From the course: Root Cause Analysis: Getting to the Root of Business Problems

Five whys analysis

From the course: Root Cause Analysis: Getting to the Root of Business Problems

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Five whys analysis

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- We've just been contacted by a company with a recurring cash flow problem. Their sales are flat the first two months in every quarter. Then the last month of that quarter they make 70% of the sales. Let's use the five whys to help them find the root cause of their irregular cash flow. For this five why analysis we'll assemble a team from sales, operations, finance, human resources, and purchasing, and keep asking why until we find a fixable cause. Why is cash flow irregular? Because over 70% of sales happen in the last month of a quarter. Why do 70% of sales happen in the last month? Because clients confirm most orders at the end of the quarter. Why? Because they know that's when the company authorizes sales discounts. Why? Because the company works to catch up before the end of the quarter to make the budget numbers. Why? Because shareholders measure performance quarterly. With this last response the team agrees we've reached a fixable cause. But that's just the first part. Now we need to check and make sure the cause and effect chain was correct by using therefore, like this, because shareholders measure performance quarterly, therefore, the company works to catch up before the the end of the quarter. Therefore, clients recognize that's when the company authorizes sales discounts. Therefore, clients confirm most orders at the end of the quarter. Therefore, 70% of sales happen in the last month, and therefore cash flow is irregular. The cause and effect chain makes sense. So, to fix the cash flow problem, the team has agreed that changing from quarterly to weekly and monthly sales reporting, and revising their discount policies will result in a more stable cash flow. I'm often asked if we need to ask exactly five times. Can we ask more or less? The number five is a guide. It's meant to remind us not to stop after just one why, and that there are usually many levels to go through to bring the root cause to the surface. So use the five why next time you have a problem to solve and then use therefore to validate that your root cause logic is correct.

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