Mastering root cause analysis: The art of asking ‘why’
Root cause analysis, though often challenging, is a vital process for continuous improvement in finance and supply chain operations. By effectively probing the root causes of issues, you can implement targeted solutions that enhance performance and efficiency.
In most Finance and Supply Chain departments, it can be a major challenge to keep up with the day-to-day, let alone making time for review and reflection. However, if you’re a leader who is serious about driving ongoing improvement in your operations, it’s a step that needs to be taken seriously – particularly if something isn’t going according to plan.
Enter the (often reviled) root cause analysis. Why is it reviled? Because it’s rarely a fun process to look backwards to find out where something has gone wrong. In many organisations, the humble root cause analysis can quickly turn political (more on that later).
However, the dangers of getting a root cause analysis wrong can be significant, so don’t be tempted to avoid it. Here’s how to do it properly.
Keep asking why - and don’t stop
You’ve probably heard of the “Five Whys” methodology, which encourages you to ask “why” five times to drill down to the root cause of a problem. It’s a sound strategy; we’d add that you shouldn’t stop at five, if required.
Our methodology is to keep asking “why” until you get to a manageable, solvable problem statement.
Let’s examine a classic example that straddles the world of Finance and Supply Chain, which you might be familiar with.
You can see in five steps we’ve progressed from an initial problem statement that is arguably too broad to solve (why is my revenue tracking below budget?) to a problem statement that can quite easily be carved off your project elephant as a discrete, relatively short-term improvement project (I need a tool to generate a statistical demand forecast and eliminate manual forecasting).
And then, keep going as needed.
Perhaps the most interesting thing about this approach is that it will not only break down your challenge into a solvable problem statement. It may even create multiple solvable problem statements, each of which will result in its own short-term improvement project.
Taking the example above, the initial question (why is my revenue tracking below budget?) could quite easily have two or more separate causes – for example, volumes could be down AND there could be some flaws in your pricing strategy.
Or for the second question (why are my volumes down?), there could be a surplus of back orders and/or broader economic conditions as a contributing factor.
The key takeaway is to keep probing and asking why until you know which problem you’re solving. If it’s broken into two or three problem statements, relish the opportunity to drive some quick improvements in your operations.
Managing the political
Earlier in the article, we mentioned that the very process of identifying a root cause can quickly become political, usually because of the perception that the process is looking to assign blame to a person or people. Thus, your team may be inclined to go on the defensive, which can affect the outcomes of the analysis and lead to wasted time and effort as you solve the wrong problem.
In our experience, it’s possible to stop a root cause analysis from becoming political by employing two strategies. Firstly, reassure your people up front that the process is looking to solve a challenge – not assign blame to a person or people. In fact, if human error does appear as the answer to one of your why problem statements, you should always keep going. For example, if you find out that a warehouse manager is consistently late with fulfilling orders, why is that? Are the systems or processes letting them down?
And secondly, you can remove any bias from the process by working with an impartial third-party. This will minimise the interplay of any internal politics, as you’ll have an independent assessor who has greater freedom to question the status quo.
A third-party root cause analysis is also more efficient, simply because your partner is already doing half the work to solve the problem, by understanding the problem. This means you’ll be ready to launch the project(s) directly off the back of the root cause analysis, saving yourself weeks or even months of investigative work.
Avoid the long-term consequences of poor root cause analysis
To sum up, the long-term impacts of an inadequate root cause analysis can be dramatic, with much time and effort wasted on solving the wrong problem. Meanwhile, the actual problem remains unaddressed and impacting your bottom line.
Keep asking why until you get to the heart of the problem. And as always, look to the data – it’s telling the story you need to hear, even if you need to dig a little to find it.
Cornerstone Performance Management are enablers of change and transformation in Supply Chain, Information Management, Financial Planning & Analytics, Management Consulting, Project Management, and Managed Application Services. Meet our team or reach out to have a discussion today.
