Root Cause Analysis and the Five Whys

Root Cause Analysis Example

Let’s go quickly into an example. Accounting is an important part of any business. In every business, you’ve got accounting that happens.

Let’s say you’re looking at the books at the end of the month and you see that your revenue numbers are wrong. They don’t match up to what you got in your bank account and you just don’t know why that’s happening.

The symptom there is the numbers are wrong, and if all you do is go in and adjust the numbers to make them right, you’re really just treating the symptom.

You’re not understanding how those wrong numbers ended up in your accounting software and how you got to the end of the month before realizing that the numbers were bad. If you don’t fix that root cause, what’s going to happen the next month? The numbers are going to be wrong again and you’re going to spend more time and energy having to go in and make adjustments and fix the numbers.

Every month after that you’ll continue to have to adjust the numbers in the accounting software to make it right. That’s what happens if all you ever do is treat the symptom.

Upstream vs Downstream

One element that’s important to understand here is the concept of upstream versus downstream work in a process or in a system.

Anytime you’re looking at an issue that you have and you want to try and dive down and understand the root cause affecting you, you’re going to move upstream in the process. What that means is that if your problem is on step eight in your process, you’re going to have to move to step seven or six or five or lower. The cause is happening before the symptom shows up in your system.

The cause never happens after the symptoms appear. So anytime you’re looking at problems in your business, you have to start looking at what’s happening upstream in your systems and in your processes to start to figure out the root cause of this issue.

So just keep that in mind. If something happened upstream, it happened at an earlier time in the process or in the system. If something happened downstream, that means it happened after the point in time that you’re looking at. Anytime you’re doing things with process improvement or systems thinking, upstream versus downstream is an important concept to understand.

The Five Whys

Let’s get into the mental models you can use to help you understand root causes and to do root cause analysis. This is one of my favorites. It’s the Five Whys. The idea behind the Five Whys is anytime you have a problem, anytime you have an issue in your business, you want to ask yourself why is this thing happening and continue to ask yourself why until you get to a root cause.

Five is just a suggestion. It’s not a hard rule. You don’t always have to ask yourself why five times. Sometimes you ask yourself why three times, and you get to a root cause that you can solve and you’ll say, “Hey this is what I’m going to fix.”

Sometimes you might have to go deeper and ask yourself seven or eight times before you actually get to a root cause that you can solve.

If we go back to our accounting example, remember that the revenue was wrong at the end of the month. Instead of just correcting the numbers and making them right, ask yourself, “Why is the revenue wrong at the end of the month?”

Now you are going to have to do some learning if you don’t already know exactly how the accounting system works and how those numbers get there.

As an example, let’s say the orders that are getting pushed into the accounting system are getting pushed with the wrong revenue values. The revenue numbers are coming from your ordering system and the numbers being sent are incorrect.

So now you can ask yourself why again. Why is your order system sending the wrong values for revenue? And again, you’ll have to do some level of learning and figure out how the ordering system comes up with those numbers. You do that little bit of investigation and figure out what’s happening in the world of the order system. With that understanding, you can then answer the question, “Why is the order system pushing out the wrong numbers?”

Let’s say the price sheet that you’re using to push order data isn’t accounting for coupons that are used and always pushes a full retail price.

Ask yourself, “Why does it send data that doesn’t include the coupon discounts?” With more understanding, you can answer this question and then have a good understanding of the problem to fix.

And guess what? If you solve that problem, you don’t ever have to solve this problem again. Next month, the order system should send the right numbers and the numbers in our final accounting should be right without having to do anything.

By understanding and solving the root cause, you are saving time in the future. You are saving money in the future and creating fewer problems down the road for your business.

Systems Thinking Elements

The one thing I want to point out is as you are doing that investigation and that learning, you’re using systems thinking. Systems thinking is about inputs, process steps, and outputs that get something done in your business. When you’re going through and doing that learning, what you’re actually doing is you’re dissecting each process step in your system.

You’re dissecting what inputs are coming into that process you’re looking at and what outputs are coming out to try and figure out where a problem is happening. You’re looking to identify where a process step is that’s not doing what you want it to do.

You’re looking for where there’s an output coming out that you don’t want or you don’t like because it’s not correct. It goes back to that basic level of understanding of systems thinking – inputs, process steps, and outputs are what make up your system.

When you’re doing a root cause analysis, you’re starting at the problem and then working backward through your system to figure out where it’s not working properly.

In this example, you asked why three times to get to an understanding of revenues being pushed without the discounts being applied. As previously mentioned, when we talk about Five Whys, the five is just a reminder. It’s not even really a recommendation.

It’s a reminder to ask yourself more than once, more than twice… Why are these things happening? In this case, you asked yourself three times.

When to Stop Asking Why

One of the questions I get a lot is, “How do I know when to stop?”

The real answer is that it’s a judgment call every time. You’re going to have to think it through and use your judgment to say, “Hey this is a reasonable spot for me to stop and solve this problem.”

There are a few things you can think through to help you know when to stop.

You want to stop at a problem that you can solve. If you ask why several times and you start getting into problems that you can’t solve, then you need to move back up until you get to a problem you can solve.

As an example, if you are having problems with taxes and the root cause that you identify is a problem with the way that the IRS builds one of its forms, you’re not going to be able to solve that problem. You’re not going to be able to go and get the IRS to change their forms so you’re going to have to go up a level or two until you get to a spot where you can solve the problem that you’ve identified.

So that’s one way to think about it. Go until you get to a problem you can’t solve and then go back up a level.

Another time to stop is when you do this exercise and get to problems that you don’t want to solve because it’s not the way you run your business or is not reasonable for you to solve the problem that you’ve identified.

Similarly, you can get to problems that would just sound silly if you said you were going to try and solve them.

If you get to a silly problem or one you don’t want to solve, you should move up a level and solve the problem there.

Going back to the accounting example, we identified our order system was sending full retail prices and not calculating any discounts from coupons. If you asked why again, you might answer that question as “Greg messed up the software and he didn’t implement it properly.”

Ask yourself why again. “Greg taught himself how to manage software and when he taught himself, he missed some things.”

So we start to get to a place where we’re not going to try and solve the problems we’re now identifying. We’re not going to go back and adjust how Greg taught himself.

We might not even talk to Greg about the problem at this point. Greg might not even work here anymore and so there’s no benefit to trying to go back to solve that.

If Greg still works here, it might be reasonable to say, “Hey let’s go and retrain Greg so he doesn’t miss this in the future.”

You might or might not want to solve that as part of this process so that’s why I say there’s a lot of judgment here that you as the leader are going to have to make.

Which answer to “why?” are you going to try and solve? Where are you going to stop what are you going? What makes sense for you for your business and your team and your staff?

All of that is going to come into play and you’ll make a decision that is going to be right for you and your business on where to stop and where to actually try and solve a problem.

Root Cause Analysis Helping You Grow

Let’s apply the concept of root cause analysis and applying it to scaling your business. It really touches on the topics from last week, effectiveness and efficiency.

Root cause analysis is about solving problems and solving problems for good so that you’re not continuing to spend resources solving or fixing the same problems over and over again.

So when we talk about root cause analysis and how it’s going to help you scale your business, it’s going to help you with the effectiveness part.

Any problems that you have around effectiveness you can solve or solve better by using root cause analysis. A root cause analysis will help you to understand why things aren’t effective.

It’s the same on the efficiency side. You can make your business more efficient by diving deeper and asking yourself why to identify bigger problems to solve. This increases your odds that you will be able to solve problems for good and that, as you scale, you will have fewer problems scale too.

You will minimize the inefficiencies and waste that you have around your different systems and in your processes.

Technology and Root Cause Analysis

On the technology side of things, there are a few things that you can do to help yourself think through this tool and use it in your business.

Remember, a root cause analysis is more about a mental model than anything. It’s about a way of thinking and from that perspective, there isn’t a tool that’s going to think for you.

In this case, what you’re trying to do with technology is to remind yourself that you should be asking yourself why and going deeper into the problems that you’re trying to solve.

There are a lot of different ways that you can do that. There are applications you use every day like a spreadsheet program, a word processor, a notes application like OneNote or Evernote.

You could be more low-tech and just use a PostIt note somewhere or something written on a whiteboard. Get something in your face to remind you that if you’re trying to solve a problem, you should go deeper than just what you see surface level.

It would be good for you to think about creating a checklist and having a problem-solving process and any time you’re faced with a big problem in your business.

Part of that process that you want to do is consider the Five Whys and go down that path of asking yourself, “Why is this happening?” Because of X. “Why is X happening?” Because of Y. “Why is Y happening?” Because of Z and so on.

Just having that checklist and that reminder will get you in a mode of thinking to where any time you face a problem, you’ll start going to your checklist. You’re going to build new behaviors over time so that you think differently about solving problems, and I promise you eventually you are not going to need that checklist.

Once you get into the habit of going through it each time, you will learn to just think differently and you will start asking yourself, “why is this happening? Why is that happening? Why is this happening?” without the need for a checklist.

So if you find it helpful for you, create that checklist first using any technology that you already have in your business. Use whatever you’re in a lot of the time.

Or it can be super low-tech like a whiteboard or PostIt note on your monitor or screen anything that’s can help remind you, “Hey, I’m doing this new thing and I’m diving deep into why a problem is happening.”

Root Cause Analysis and People Management

Root cause analysis can be applied to managing people wherever you have problems. This is going to be one of your go-to tools to try and understand the deeper cause of those problems.

One of the applications that works well in the people management space is helping understand performance issues. Anytime you have an employee that’s not working to your expectations, go in and use the Five Whys to understand why they’re not performing well. Depending on what’s going on, that can take you in all different kinds of directions.

Maybe it’s training that that is the problem and you need better training. Maybe your employee is going through a rough personal patch right now and they’ve got some personal challenges that are impacting their work performance. Maybe they’re just not good at what you have them doing and you need to think about having them do something else or worse case you need to start working them out your business.

In any case, using the Five Whys and root cause analysis can really help you understand, at a much deeper level, why performance issues are happening and then what is the appropriate solution for the problem is.

If you think about those problems with an employee, you can see the danger of trying to treat the symptoms in the people management space.

There are several problems that could lead to poor work performance. It might be not having the right training. It could be personal problems that are impacting work performance. Maybe the employee is not passionate about work anymore. They might not be excited for the job they’re doing or can’t do the job that you’ve assigned to them.

All of those things have many different solutions and it’s only by asking yourself those deeper questions that you’re going to end up with the right solution.

What would happen if you go in and try and treat the symptoms? You’ve got an employee that’s not working well and you don’t dive any deeper than that. It’s going to be really hard to get the right thing that’s going to help that employee actually do a better job.

If they’re having real personal problems that are impacting their work performance and you just go try and train them more, it’s probably not going to help.

You can think through any of those problems. If you tried to solve one of them and you actually had any other problem, whatever you’re doing is not going to be effective in actually improving performance.

Use the Five Whys or other root cause analysis tools to understand why the employee is not performing well.

If you’re looking for extra guidance on how to apply this or other tools in your business, you can book a 15 minute call with me for $95 here.

If you have a bigger need, please email me and we can discuss how I can best help you Optimize for Outcomes.

Brian