This chart isn’t a one-size-fits-all kind of chart. It comes with its own advantage and disadvantages.
Here are its advantages:
Improve problem-solving by turning problems into laid-out facts
Increase efficiency by putting an emphasis on the few specific factors that contribute the most to the problem
Enhance decision making by taking into consideration the factors with the greatest impact
Here are its disadvantages:
Limited only to showing observable qualitative data
Not useful for statistics computation
Offers no additional insight about a specific factor
Need additional Pareto charts to provide more insight
No forecast analysis since the data is based on historical data
Practice caution in using a Pareto chart. Make sure your data is accurate. One small mistake could result in misinterpretation and misjudgment.
Kasper Langmann, Co-founder of Spreadsheeto
Without further ado, let’s jump right away into how you can create this type of chart.
Making a Pareto Chart
To start, let’s pretend that you’re someone who wants to improve your own time management.
You feel like you’re wasting too much of your time but you can’t exactly pinpoint what. So your first step was to record the amount of time you spent last week on an activity that’s more than an hour.
Here’s the result:
Because you’re the type who likes to view data in a chart, you decided to use a Pareto chart.
The first thing you should do is select the range that contains your data including the headings. In this case, it’s A2:B12.
Then, select the ‘Insert’ tab from the tab list.
After that, click on the ‘Insert Statistic Chart’ and select ‘Pareto’ from the Histogram group.
Congratulations! You now have a Pareto chart!
Pro Tip: Show the Data Labels
Data labels are helpful in this type of chart since they show the individual value of the factor at a glance.
To show the ‘Data Labels’, simply click on the chart and click the ‘Chart Elements’ symbol. Then, tick the box beside ‘Data Labels’.
Creating a Pareto chart in earlier versions of Excel wasn’t easy. There are computations involved which makes it a bit complicated. In addition, you also had to manually place the data in decreasing order.
Fortunately, Microsoft added a built-in Pareto chart in Excel 2016.