Pareto Chart – Automate 80% OF SAVINGS with just 20% of activities!
The most insightful ratio that you might not have heard is called the Pareto ratio, Pareto’s law or the 80:20 rule. Essentially, your teams are spending 80% of their time on a mere 20% of business processes. About 20% of your customers make up roughly eighty percent of your profits, and eighty percent of your results are from twenty percent of the efforts you put in.
A Pareto chart coupled with an Opportunities map (see link at the end to get more info on this), will help you to build huge momentum and massively accelerate your rollout plans. But..
What is Pareto’s law?
In “Lean” intelligent automation, you can use this 80:20 rule to find the best automation opportunities in your business for your Automation team to focus on. I want to show you how to create and use a simple Pareto Chart to identify a shortlist of processes that will deliver the most savings, so that you move away from small tactical processes and deliver large transformational automation.
You can create a Pareto chart in five simple steps:
1. Measure the effort for all processes
2. Calculate the percentage of the total effort of each individual process
3. Put processes in order of most effort
4. Calculate the accumulative effort of each process
5. Find that 80% mark
Create a data capture table
In an excel table as shown below, you need several columns for your team to populate as they build a list of processes. In workshops as your automation analysts go team by team, they will be able to gather high level process data from several teams in a matter of days.
I really like this process because it’s by far the fastest (and cheapest – if you were looking at process mining) way to scan hundreds of processes and teams in a matter of weeks.
You will need:
· Process names (and the department and team name if you are compiling data from across your business)
· Average handling time (how long each process will take to complete a single iteration)
For example, How long do staff take on average to complete the registration process for a single customer
· Volume of work (how many times per month do staff do each process)
For example teams may complete 100s of customer registrations each day, which could amount to hundreds or thousands of customer registration on average each month
NB: Average monthly volume is preferred as a daily average (using a month’s worth of data) could be unreliable due to seasonal peaks and troughs throughout the year. Whereas a yearly average could take too long to gather that amount of data.
Step1 – Calculate the Effort
Depending on the size of your automation team, and also the relationships you’ve built with business teams, you can have multiple analysts working is different teams simultaneously to speed things up.
What I have done before on occasions when I was the single analyst on the team and had good relationships with teams and had their support, was to book short sessions to explain how to complete this data capture table and do a few examples, then have the team themselves go through this themselves. This allowed me to cover a LOT of ground meeting with multiple teams in a week and collating data for 100s of data in a few short weeks.
Another point to add, is it helps teams complete the tables you provide them if it is partially complete. If you’re lucky, your business may have a lot of process data in documentation or extractable from applications logs, or in Management Information (MI). Your team can fill in the data they can find, and encourage business teams to sense check, revise and complete the data table for their processes.
For an Automation standpoint, you can other process details for accessing automation suitability of each process ( cover this in other articles), but to demonstrate this Pareto chart your team as a minimum need to collect Process Name, Average Handling time and Work volume.
The Effort of a process is simply multiplying the Average handling time with the Volume of work. E.g., if a process takes 2mins and is run 100 times a month the staff effort is 200 minutes a month
Step2 – Calculate the Effort%
With Efforts of all processes calculated (for your business or for your department, depending on your scope of your program) you total up the effort for all processes together. This on its own can show you how much time your entire business or department are working on all activities that you’ve identified. If there is a significant difference between the amount of staff and total process effort, this will indicate that there are still a lot of processes and activities that you’ve missed.
The Effort percentage for each process is then calculated by (Process Effort)/(Total Process Effort)
If all processes make up 5000 minutes a month and your process is 200min a month, that process’s Effort % = 200/5000 = 4%
Step3 – Put Effort in descending order
With Effort% calculated for all processes from all teams in your table, put processes in order of Effort%, so the process with the most effort at the top.
Step4 – Accumulate Effort %
Create a new column for Accumulates Effort %. When you’ve ordered the processes, add the process effort % of the first process in this column. Then add the 2nd process’s Effort %, then add the 3rd process’s effort to the Accumulated total, and so on.
As you continue adding each process’s Effort % to the Accumulated total this to continue towards 100%, when all have been added up. You can see how this works on the most righthand column.
Step5 – Find the 80% mark
With your long list of processes organised with the most effortful process at the top, all you need to do now is to find the 80% mark and skim the best processes off the top.
However, the Pareto chart is a powerful visual to show senior leadership where you want to focus and how big of impact your ventures will be.
Excel on latest versions has a Pareto version, where the histogram bars is the effort for each process, and the line curve is the accumulated % of each process.
You can find the 80% mark on your Pareto chart and highlight the processes you wish to automate.
Automation Analyser tool
As mentioned earlier, as your analysts work with each target team, there are other data points that they can collect to assess whether a process is suitable for automation, and how suitable. Also, I mentioned how an Automation Opportunities Map coupled with a Pareto Chart can accelerate your automation program. LeanIA’s analysis tool has this all in one, were your whole team can drop data gathered from different teams into a central location to be analysed for assessing and identifying not only the best opportunities for your team to focus on, but suggests a priority order for your team to focus on the right projects first, allowing you to build momentum as your roll out automation without stalling your program.
There’s lots more this application can do, as you have a Opportunity bubble chart at the department/Team level, and when you chose your target team, you can dive deeper to look at a bubble chart of opportunities just for that team. These visuals and tables can easily be copied for presenting to your leadership team
Subscribe to my YouTube channel Tony IA (Intelligent Automation, Simplified) for videos created weekly, to simplify intelligent automation for business leaders and professionals who are new to automation to level-up your knowledge. Become empowered on how you optimise your business and discover new technologies, in a lean and accelerate way. You can also learn more from my book, Business @ the Speed of Bots: The AEIO YOU method HOW TO IMPLEMENT ROBOTIC PROCESS AUTOMATION THAT SCALES. Get ready for the new digital transformation age for more information. The foreword is written by Guy Kirkwood, who is the Chief Evangelist at UiPath, and a very well-known advocate of RPA with over 20 years of experience in outsourcing.