complained about that specific problem. Put simply, each score will indicate exactly how many complaints the manager has received about that issue. 

 

Problem Root Cause Score
  • Lack of clarity about who’s responsible for what
  • Poor project organization
3
  • Missing assets and resources from other teams
  • Poor project organization
4
  • Scattered and siloed information and conversations
  • Poor project organization
2
  • Zero accountability for missed deadlines
  • Team culture of disrespect
3

Step #4: Group the problems

We’re making some progress! But, this still doesn’t give us totally clear direction on how we should start getting that project back on track.

Next, you need to group the problems based on their root cause. All problems with the same root cause should be placed in the same category. After doing so, here’s what we end up with: 

Poor project organization leads to…

  • Lack of clarity about who’s responsible for what: 3
  • Missing assets and resources from other teams: 4
  • Scattered and siloed information and conversations: 2

Team culture of disrespect leads to… 

  • Zero accountability for missed deadlines: 3

Step #5: Add the scores for each group

Are you ready for some simple math? Now that you have the problems categorized by their root cause, you need to add the scores in each group. That will indicate the priority that each root cause needs to be addressed with.

Using our example of a project that’s behind schedule, we end up with the following totals for the root causes:

  • Poor project organization: 9
  • Team culture of disrespect: 3

That leads the manager to believe that addressing the general lack of order and structure within the project will solve a lot of the smaller problems that are currently sabotaging the team’s project. 

Step #6: Take action

All of this information is just knowledge—unless you act on it. That’s why the last step any manager must take is to use that information to take action and improve things for the team.

For example, knowing that a major lack of organization is causing a lot of problems for the project and the team, this manager might decide to implement project management software or some other online platform that will help:

  • Clearly indicate what tasks are on each team member’s plate
  • Keep assets and resources centralized in one spot and ensure they’re easily accessible
  • Centralize communication and conversations about the project using comments within the software

Our hypothetical leader might even find that having this software implemented helps to increase accountability around deadlines—because there’s no longer confusion about responsibilities or timelines. It’s all clearly mapped out for the whole team.

See how Pareto Analysis works? By making your way through those steps, you can identify smaller tasks and changes that will hopefully lead to a much larger impact. Or, in other words, 20% of your actions might just produce 80% of the results. 

4 Other Tips for Successful Prioritization

While Pareto Analysis is a pretty straightforward concept in theory, it doesn’t always feel that way in practice. 

So, we connected with several other leaders and managers to get their best advice on how to identify and take action on team-wide priorities. 

1. Use a simple task matrix. 

Pareto Analysis can be helpful, but when you’re really struggling just to keep your head above water, it can seem a little too high-level. You aren’t trying to make a major impact—you’re just trying to make it through the day.

In those circumstances, you might want to consider using an even simpler strategy to figure out what things you most need to take care of within the next few hours. You’ll often hear this referred to as the Eisenhower Matrix or the Urgent Important Matrix, and you can find out more about how to use this tool in this post

“Using a simple 2 x 2 [matrix] of what’s urgent [and] what’s important is a great way to prioritize with the team,” says Michael O’Brien, an executive leadership coach, speaker, and author. “When a leader includes her team in this process, push-back is diminished and buy-in increases.” 

2. Keep your eye on the big picture.

You know that as a leader, it’s all too easy to get caught in the weeds. But, that’s not something you can do as you’re identifying root causes of the problems you’re facing—or really using any other sort of prioritization tool. 

Regardless of your methods, you need to be able to zoom out and get a bird’s-eye view of your team and your entire organization in order to make the best decisions about priorities.

“What is your ultimate goal? In my case, it’s bringing in leads for the company. Once I’ve identified my goal, I first look at everything that’s directly affecting that goal,” says Ciara Hautau, Lead Digital Marketing Strategist at Fueled. “Look at historical metrics—are conversions down? Why? Is site traffic down? Why? Get to the root of the issue. Once you identify the issues that are hindering your ability to hit your goals, you’ll find the vital tasks your team needs to tackle.”

“The main problems that a team decides to focus on first involve analyzing your goal and potential setbacks to your goal,” shares Dr. Benjamin Ritter, an Internal Leadership Coach. “Mind you I said goal. The overall goal. What is your main goal? What is the one thing that will make that goal possible? What is the one major setback that can occur to prevent you from reaching that goal? Now, with that information, you can prioritize your efforts.”

Keeping your eye on the big picture is also helpful if you’re stuck between two problems or tasks that seem equally pressing. 

“If I’m sorting through problems and struggling with two equally important issues, I reflect on the company values of excellent customer service and high performance. If the problem doesn’t tie into either one of those values, I’ll put it on the back burner for the moment,” explains Jason Patel, Founder of Transizion, a college and career prep company. “If the company values dictate meticulous care for clients and the way we perform our service, then I’m going to first address the problems that relate to those values.”

3. Emphasize priorities on a recurring basis.

Priorities keep your team moving in the right direction—but that doesn’t mean they’re a set it and forget it sort of thing. They need to be consistently emphasized so that they stay top of mind for everyone within the organization. 

“The key to making this stick is to share the goals and priorities with all the people in the company on a no less than quarterly basis,” states Heidi Pozzo, founder of Pozzo Consulting. “Leaders and managers should be talking about priorities on a regular basis and formal discussion on progress should happen no less than monthly.”

“When there is alignment that flows through operating plans, individual goals, and performance reviews, priorities are clear and there is less pushback,” she adds. “These conversations also encourage dialogue throughout the organization and ideas percolate in a way that good ideas float up and get prioritized.”

4. Remember that not everything is about prioritization. 

Priorities, priorities, priorities. You’re focused on cranking your way through your team’s to-do list and really moving the needle for your organization.

That’s great. But, it also means that you might be able to benefit from this counterintuitive reminder: not everything is about priorities and impact. In fact, that constant grinding could destroy the morale of your team. 

“There is time to not prioritize and teams can flourish if given the opportunity to be creative and work on the things they really want to,” says Dr. Ritter. “Make sure to create some space for that too if you want your team to be more engaged, creative, and innovative.”

Do You Have to Use Pareto Analysis?

There’s no doubt that Pareto Analysis can be helpful for identifying a starting point—especially when you feel buried under problems that need solving.

“Prioritizing can be daunting,” says Hautau. “On any given day, I know there are millions of things we could be doing as a team that will impact our leads, but it’s so important to break that down and figure out what’s the most important (aka what’s going to drive the most impact).”

However, that doesn’t necessarily mean it should be your default choice in every scenario. Like any other method or technique, it does have its drawbacks and limitations. 

“I think the philosophy of focusing on what will get you the most return is fairly sound,” explains Matt Edstrom, CMO of GoodLife Home Loans. “Having said that, I don’t necessarily think it’s applicable to all situations that require prioritization.”

“When working with a team, the return isn’t the only concern when it comes to getting tasks done. If you work closely with clients that vary in size, for example, there will be different deadlines to meet. I can’t skip a smaller client’s task simply because the return will be smaller than what we might get from a bigger client,” he continues. “In order to maintain a good reputation, you don’t want to burn any bridges with any clients.”

Those other considerations are definitely important, but in those moments when you feel paralyzed and swamped, consider using Pareto Analysis as a tool to help you at least start to figure out the best way forward. 

Even if it doesn’t give you a totally conclusive answer, it’s still a helpful process for considering all of your options and forming an educated strategy about what to tackle next. 

By On July 18, 2019