Root Cause Analysis

Here we present a hypothetical case based on a real situation that illustrates how to remove root causes as part of a classic problem solving approach.

The actual business does not matter, neither does the identity of the organisation add any value to the important messages in this short case.

Nearly every sales manager will have had to deal with the issue we describe at some point in their career – probably more than once in most cases. As you read through the piece, much of its content will hopefully ring true. Maybe you know what you should be doing to deal with this kind of problem effectively, maybe you would like to know. We know what to do and how to do it.

There were two likely causes – either the prospect base was too small to achieve the forecast or the conversion rate was below expectations.

Process inspection had revealed that management had not been focussing enough attention on the prospect base being the most important factor affecting 30/60/90 day forecasting, and that root causes identified in operations reviews to date were generally not quantified causes upon which action could be initiated and results measured.

Reasons given for the order revenue shortfall tended to be statements of problems, or factors outside of the operation’s span of control, as opposed to root causes that were within the control of operations management – things about which they could do something.

We recommended that a classic problem solving approach be taken to deal with the issue.

Identifying the Problems

Our solution started by making sure they were going to work on the right problem. 

Had they really identified the likely causes, or just made two fairly obvious assumptions? Did both apply to every sales team? What was needed was a clear problem statement for each team. There were only four possibilities in the scenario, so we created two simple templates – one to help each sales team generate a problem statement, and one for management to capture the whole picture:

Template – Problem Identification

Template – Problems by Team

Analysing the Problems

Once the problem statements were identified and gathered (step 1), each sales team was in a position to move to step 2 – analysis.

Under our guidance, they set about the analysis, and brainstormed all the possible factors affecting the order revenue shortfall. They then organised the factors into five groups using other classic quality tools. The groups were:

• Coverage – what actual selling time was available
• Activity – number of appointments, proposals, demonstrations, etc.
• Marketing programmes – how well they were being implemented
• Use of the forecasting process – how well this was implemented
• Level of selling skills – how well qualified was each sales team

Uncovering the Root Causes

They looked at a great number of possible causes across the five groups. For example, in the coverage group, they identified possible causes as:

• Number of vacant territories
• Attrition rate
• Training time
• Holidays

Coverage shortfall – sales team time lost – is a certain cause of order shortfall, but it is too big to deal with as a single entity. The four possible causes had already broken the coverage problem into bite-sized chunks, each of which could be worked on with maximum clarity and focus. Importantly, all four potential causes were quantifiable as either absolutes or percentages.

When looking for root causes, keep asking “Why?”. If you can ask the question “Why?”, you do not have a root cause. You are still peeling away the layers of the onion, but have yet to reach the rotten core. Removing five or six layers usually exposes the root cause.

One sales team looked at the previous month’s holidays for their sales territory, which had a planned headcount of six. They found that:

• 25% of selling time had been lost because of holidays
• WHY?
• Because three people were away for the same two weeks
• WHY?
• Because the holiday authorisation process was not working
• WHY?
• Because management had let the process slip

Solution, obviously – enforce the process – or replace the management!

They had quantified data analysis, a root cause and a clear action requirement which, in this case, defined itself, as the second option was a non-starter!

So far they had established that 25% of selling time had been lost to holidays during the month.

Further peeling back of the onion in training, attrition and vacant territories revealed that:

• 10% of total selling time had been spent on training courses
• They were continuing to suffer a 35% attrition rate
• There were two vacant territories at the time

So the coverage situation in the six-person sales territory was:

• 25% of coverage lost to holidays
• 10% of coverage lost to training
• 33% of the territories were vacant
• Total coverage lost was therefore 68%

This meant that coverage for the month was a mere 32% of what it should have been.

Critically, none of this information was clearly visible to the 30/60/90 day forecasting process.

Prioritising Potential Solutions

Similar analyses and uncovering of root causes were performed on the other four groups of factors – activity, marketing programmes, use of the forecasting process and level of selling skills – which led to three root causes being classified as the overall “vital few” (those whose removal would have the greatest impact):

• Sales training
• Coverage
• Sales activity

We shall stay with the coverage related problems to illustrate the next steps in the process.

The team then worked its way through step 3 of the problem solving process and came up with the following potential coverage solutions:

Planning and Implementing Selected Solutions

Action plans were put in place to remove the root causes to these problems (step 4) and implemented (step 5).

 The Result

The result of careful identification of the problem and systematic application of root cause analysis to the appropriate problem solving step was that:

 Each sales team worked on the right problem – a good place to start!

• The problem was broken down into bite-sized chunks – maximising focus and clarity
• The chunks were quantified – so later evaluation would be objective rather than subjective
• Root causes were exposed – not superficial symptoms
• Obliterating root causes prevented the problems reoccurring
• Solutions were prioritised and selected to give the best return – the vital few
• These solutions were within the division’s span of control – not somebody else’s problem
• The people involved owned the solutions to their problem because they had created them
• Clear, well documented, well understood action plans were put in place
• Those actions were implemented by the people who owned the solutions

A relatively small investment in a quality approach to exposing root causes avoided tinkering with symptoms – an approach, so often used in many organisations, that is expensive, frustrating, ineffective, always fails to deliver a return and often makes the problem worse.

Evaluating the Solutions

The plans and actions put in place in our illustration solved the problem in the only effective way – by accurately defining the problem, breaking it down into bite-sized chunks and then removing the root causes. This was confirmed by evaluating the solutions post implementation (step 6).

Our approach delivered an ongoing business return by preventing the costs of reoccurrence, and freeing resource to work on activities that added value or reduced cost in other areas. The immediate business benefits were not only financial. People were motivated by doing something useful and satisfying. This will have impacted their personal effectiveness and led to even more ongoing financial returns.

 Business Benefit Check

Applying appropriate quality tools and processes, Root Cause Analysis in this case, always delivers multi-faceted business benefits. In our illustration:

• The cost of the problem was wiped out
• Resources were redeployed to removing unnecessary cost or adding more value in other areas
• The negative impacts on the people were replaced by positive impacts, improving their effectiveness and productivity

There is no double or triple counting here, all three business benefits continue indefinitely, and most of the value goes straight to the bottom line.

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