The Root Cause

Rethink Your Approach To Solving Stubborn Enterprise-Wide Problems

When Relationships Get Polarized

Imagine being the director of finance at the Facilities Management division of a major financial institution. You provide the institution’s executive management team with financial reports on its large number of branch network offices.


Here is Your Predicament:

Every month, the Information Technology (IT) department processes financial data from the branch network that you collect and aggregate according to IT’s instructions and time table. And yet, the Profit and Loss statements are nearly always late, inaccurate, and incomplete. Subsequently, the missing data is added during the next reporting period.

As a result, the executive management team complains about the monthly reports, and you get asked to explain why there is such variation in the numbers from month-to-month. Since you are convinced that you and your department did everything right, you conclude that the IT department is messing up. After all, nobody else is involved in the process.

However, when the executive management team questions the IT department, IT clears their reputation by showing the computer log books, proving that none of the programs they run for the production of monthly P&L statements show any error messages.

Because the IT department is upset for being blamed in front of the executive management team, cooperation between Finance and IT breaks down―their relationship is polarized. And, because you are responsible for producing financial statements, and because no improvements have been made for nearly three years now, the executive management team is growing impatient with you.

So, there you are, all on your own, and another year-end transition is coming up soon, which makes matters only worse. After all, mistakes made in one month can be corrected in the following month, but mistakes made in December CANNOT be corrected in January―the first month of the new accounting year. And so, you fear having to spend another Christmas and New Year at the office instead of at home with family.


Murphy’s Law

When it rains it pours; the executive management team requests to receive P&L statements three days earlier than before. Since you were already five days late, now you are going to be eight days late.

So, you decide to become resourceful and start analyzing discrepancies in numbers reported for one and the same month on subsequent P&L statements. You notice a distinct pattern, which suggests that your nightmare started after the introduction of a new computer program that branch offices use to procure office supplies, various subscriptions, and other purchases. And, based on experience, you can actually estimate the amount by which you anticipate that the P&L of the current month will be incorrect.

Given the fact that the executive management team holds you accountable for solving the problem―despite the fact that your department is not causing any problems, and that IT is not giving you any support―you decide to be creative. You add the estimated amount by which you anticipate the P&L to be incorrect to the data you send to IT for processing.

Unfortunately, this plan back-fires. When the computer system functions incorrectly, you are in the clear. However, when the computer system functions correctly, you only increase the inaccuracy. And, you can count on being summoned to appear before the executive management team to explain why you tamper with financial reports ………?


How Can a Problem Become So Intrusive?

This is a true story; I’m not making this up! It is how I was introduced to my assignment of solving a tough problem that nobody denied existed, and for which no one was taking any responsibility. By now, this problem was plaguing the finance director for nearly three years! Either, someone is hiding that s/he made a mistake, or there is a big problem and everyone is indeed just doing their job; but, how is that even possible?

I noticed that everyone was looking for solutions, and nobody thought of looking for root causes first. That observation reminded me of an expression from the medical world, which states: “Prescription without diagnosis is malpractice”!

It was equally obvious that all parties were entrenched in their own departments, and within their own silo of specialized knowledge. And that’s exactly how you experience polarized relationships. In my interactions with them I was treated with caution and suspicion while their body language screamed “you’re not going to pin this one on me, pal!


Charting a Course Away from Trouble

Identifying the problem was the easy part, because that was what everyone was talking about: the P&L statement is eight days late and the content is inaccurate and incomplete.

The definition of a problem is a discrepancy between the desired state and the actual state, and the executive management team was perfectly clear on the desired state. Then, the remaining unknown factor is the actual state; the current end-to-end process of producing a monthly P&L statement.

End-to-end means that you start mapping the process at the old P&L statement and you stop once you have finished producing the new P&L statement. This involves identifying the actors and their behavior―ask which people of which departments are involved, and to describe their contribution towards the process.

All that is expected of you is to facilitate the process; interviewing people. Who does not want to talk about their work? And, nobody knows more about the process than the people who are actually doing the work! Then, you make the end-to-end process visible with the use of process mapping software, and print copies of the map. With this map in hand you will gain a lot of respect and good-will from all actors who call you a genius for understanding the complexities of their work.

Then, let the magic enfold before your eyes when you bring them together in the same room. The process map acts as a common point of departure, because never before did they see a visual representation that demonstrates how their work contributes to the end-to-end process. And, for the first time do they realize why their work, and how they perform their work, matters in the greater scheme of things. Once they realize they’re all in the same boat, all fictitious barriers between people and departments disappear.

These people know their stuff and they are proud to share their expertise and wisdom for a cause that is much bigger than their job description and themselves. All of a sudden, for the first time in years, they are talking to each other again and chances are they will solve the problem in no-time at all.


Take Away

Experience teaches that systemic problems are caused by one or more incidents, and, when taken separately, none of them are any cause for alarm. These are the root causes of the story above:

  • The computer system was programmed to start compiling the new P&L statement at 20:00 hours, on the last business day of the month.
  • A new procurement system was introduced.
  • When branch offices wait to report their numbers for the new procurement system until the last business day of the month―which happened frequently―processing time of their daily downloads was much longer than on any other day of the month.
  • When processing of daily downloads was not completed before 20:00 hours―which was typically the case on the last business day of the month―production of the new P&L statement started with the at 20:00 hours available data only.
  • The P&L statement for the next month included the data that did not make it onto the P&L statement of the previous month.

This story of the production of a monthly P&L statement shows that solving systemic problems may just require that―as per Dr. Albert Einstein’s suggestion―a decision maker changes his/her level of thinking; a simple solution that might well be the toughest, and least welcome piece of advice.

All that was needed in the story above was a level of thinking that perceives a business in terms of processes from end-to-end, instead of an organizational hierarchy within which each leader assumes responsibility for his/her own department only. The belief that one is only accountable to one’s immediate superior, and only for what is specified in one’s job description, justifies the idea that anything else is “not my problem”. Instilled with the fear of being blamed or punished for making mistakes, no one feels compelled to lend a hand in solving systemic problems―there is no incentive and the downward risk is just not worth it. Imagine you were that director of finance …Imagine what it would mean for the business if you resign …







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