Investigating and Determining Organizational Problems - Business Decision Making - ثاني ثانوي

Lesson 4 Chapter 6 www.ien.edu.sa QUICK TIP Because symptoms are usually easy to identify, it is tempting to pursue them instead of causes. Investigating and Determining Organizational Problems: Root-Cause Analysis A common tendency is to overlook the root cause of problems and focus on the symptoms. Complex situations usually involve interrelated problems, each with a different cause. To link a problem to its cause, you must perform a root-cause analysis, a study that determines the real basis for the problem. Because many problems demand more than a one-time solution, root-cause analysis is often part of a continuous improvement effort. Table 6-3 lists the do's and don'ts for determining causes. 4-1 Peforming a Root-Cause Analysis In Lesson 3, we dealt with the example of an adventure tour operator that was experiencing poor sales performance. Continuing with this example, we will now explore the ways in which the organization might try to uncover the causes of the problem in order to try and resolve it. 1. Differentiate between symptoms and causes A symptom is evidence of a change, such as a decrease in revenue. A cause is the reason for or the origin (root) of a change, such as customers being unable to afford adventure tour vacations. You can usually determine if something is a symptom by asking whether it is being caused by, or due to, something else. If the answer is "yes", then it is a symptom. A "no" means it is more likely to be a root cause. 2. Look for more than one cause Organizational problems rarely have a single cause. Many factors typically contribute to complicated issues, and some are easier to identify than others. Find the most significant causes of the problem and work on those first. For example, the most obvious cause of an adventure travel company's problems might be the rising cost of airfares and ground transportation. However, additional research might reveal that people are also concerned about political unrest in some tour locations. Identify the major issues so you can develop appropriate solutions. 172 6 Chapter رة ا Ministry of Education 2024-1446 Business Decision Making S1 S2 S3.indb 172 30/06/2023 14:28

QUICK TIP Often, the minor factors become less trouble when the major causes are remedied. 3. Consider the cost Although you should identify the basis of a problem before solving it, attacking the root causes is not always the best approach. Sometimes the costs of fixing the problem are higher than treating the symptoms. وزارة التعليم Ministry of Education 2024-1446 Business Decision Making S1 S2 S3.indb 173 DEFINITIONS Root-cause analysis: A study that determines the real basis for the problems that you solve. Symptom: Evidence of a change, such as a decrease in revenue. Cause: The reason for or the origin (root) of a change, such as customers being unable to afford travel vacations. Organizational problem: A problem within a business or organization which affects many different departments. For example, the adventure travel company you are working at developed a tour to Asia without local guides to reduce the price of the tour. Customer satisfaction on the tour is very low, and not including guides is the main cause of the problem. However, it is now prohibitively expensive to find, train, and hire local guides in Asia. In such cases, treating the symptom (reducing the tour cost even further to increase customer satisfaction) might be the best solution. TABLE 6-3: Problem statement do's and don'ts Guidelines Do Causes and symptoms Trade-offs Techniques • Differentiate between causes and symptoms • Look for more than one cause • Find the most significant causes of the problem and work on those first • Consider the pros and cons of addressing the root cause • Choose to treat the symptom if the trade-offs make that the best solution Use the "5 Whys" approach to uncover and define problems • Create a cause-and-effect diagram to visualize a complex problem Don't • Don't mistake evidence of a change (symptom) for the reason for the change (cause) • Don't limit yourself to one reason for the problem •Don't try to solve every problem by addressing the root cause • Don't fix the problem if the costs are much higher than treating the symptoms • Don't be afraid to ask the same question more than once • Don't hesitate to redefine a problem • Don't discard a cause-and-effect diagram if it doesn't reveal the cause of a problem immediately Decision-Making Processes in Organizations 173 30/06/2023 14:28

174 6 Chapter رة ا Ministry of Education 2024-1446 Business Decision Making S1 S2 S3.indb 174 4. Root-cause analysis techniques A popular approach used to uncover and define problems is called 5 Whys. Popularized by Toyota in the 1970s, the 5 Whys involves looking at a prob- lem and asking "why?" or "what was the cause of this situation?" at least five times. Challenge each answer with another "why" until you determine the root cause of the problem. Each answer should help further clarify the cause. The 5 Whys I was late for class. I was late for school. I woke up late. Why? Why? Why? I slept through my alarm. Why? I didn't get enough sleep. Why? I went to bed too late. 4-2 Using a Pareto Chart A Pareto chart (see Figure 6-9) is used to analyze the type/frequency of a prob- lem's causes. It is a type of bar chart and can be a useful visual tool for communicating with others about a problem. The bars represent the cost or frequency of each factor, with the bars organized from left to right-most to least significant. FIGURE 6-9: A Pareto chart showing the type and frequency of reasons students were late to class Missed the bus Overslept Traffic Feeling Waiting for unwell a sibling 30/06/2023 14:28

وزارة التعليم Ministry of Education 2024-1446 Business Decision Making S1 S2 S3.indb 175 Complicated problems typically grow out of many related issues. A popular way to visualize a complex problem is by creating a cause-and-effect or fishbone diagram. See Figure 6-10. Write the main problem in a box, and then draw a horizontal line from the box across the page like the spine of a fish. Identify related factors that contribute to the problem by drawing lines from the spine and labeling each. Include as many factors as you can. Examine the draw- ing to determine the main causes of the problem. DEFINITIONS 5 Whys: A problem-solving approach that involves looking at a problem and asking "why?" or "what was the cause of this situation?" at least five times. Pareto principle: Also called the 80/20 law, the Pareto principle states that 80% of outcomes come from 20% of causes. Fishbone diagram: A diagram, which looks like the skeleton of a fish, showing the causes that contribute to a problem. FIGURE 6-10: Fishbone diagram of the factors contributing to weak sales in the adventure tour Political company Economic Passport prices and delays Riyal soft against other currencies Tourist visa requirements Stock market performance Unrest in some tour locations Real wage growth rates Weak Sales Increase in do-it-yourself travel/tourism Outdated Web site New tour companies Airlines offering travel packages Marketing Decline in magazine circulation (Travel ads) Online travel agencies Competition Decision-Making Processes in Organizations 175 30/06/2023 14:28

YOU TRY IT Practice determining causes by creating a list, table, or diagram. Complete the following steps. 1. Read the following description of a problem. Problem: Typically, the late spring and summer months are the most popu- lar times for personal travel. For the last five years, the top sales months have been April-August. This year, however, sales did not increase during these months. In fact, tours overall have decreased by 8% compared to last year. This is true for most travel companies. Only 5% said they sold more tours, 10% said sales were the same, 35% said sales were somewhat lower, and 50% said they were significantly lower. Specialty Travel expected adventure travel to increase substantially, but it remained steady compared to last year. Adventure travel includes exploring remote or exotic areas and engaging in activities such as hiking, parasailing, rafting, diving, and sailing. Although Specialty Travel promoted popular European tours, sales for those tours are also flat. The most popular European destinations are France and Italy. Another problem is that tour operators in these countries are charging more for their services. Specialty Travel also expected tour sales overall to increase by 5% as it has in previous years. Specialty Travel surveyed its customers and found that they are delaying travel plans because of concerns about the economy, airline services, and security. This means that plans to expand tours, staff, and the Specialty Travel Web site should be put on hold. Other expenses might need to be cut. 2. In your notebook, use a technique discussed in this lesson, such as the 5 Whys approach or a cause-and-effect analysis, and create a list, table, or diagram to identify the cause of the problem. 176 6 Chapter رة ا Ministry of Education 2024-1446 Business Decision Making S1 S2 S3.indb 176 30/06/2023 14:28

REVIEW QUESTIONS 1. What do you do when using the 5 Whys technique? a. Identify You, Yourself, Yours, Youth, and Yield b. Draw a cause-and-effect diagram c. Ask "why" and challenge the answer with another "why" five times d. Limit yourself to five questions 2. What does a fishbone diagram show? a. Who is causing a problem b. Many solutions for a complicated problem c. Many causes for a complicated problem d. The root cause of a problem 3. Using Figure 6-10, identify the effect: a. stock market performance b. outdated Web site c. tourist visa requirements d. weak sales 4. In a small group or on your own, decide which of the causes in Figure 6-10 has the biggest impact on sales. What are your reasons for this choice? Research the subject online to find evidence to support your answer. Ask your teacher for feedback on what you find. وزارة التعليم Ministry of Education 2024-1446 Business Decision Making S1 S2 S3.indb 177 Decision-Making Processes in Organizations 177 30/06/2023 14:28