The technique of 5 whys was formally developed by Sakichi Toyoda and was used within the Toyota Motor Corporation during the evolution of its manufacturing methodologies.
--> What is it?
5 whys is an iterative interrogative technique used to explore the cause-and-effect relationships underlying a particular problem.
The primary goal of the technique is to determine the root cause of a defect or problem by repeating the question "Why?" Each answer forms the basis of the next question.
Our stock price just plummeted!
1. Why? Why did that happen?
Well, we missed our earnings...
2. Well, why?
Because we were discounting our prices too much
3. Why were we doing that?
Because we wanted to retain our customers, so we were offering bigger discounts.
4. Why are we trying to retain customers with discounts?
Well, because we want to grow market share
5. Why do we want to grow market share?
Well, because that's what the incentive plan is tied to - for all our managers and business unit presidents. The bigger the share, the bigger the bonus they get.
By the time you get to that 4th or 5th why, hopefully a new insight will pop out and you'll be able to start solving the real problem that will have a true impact on the organization.
If we had just stopped at "hey, the stock price fell, "and it's because we missed earnings "because we were discounting", there's no real insight there. When we keep asking why and peeling it back, we can identify what that true root cause is.
--> The 1 how:
1 how can give answers of the preventive and/or corrective actions.
In the example, incentive plan was the root cause for the fall in stock price. So the question is:
How to design a better and effective incentive plan?
Put restrictions on discounting or Tie the plan to territory volume, etc.
This 1 how can also lead to further questions such as: Is it the only way to do it? Is there any better way to do it? etc.
Try it yourself too…
Disclaimer: The views expressed are personal of the author of this article.
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