Which Type Of Chart Uses The Rule Of 20:80
If you are involved in data analysis, you know that charts are essential to present information in an easy-to-understand manner. However, choosing the right chart type can be a daunting task, especially if you are not familiar with the different types of charts available. One chart that you might come across is the 20:80 rule chart.
What Is The 20:80 Rule?
The 20:80 rule, also known as the Pareto principle or the law of the vital few, is a concept that states that roughly 20% of the input leads to 80% of the output. This principle can be applied to many areas of life, including business and economics.
When it comes to data analysis, the 20:80 rule can be used to identify the most critical factors that contribute to a particular outcome. By focusing on these key factors, you can make more informed decisions and achieve better results.
What Is A 20:80 Chart?
A 20:80 chart is a type of chart that visualizes the 20:80 rule. It is also known as a Pareto chart or a sorted histogram. The chart consists of a bar graph and a line graph. The bars represent the frequency or relative frequency of each category, sorted from the most significant to the least significant. The line represents the cumulative percentage of the data.
The 20:80 chart is commonly used in quality control, inventory management, and marketing. It is an effective tool for identifying the critical few factors that contribute to a particular outcome.
How To Create A 20:80 Chart?
Creating a 20:80 chart is relatively easy. Here are the steps:
- Collect the data you want to analyze.
- Determine the categories you want to use.
- Calculate the frequency or relative frequency of each category.
- Sort the categories from the most significant to the least significant based on their frequency or relative frequency.
- Calculate the cumulative percentage of the data.
- Create a bar graph with the categories on the x-axis and the frequency or relative frequency on the y-axis.
- Create a line graph with the categories on the x-axis and the cumulative percentage on the y-axis.
- Overlay the line graph on the bar graph.
Once you have created your 20:80 chart, you can use it to identify the critical few factors that contribute to a particular outcome.
When To Use A 20:80 Chart?
A 20:80 chart is useful when you want to identify the most critical factors that contribute to a particular outcome. It is also helpful when you want to prioritize your efforts and resources based on the most significant contributors.
For example, if you are a sales manager, you can use a 20:80 chart to identify the top 20% of your salespeople who contribute to 80% of your sales. You can then focus your training and development efforts on these top performers to improve their performance further.
Conclusion
If you are involved in data analysis, the 20:80 chart is a valuable tool that can help you identify the critical few factors that contribute to a particular outcome. By focusing on these key factors, you can make more informed decisions and achieve better results.