How to Create Pareto Chart in Excel

If you are looking to create a Pareto chart in Excel, you have come to the right place. Pareto charts are effective tools for identifying the most critical issues or problems in a dataset. They are helpful in prioritizing tasks and improving decision-making. If you are not familiar with Pareto charts, they are bar graphs that display the relative importance of different factors in a dataset.

In this blog post, we will take you through the steps required to create a Pareto chart in Excel. Whether you are a beginner or an experienced Excel user, this guide will provide you with comprehensive and easy-to-follow instructions. You will learn how to prepare your data, create a histogram, sort the data in descending order, calculate the

What is a Pareto Chart?

Before we dive into creating a Pareto chart in Excel, let’s briefly define what it is and how it works. A Pareto chart is a combination of a bar chart and a line chart, named after Vilfredo Pareto, who observed that 80% of Italy’s wealth was held by 20% of its population. In Excel, a Pareto chart displays vertical bars representing the relative frequency or size of different categories in descending order, with a line chart representing the cumulative percentage of those categories. This chart is helpful in identifying the most critical issues or problems in a dataset and prioritizing tasks.

Step-by-Step Guide to Create Pareto Chart in Excel

Step 1 – Organize Your Data

Before creating the Pareto chart, ensure your data is structured correctly. In Excel, list the categories in column A and the frequency or size of each category in column B. Ensure all the categories listed have a common theme and fall under one umbrella category.

Step 2 – Create a Bar Chart

Select all the data in your two columns, navigate to the Insert tab and select Bar chart in the Charts group. Choose the first 2D option (Clustered Bar Chart) under the Bar Charts option. A new Chart will appear.

Step 3 – Add Cumulative Percent Series

To add the cumulative percentage line, we need to add a new data series to the chart. Right-click on the chart and select ‘Select Data’ then click on ‘Add’. In the ‘Edit Series’ dialog, add the following series name, ‘Cumulative Percent,’ and use this formula in the ‘Series Values’ box: ‘=[frequency_data]/SUM([frequency_data]).’ Then, click OK and OK again.

Step 4 – Change Cumulative Percentage Series Chart Type

Right-click on the Cumulative Percent data series in the chart and select ‘Change Series Chart Type.’ Selecting ‘Line’ Chart type for this series will make the chart with two chart types – bars and line charts.

Step 5 – Format the Chart

You can now format the chart to give it a more finished look. Give the chart a title that reflects the data represented. Add chart elements like data labels, gridlines, and legends. Format the bars, lines, and colors to fit in with your data. Use the chart tools to achieve what you want.

Step 6 – Interpret the Chart Results

With the Pareto chart, the relative importance of each category can be determined visually by comparing its bar value to the others and also by where it falls on the cumulative percentage line. Once you have created the chart and formatted it, you should be in a position to draw conclusions about the most significant factors presented.

Summing Up

Congratulations! You have just created a Pareto chart in Excel. Use it to prioritize your tasks, make informed decisions, or just to get insights into your data. With practice, you can sharpen your skills in creating and interpreting Pareto charts, an effective data analysis and management tool.

The Benefits of Using Pareto Charts

Pareto charts are incredibly useful when you want to identify the most significant issues or problems in a dataset. Here are some benefits of using Pareto charts while analyzing data:

• Helps to prioritize tasks and focus on the most critical issues
• Supports informed decision making
• Identifies potential areas for process improvement
• Provides a visual aid for data interpretation and communication to stakeholders
• Provides insight into the 80/20 rule, where 80% of the effects come from 20% of the causes.

Using Excel’s Built-in Pareto Chart Template

In addition to creating your Pareto chart manually, Excel provides built-in Pareto chart templates. These templates are useful if you want to save time and don’t want to design a chart from scratch. Here’s how to use Excel’s built-in Pareto chart template:

1. Copy and paste your data into the template sheet.
2. Select the data range, including the column headings.
3. From the Insert tab, select ‘Recommended Charts.’ From the dialog box that appears, select ‘All Charts’ in the left pane and ‘Pareto’ in the right pane.
4. Click OK, and your Pareto chart is ready!

Conclusion

Pareto charts are crucial in identifying the most significant issues when analyzing data. They are easy to create and understand and help prioritize tasks, make informed decisions, and continually improve your processes. By following the steps outlined in this article, you can create a Pareto chart in Excel quickly and make data-driven decisions that help your business grow.

Frequently Asked Questions

Here are some common questions and answers about creating Pareto chart in Excel:

1. Can you create a Pareto chart in Excel using percentage data?

Yes, you can create a Pareto chart in Excel using percentage data. However, you need to convert the percentage data into frequency data by multiplying the percentage by the total number of observations. After creating the chart, you can convert the frequency axis back to percentage axis to make it easier to read.

2. How do I add data labels to my Pareto chart?

To add data labels to your Pareto chart, right-click on any of the bars or lines in your chart, select ‘Add Data Labels,’ and choose the type of data labels you would like to add to the chart. You can add data labels to bars, lines or both.

3. How do I change the order of bars or lines in my Pareto chart?

To change the order of bars or lines in your Pareto chart, simply sort the data in your data range from highest to lowest or lowest to highest. After sorting, the bars and lines in the chart will follow the order of your data.

4. Can I customize the colors of the bars and lines in my Pareto chart?

Yes, you can customize the colors of the bars and lines in your Pareto chart. To do this, right-click on any of the bars or lines in your chart and select ‘Format Data Series.’ Navigate to the ‘Fill’ and ‘Border Color’ options, choose your preferred colors, and click ‘OK’.

5. What is the difference between a Pareto chart and a histogram?

A Pareto chart and a histogram may look similar, but there is one significant difference. A Pareto chart displays the relative frequency or size of different categories in descending order and has a cumulative percentage line, while a histogram displays the frequency distribution of continuous data. In a histogram, the bars represent ranges of values, and the height of each bar represents the frequency or proportion of data points that fall within that range.