This is the second in our series of tips for using analysis tools to solve HR issues. This one is on the Pareto analysis tool. A Pareto analysis (also called the 80/20 rule) is a very simple technique that helps you to identify and prioritize the changes you need to make. It uses the idea that 20% of issues usually generate 80% of the problems (or, on the other hand, 80% of the benefits usually come from 20% of the work that is done).
Here are five tips for using the Pareto Analysis tool:

• Tip 1 – Write out a list of the issues or causes of the problem (tip within a tip – use the Fishbone diagram to help with this)
• Tip 2 – Group the causes into related issues (again the Fishbone could be handy here!
• Tip 3 – Score the items or groups. The scoring method you use depends on the sort of problem you are trying to solve (it usually helps to use a chart to show your scoring).
• Tip 4 – The priorities to tackle first are the one that has the highest score. This will give you the biggest benefit for the time and energy expended in solving it.
• Tip 5 – The options with the lowest scores will probably not even be worth bothering with – solving these problems may cost you more than the solutions are worth.

In the HR Tips for the Fishbone Diagram we used an example of a manager who has taken over a failing service center. He commissions research to find out why customers think that service is poor (complaints have gone up by 20% compared to the same quarter last year). We will use the same exaple, but this time we will apply the Pareto analysis technique.

As a reminder, the managers send out a customer survey and he gets the following comments back from the customers:

1. Phones are only answered after many rings.
2. Staff seem distracted and under pressure.
3. Engineers do not appear to be well organized. They need second visits to bring extra parts. This means that customers have to take more holiday to be there a second time.
4. They do not know what time they will arrive. This means that customers may have to be in all day for an engineer to visit.
5. Staff members do not always seem to know what they are doing.
6. Sometimes when staff members arrive, the customer finds that the problem could have been solved over the phone.

The manager groups these problems together. He then scores each group by the number of complaints, and orders the list:

Lack of staff training: items 5 and 6: 51 complaints
Too few staff: items 1, 2 and 4: 21 complaints
Poor organization and preparation: item 3: 2 complaints

The manager can then use a chart to display the results.

By doing the Pareto analysis the manager can better see that the vast majority of problems (69%) can be solved by improving staff skills. He is able to focus on training as an issue, rather than spreading effort over training, taking on new staff members, and possibly installing a new computer system. Pareto analysis not only shows you the most important problem to solve, it also gives you a score showing how severe the problem is.

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