Pareto Chart - Definition, Examples, and Best Practices

What is a pareto chart?

A pareto chart ranks categories from largest to smallest as bars, with a cumulative percentage line overlaid on top. As you read from left to right, the bars get smaller and the line climbs toward 100%. The chart is based on the Pareto principle (the 80/20 rule) - the idea that roughly 80% of effects come from 20% of causes.

The power of a pareto chart is that it answers two questions at once: which categories are the biggest contributors, and how many categories does it take to account for the majority of the total. This makes it a go-to tool for prioritization - quickly showing your audience where to focus.

When to use a pareto chart

Pareto charts are widely used in quality management, operations, and strategic planning. Typical use cases:

• Root cause analysis - identifying which defect types or failure modes account for most of the quality issues
• Customer support prioritization - showing which complaint categories drive the majority of tickets, so the team can focus improvement efforts
• Cost optimization - ranking cost line items to show which ones make up 80% of total spend
• Sales concentration - visualizing how much revenue comes from the top 10% of clients, useful for account management strategy

Pareto charts work best when you have a finite number of discrete categories that you want to rank. They're less useful for time-based data (use a line graph) or for showing composition (use a stacked bar or pie chart).

How to read a pareto chart

Read the bars from left to right - they show individual contribution, ranked from largest to smallest. Read the cumulative line to see the running total. The point where the line crosses 80% tells you which categories (from the left) account for the bulk of the impact. Everything to the right of that point is the "long tail."

Best practices

• Always sort bars from largest to smallest (left to right). An unsorted pareto chart defeats the purpose
• Include the cumulative percentage line - without it, you just have a sorted bar chart
• Use a secondary y-axis for the percentage line (0-100%) and a primary y-axis for the bar values
• Highlight the 80% threshold with a horizontal reference line. This makes the "vital few vs trivial many" split immediately visible
• Keep the number of categories manageable. If you have 30+ categories, consider grouping the smallest ones into an "Other" bucket