Tools and Techniques Essay Example

Tools and Techniques Essay Example Tools and Techniques Essay Tools and Techniques Essay Critical thinking can be argued to have enormous impacts on the typical decision-making process. Throughout the decision-making cycle we, as individuals or groups, analyze, interpret, assume, hypothesis and eventually take action, in reference to a given event, in order to make changes for the better. Similar to a master woodworker, there are specialized tools and techniques which can be used to influence our products or final decisions. Picture this, a wooden salad bowl created by a 12th grade student in shop class versus a wooden salad bowl made by Bob Villa or Norm Abram of The New Yankee Workshop. Experience has an impact on the outcome but the tools and techniques are the greatest influence. The purpose of this document is to discuss and describe the Pareto Principle and Pareto Charts, a specific decision-making tool and technique. In addition to a brief history, an attempt will be made to illustrate how the Pareto Principle and Pareto Charts apply to common business practices. Originations The Pareto Principle. According to the life summary by the Encyclopedia Britannica Online, Vilfredo Pareto was an Italian economist and sociologist, known for his application of mathematics to economic analysis and for his theory of the circulation of elites'(2005, p. 2). Pareto recognized that 80% of the land in Italy was owned by 20% of the population. This realization is widely known today as the Pareto Principle or the 80-20 Rule. The realization is important to note this because Vilfredo Pareto also discovered that the principle was recognizable in other components of his life. In order to make the transition from Paretos original view to common business practices we can thank Dr. J. M. Juran. Joe De Feo, CEO and President of the Juran Institute, stated, Dr. Juran has been called the father of quality (2003, p. 1). Dr. Juran has been credited with establishing quality control standards which aid current-day managers in using the 80-20 rule. In reference to business operations, the 80-20 rule is best understood in this manner, 80% of an organizations problems arise from 20% of the organizations processes. Knowing the basis of the Pareto Principle is critical to managers. With this knowledge leaders can visually track problem areas with a valuable tool, the Pareto Chart. Pareto Charts What, Why and When A Pareto Chart is a tool which portrays the frequency of occurrence of a variable of interest in various categories, arranged in order of descending frequency. (Stevenson, 2000, p. 51) Simply stated, a Pareto Chart is a specialized tool bar graph. The chart is used to display the importance of problems or conditions. The construction of a Pareto Chart is quite simple. Relating back to the 80-20 rule, 80% of problems usally stem from 20% of the processes or actions, the first step would be to determine the breakdown of problems or causes to be compared. In my organization, the main problem could be customer dissatisfaction regarding service calls. Specific examples for customer unhappiness could be service calls not answered at all, service calls not completed due to product knowledge and service calls delayed due to unavailable parts. The second steps would be to select a unit of measurement or time to be studied. To continue the example within my organization, the frequency could be weekly, bi-weekly or monthly. The third step toward completing a Pareto Chart would be to collect and summarize the data. Using the selected examples, our managers would start to track when a problem would satisfy the selected criteria. If we missed a service call due to unavailable parts during a given time then the issue would be logged. The final step would be to create the chart. Using horizontal and vertical axes a visual picture would emerge. The categories or problems would populate on the horizontal axis and the frequency for each category would reflect on the left vertical axis. If done correctly the resulting picture will clearly highlight the critical areas for improvement. There are many reasons why a Pareto Chart should be used. The big picture question is what to do with the results. The clearest example would be to focus on a problem or improve a process that will yield the biggest benefits. (Manktelow, 2003, p.1) If we, Bennetts Business Systems, were trying to improve customer satisfaction and our target problem was service calls we would look to rectify the category with the highest frequency of mishaps. In most cases, this category will reflect about 80% of the problems. By using the Pareto Chart we would be able to achieve the highest return on efficiency for our efforts. There are other benefits to using the Pareto Principle and Pareto Charts. From a managerial perspective, the tool and technique will aid in breaking down complex problems into smaller components. In addition, the breakdown will assist leaders in allocating resources. This decision-making by-product is an enormous benefit. The best case scenario of any critical decision result is to end up at a better outcome. Not realizing or recognizing the importance of resources can drastically alter the decision-making process and implementation plan. Failure at this stage can be devastating. The Pareto Principle and Pareto Chart can and should be used in organizational environments when problems or issues are apparent. The obvious situation for use occurs when data or information can be separated into categories. The ideal example would be when a department can count the number of times an event happens. Outside of the typical problem analysis, Bennetts Business Systems uses Pareto Charts to illustrate sale activity. Through this example the 80-20 rule is supported. 75% of the highest sales activity is produced by 25% of the sales staff. We use this summary analysis to find out what activities the successful 25% are accomplishing and in turn coach the remaining 75% on how to improve. Conclusion Michael Williamsen might have said it best, The Pareto Chart is one of the most helpful tools in the Six Sigma tool box. These charts help pinpoint unacceptable occurrences that warrant high priority. The charts show the frequency and severity of problems and where they occur. ( 2005, p. 9). From an enlightened mathematician and economist to a master of quality control we have been given an extremely useful decision-making tool and technique. The Pareto Principle and Pareto Chart provide managers the needed edge to succeed in a complex problem-filled business environment. References Pareto, V. (2005). Encyclopedia Britannica. Retrieved September 27, 2005 from Encyclopedia Britannica Premium Service https://www. britannica. com/eb/article-9058449 Feo, J. (2003). Juran Institute: Quality Improvement Tools. Retrieved September 27, 2005 from Juran Institute, Inc. https://www. britannica. com/eb/article-9058449 Stevenson, W. (2000). Quality Progress. Milwaukee. Oct 2000. Vol. 33, Iss. 10; pg. 51, 5pgs Retrieved September 26, 2005, from the ProQuest Database. Manktelow, J. (2005) Mind Tools: Pareto Analysis.