What are the best ways to identify the root cause of a problem in your small business?

1 Ask why repeatedly

The 5 Whys technique, developed by Toyota, is a simple yet powerful tool for root cause analysis. The idea is to ask why a problem occurred and continue to ask why for each answer until the core cause is identified. For example, if sales are dropping, you might ask why customers are not satisfied with your products, and then why your products are defective or not meeting expectations. You could further ask why quality control is poor or design is outdated, and then why there isn't enough investment in training or innovation. By asking why multiple times, you can uncover the root cause of the problem and work towards solving it instead of just treating the symptoms.

2 Use a fishbone diagram

The fishbone diagram is a useful tool for root cause analysis, also known as the Ishikawa diagram or the cause-and-effect diagram. This tool helps you to visualize the possible causes of a problem and their relationships. To use it, you need to define the problem clearly at the right end of the diagram, then identify the main categories of causes and their specific causes. You can then analyze the diagram and prioritize the most likely or significant causes that need to be addressed. The fishbone diagram can help you organize your thoughts and identify the root cause of the problem from different perspectives.

3 Collect data and evidence

Asking why and using a fishbone diagram can help you generate hypotheses about the root cause of a problem, but collecting data and evidence is also necessary to validate those hypotheses. Data can measure the extent and impact of the problem, identify patterns and trends, and test assumptions. To collect data, surveys and interviews with customers, employees, suppliers, or other stakeholders can be conducted. Additionally, observation and testing of products, services, or processes in real situations can be documented to identify errors or defects. Benchmarking and comparison with competitors or industry standards can also reveal any gaps or weaknesses. By collecting data and evidence, you can support your root cause analysis with facts and figures and avoid relying on intuition or bias.

4 Use a Pareto chart

A Pareto chart is a type of bar chart that displays the frequency or impact of different causes of a problem, as well as a cumulative line indicating the percentage of the total. This chart is based on the Pareto principle, which states that 80% of effects come from 20% of causes. To use a Pareto chart, you must list all possible causes and assign each one a value, such as the number of occurrences, cost, time, or customer satisfaction. Then, sort the causes from highest to lowest value and plot them as bars on the chart from left to right. Additionally, calculate the cumulative percentage of each cause and plot it as a line on the chart from left to right. By identifying the causes on the left side of the chart - which are typically most frequent or impactful - you can prioritize root causes and allocate resources accordingly. The Pareto chart can help you do this effectively.

5 Implement and monitor solutions

Once you have identified the root cause of the problem and the best solutions to address it, you need to implement them and monitor their results. This is essential in order to ensure that your root cause analysis leads to actual improvement and prevents the problem from recurring. To do this, you should create an action plan that outlines tasks, responsibilities, resources, timelines, and expected outcomes of each solution. After communicating the plan to all the relevant stakeholders and obtaining their support, you should execute the plan and track the progress and performance of each solution. Additionally, you should evaluate the outcomes and measure the impact of each solution on the problem and your overall goals. If necessary, adjust the plan and document any lessons learned. By implementing and monitoring solutions, you can close the loop of root cause analysis and achieve lasting results for your small business.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?