Pareto Analysis


Pareto analysis is a formal technique useful where many possible courses of action are competing for attention. In essence, the problem-solver estimates the benefit delivered by each action, then selects a number of the most effective actions that deliver a total benefit reasonably close to the maximal possible one.

Pareto Analysis

What is a ‘Pareto Analysis’

A technique used for decision making based on the Pareto Principle, known as the 80/20 rule. It is a decision-making technique that statistically separates a limited number of input factors as having the greatest impact on an outcome, either desirable or undesirable. Pareto analysis is based on the idea that 80% of a project’s benefit can be achieved by doing 20% of the work or conversely 80% of problems are traced to 20% of the causes.

Explaining ‘Pareto Analysis’

In its simplest terms, Pareto analysis will typically show that a disproportionate improvement can be achieved by ranking various causes of a problem and by concentrating on those solutions or items with the largest impact. The basic premise is that not all inputs have the same or even proportional impact on a given output. This type of decision-making can be used in many fields of endeavor, from government policy to individual business decisions.

Further Reading

  • Pareto-improving campaign finance policy – [PDF]
  • Motivations and limitations in implementing Halal food certification: a Pareto analysis – [PDF]
  • Pareto-improving social security reform when financial markets are incomplete!? – [PDF]
  • An analysis of the allocation of pertinent risks in the Zambian building sector using Pareto analysis – [PDF]
  • Exponentiated Pareto distributions – [PDF]
  • Pareto analysis based on records – [PDF]
  • Pareto improving financial innovation in incomplete markets – [PDF]
  • Critical factors for effective implementation of the HACCP system: a Pareto analysis – [PDF]
  • An application of Pareto analysis and cause-and-effect diagram (CED) to examine stoppage losses: a textile case from Bangladesh – [PDF]