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What is Pareto Analysis?

- statistical technique in decision making that is used for the


selected major tasks that produce significant overall outcome
What is McKinsey 7-S Framework?
-A framework of organizational effectiveness that postulates that
there are seven internal factors of an organization that need to
be aligned and reinforced in order for it to be successful
What is Pareto Analysis?
Who will use it?
When to use it?
Why we use it?
How we use it?
What?
Uses Pareto Principle also known as 80/20
rules
Greater part of problems(80%) are produced by
a few key causes(20%)
Method of determining all the root causes of
a problem and trying to determine few which
have the greatest frequency / influence
Its score also show how severe/serious the
causes direct to the problem
When? and Why?
This analysis can be apply together with
Ishikawa diagram (fish bone diagram)
that use to identify the root factors of the
problem
Identifying the root factor can expedite the team
to focus on the key factors of the problem
This method is use to analyse internal
environment of an organization or company
Example
Dissatisfied Customer in Retail Shop
Causes (Complaint)
Score /
Frequency
% of
Total
Cumulative
%
Unfriendly Staff 243 42.04% 42.04%
Out Of Stocks 220 38.06% 80.10%
Slow Response Time 30 5.19% 85.29%
Miscommunication 20 3.46% 88.75%
Wrong/No Price Tag 17 2.94% 91.70%
Human Error 13 2.25% 93.94%
Late 12 2.08% 96.02%
Facilities Breakdown 10 1.73% 97.75%
Incompetency 7 1.21% 98.96%
Wrong Information Given 6 1.04% 100.00%
Total 578 100% 100.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
90.00%
100.00%
Dissatisfied Customer in
Retail Shop
% of Total
Cumulative %
20% of the causes (2 out of 10) carries 80% of the complaints of the retail
shop
To facilitate organizational change
To help implement new strategy
To identify how each area may change in a future
To facilitate the merger of organization

Strategic planning tools in order to identify if they are effectively
aligned and allow organization to achieve its objectives.
Emphasis on HR (Soft S) as a key to higher organizational performance
All 7 elements interconnected and a change in one require chance in all
elements in order the firm function effectively

Shared
Value
Structure
System
Style
Staff
Skills
Strategy
Sources: Mind Tools.com

Derives from assessment of organizational internal and
external SWOT
Must be dynamic and responsive to internal and external
environment
Represent major approaches adopted by the organization
to achieve mission and goals

Strategy
How the company is organized to execute strategy
Structure may be centralized or decentralized
Facilitate in achieving mission and goals

Structure
Process and procedure of the organization that staff
engage in to get the job done
Systems

Capabilities and competences of the employees to
perform well
Skills
What type and how many employees an organization
will need and how they will be
recruited, trained, motivated and rewarded.
Staffs
Core of the Mckinsey model
Norms and standards that guide employee behavior
and company actions
Shared
Values
Managements style of company leaders in how they
interact with stakeholder, customers and staffs
Style
Identify the are that
not effectively aligned
Determine the
optimal
organizational design
Decide where and
what changes should
be made
Make the necessary
changes
Continuously reviews
the 7s
Sources: Strategic Management Insight.com