Problem Solving 315
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A managerial problem can be described as the gap between a given current state of affairs and a future desired state. Problem solving may then be thought of as the process of analyzing the situation and developing a solution to bridge the gap. While it is widely recognized that different diagnostic techniques are appropriate in different situations, problem solving as a formal analytical framework applies to all but the simplest managerial problems. The framework is analogous to the scientific method used in chemistry, astronomy, and the other physical sciences. In both cases, the purpose underlying the analytic process is to minimize the influence of the investigator's personal biases, maximize the likelihood of an accurate result, and facilitate communication among affected parties.

Problem solving was popularized by W. Edwards Deming and the expansion of the total quality management movement in the 1980s. While Deming described what he called the Shewhart cycle, the technique is more commonly known as the Deming Wheel or simply as the PDCA cycle. Regardless of the name, a problem solver is urged to follow a step-by-step approach to problem solving-plan, do, check, act (hence the PDCA acronym).

In the planning stage, a manager develops a working hypothesis about why a given problem exists and then develops a proposed solution to the problem. The second step is to implement, or do, the proposed remedy. Next, the manager studies or checks the result of the action taken. The focus of this review is to determine whether the proposed solution achieved the desired result-was the problem solved? The fourth step then depends upon the interpretation of the check on results. If the problem was solved, the manager acts to institutionalize the proposed solution. This might mean establishing controls or changing policy manuals to ensure that the new way of doing business continues. However, if the check indicates that the problem was not solved or was only partially corrected, the manager acts by initiating a new cycle. Indeed, the technique is represented as a cycle based on the belief that many problems are never fully solved. For example, suppose that the problem in a given manufacturing facility is determined to be that labor productivity is too low. A change in processing methods may be found to successfully increase labor productivity. However, this does not preclude additional increases in labor productivity. Therefore, the PDCA cycle suggests that managers should pursue a course of continuous improvement activity.

The problem-solving framework can be used in a wide variety of business situations, including both large-scale management-change initiatives and routine improvement or corrective activity. Indeed, management consultants may be thought of as professional problem solvers. By relying on the proven problem-solving framework, external consultants are often able to overcome their lack of specific industry experience or knowledge of an organization's internal dynamics to provide meaningful analysis and suggestions for improvement. To more fully explore the issues presented by problem solving, the four-step PDCA cycle is expanded to a nine-step framework in the next section.

Perhaps the only generalizable caveat regarding problem solving is to guard against overuse of the framework. For example, Florida Power & Light became well known for their problem-solving ability in the late 1980s. One of their most successful initiatives was to institute an aggressive tree-trimming program to anticipate and prevent power failure due to downed limbs falling on electrical lines during storms. They were so successful that they integrated the problem-solving framework into their day-to-day managerial decision making and organizational culture. While this resulted in well reasoned decisions, it also meant that implementing even simple changes like moving a filing cabinet closer to the people using it required an overly bureaucratic approval process. This phenomenon is commonly referred to as paralysis of analysis. Therefore, managers should remain aware of the costs in both time and resources associated with the problem-solving framework. Accordingly, the nine-step framework described below is offered as a suggested guide to problem solving. Managers should feel free to simplify the framework as appropriate given their particular situation.



Although business problems in the form of a broken piece of machinery or an irate customer are readily apparent, many problems present themselves in a more subtle fashion. For example, if a firm's overall sales are increasing, but its percentage of market share is declining, there is no attention-grabbing incident to indicate that a problem exists. However, the problem-solving framework is still helpful in analyzing the current state of affairs and developing a management intervention to guide the firm toward the future desired state. Therefore, a solid approach to problem solving begins with a solid approach to problem identification. Whatever techniques are used, a firm's approach to problem identification should address three common identification shortfalls. First and most obviously, the firm wants to avoid being blindsided. Many problems develop over time; however, unless the firm is paying attention, warning signals may go unheeded until it is too late to effectively respond. A second common error of problem identification is not appropriating properly. This means that although a firm recognizes that an issue exists, they do not recognize the significance of the problem and fail to dedicate sufficient resources to its solution. It can be argued that not prioritizing properly has kept many traditional retail firms from responding effectively to emerging internet-based competitors. Finally, a third common error in problem identification is overreaction-the Chicken Little syndrome. Just as every falling acorn does not indicate that the sky is falling, neither does every customer complaint indicates that a crisis exists. Therefore, a firm's problem identification methods should strive to present an accurate assessment of the problems and opportunities facing the firm.

While no specific problem-identification technique will be appropriate for every situation, there are several techniques that are widely applicable. Two of the most useful techniques are statistical process control (SPC) and benchmarking. SPC is commonly used in the repetitive manufacturing industries, but can also prove useful in any stable production or service-delivery setting. A well formulated SPC program serves to inform managers when their operational processes are performing as expected and when something unexpected is introducing variation in process outputs. A simplified version of SPC is to examine performance outliers-those instances when performance was unusually poor or unusually good. It is believed that determining what went wrong, or conversely what went right, may inspire process or product modifications. Competitive benchmarking allows managers to keep tabs on their competition and thereby gauge their customers' evolving expectations. For instance, benchmarking might involve reverse engineering-disassembling a competitor's product-to study its design features and estimate the competitor's manufacturing costs. Texas Nameplate Company, Inc., a 1998 Malcolm Baldrige National Quality Award winner, uses competitive benchmarking by periodically ordering products from their competitors to compare their delivery-time performance.

Additional listening and problem identification techniques include the time-tested management-by-walking-around, revamped with a Japanese influence as going to gemba. The technique suggests that managers go to where the action is-to the production floor, point of delivery, or even to the customer's facilities to directly observe how things are done and how the product is used. Other methods include active solicitation of customer complaints and feedback. Bennigan's Restaurants offer a five-dollar credit toward future purchases to randomly selected customers who respond to telephone surveys on their satisfaction with their most recent restaurant visit. Granite Rock Company, a 1992 Baldrige Award winner, goes even farther by allowing customers to choose not to pay for any item that fails to meet their expectations. All that Granite Rock asks in return is an explanation of why the product was unsatisfactory.


The amount of resources that should be dedicated to verification will vary greatly depending upon how the problem itself is manifested. If the problem is straightforward and well-defined, only a cursory level of verification may be appropriate. However, many business problems are complex and ill defined. These situations may be similar to the case of a physician who is confronted with a patient that has self-diagnosed his medical condition. While considering the patient's claim, the doctor will conduct her own analysis to verify the diagnosis. Similarly, the need for verification is especially important when a manager is asked to step in and solve a problem that has been identified by someone else. The introduction of the manager's fresh perspective and the possibility of a hidden agenda on the part of the individual who initially identified the issue under consideration suggests that a "trust, but verify" approach may be prudent. Otherwise, the manager may eventually discover she has expended a great deal of time and effort pursuing a solution to the wrong problem.

In the case of particularly ambiguous problems, McKinsey & Company, a management-consulting group, uses a technique they call Forces at Work. In this analysis, McKinsey's consultants review the external pressures on the client firm arising from suppliers, customers, competitors, regulators, technology shifts, and substitute products. They then attempt to document the direction and magnitude of any changes in the various pressures on the firm. In addition, they review any internal changes, such as shifts in labor relations or changes in production technology. Finally, they look at how the various factors are impacting the way the firm designs, manufactures, distributes, sells, and services its products. Essentially, McKinsey attempts to create comprehensive before-and-after snapshots of their client's business environment. Focusing on the differences between the two, they hope to identify and clarify the nature of the challenges facing the firm.


The next step in problem solving is to formally define the problem to be addressed. This is a negotiation between the individuals tasked with solving the problem and the individuals who over-see their work. Essentially, the parties need to come to an agreement on what a solution to the problem will look like. Are the overseers anticipating an implementation plan, a fully operational production line, a recommendation for capital investment, or a new product design? What metrics are considered important-cycle time, material costs, market share, scrap rates, or warranty costs? Complex problems may be broken down into mutually exclusive and collectively exhaustive components, allowing each piece to be addressed separately. The negotiation should recognize that the scope of the problem that is defined will drive the resource requirements of the problem solvers. The more focused the problem definition, the fewer resources necessary to generate a solution. Finally, the time frame for problem analysis should also be established. Many business problems require an expedited or emergency response. This may mean that the problem solvers need to generate a temporary or interim solution to the problem before they can fully explore the underlying causes of the problem. Ensuring that the overseers recognize the limitations inherent in an interim solution serves to preserve the credibility of the problem solvers.


Now that the problem has been formally defined, the next step is for the problem solvers to attempt to identify the causes of the problem. The ultimate goal is to uncover the root cause or causes of the problem. The root cause is defined as that condition or event that, if corrected or eliminated, would prevent the problem from occurring. However, the problem solver should focus on potential root causes they are within the realm of potential control. For example, finding that a particular weight of motor oil is insufficient to protect an engine from overheating readily leads to an actionable plan for improvement. Finding that the root cause of a problem is gravity does not.

A common technique for generating potential root causes is the cause-and-effect diagram (also known as the fishbone or Ishikawa diagram). Using the diagram as a brainstorming tool, problem solvers traditionally review how the characteristics or operation of raw materials, labor inputs, equipment, physical environment, and management policies might cause the identified problem. Each branch of the diagram then becomes a statement of a causal hypothesis. For example, one branch of the diagram might suggest that low salaries are leading to high employee turnover, which in turn results in inexperienced operators running the machinery, which leads to a high scrap rate and ultimately higher material costs. This analysis suggests that to address the problem of high material costs, the firm may have to address the root cause of insufficient salaries.

Collection and examination of data may also lead the problem solver toward causal hypotheses. Check sheets, scatter plots, Pareto diagrams, data stratification, and a number of other graphical and statistical tools can aid problem solvers as they look for relationships between the problems identified and various input variables. Patterns in the data, changes in a variable over time, or comparisons to similar systems may all be useful in developing working theories about why something is happening. The problem solver should also consider the possibility of multiple causes or interaction effects. Perhaps the problem manifests only when a specific event occurs and certain conditions are met-the temperature is above 85 degrees or the ambient humidity is abnormally low.

Once the problem solver has identified the likely root causes of the problem, an examination of the available evidence should be used to confirm or disconfirm which potential causes actually are present and impacting the performance under consideration. This might entail developing an experiment where the candidate cause is controlled to determine whether its manipulation influences the presence of the problem. At this stage of the analysis, the problem solver should remain open to disconfirming evidence. Many elegant theories fail to achieve the necessary confirmation when put to the test. At this stage of the analysis it is also common for the problem solver to discover simple, easily implemented actions that will solve all or part of the problem. If this occurs, then clearly the problem solver should grasp the opportunity to "pick the low hanging fruit." Even if only a small component of the problem is solved, these interim wins serve to build momentum and add credibility to the problem-solving process.


Once the root causes of the problem have been identified, the problem solver can concentrate on developing approaches to prevent, eliminate, or control them. This is a creative process. The problem solver should feel free to challenge assumptions about how business was conducted in the past. At times, an effective approach is to generalize the relationship between the cause and the problem. Then the problem solver can look for similar relationships between other cause and effects that might provide insight on how to address the issues at hand. In general, it is useful to attempt to generate multiple candidate solutions. By keeping the creative process going, even after a viable solution is proposed, the problem solver retains the possibility of identifying a more effective or less expensive solution to the problem.


Assuming that the problem was well defined, evaluation of the effectiveness of alternative solutions should be relatively straightforward. The issue is simply to what extent each alternative alleviates the problem. Using the metrics previously identified as important for judging success, the various alternatives can generally be directly compared. However, in addition to simply measuring the end result, the problem solvers may also want to consider the resources necessary to implement each solution. Organizations are made up of real people, with real strengths and weaknesses. A given solution may require competencies or access to finite resources that simply do not exist in the organization. In addition, there may be political considerations within the organization that influence the desirability of one alternative over another. Therefore, the problem solver may want to consider both the tangible and intangible benefits and costs of each alternative.


A very common problem-solving failure is for firms to stop once the plan of action is developed. Regardless of how good the plan is, it is useless unless it is implemented. Therefore, once a specific course of action has been approved, it should continue to receive the necessary attention and support to achieve success. The work should be broken down into tasks that can be assigned and managed. Specific mile-stones with target dates for completion should be established. Traditional project management techniques, such as the critical path method (CPM) or the program evaluation and review technique (PERT) are very useful to oversee implementation efforts.


Another common failure is for firms to simply move on after a solution has been implemented. At a minimum, a post-implementation evaluation of whether or not the problem has been solved should be conducted. If appropriate and using the metrics that were established earlier, this process should again be relatively straightforward-were the expected results achieved? The review can also determine whether additional improvement activities are justified. As the PDCA cycle suggests, some problems are never solved, they are only diminished. If the issue at hand is of that nature, then initiating a new cycle of problem-solving activity may be appropriate.

A secondary consideration for the post-implementation review is a debriefing of the problem solvers themselves. By its very nature, problem solving often presents managers with novel situations. As a consequence, the problem-solving environment is generally rich in learning opportunities. To the extent that such learning can be captured and shared throughout the organization, the management capital of the firm can be enhanced. In addition, a debriefing may also provide valuable insights into the firm's problem-solving process itself. Given the firm's unique competitive environment, knowing what worked and what did not may help focus future problem-solving initiatives.


The final step in problem solving is to institutionalize the results of the initiative. It is natural for any system to degrade over time. Therefore, any changes made as a result of the problem-solving effort should be locked in before they are lost. This might entail amending policy manuals, establishing new control metrics, or even rewriting job descriptions. In addition, the firm should also consider whether the problem addressed in the initiative at hand is an isolated incident or whether the solution can be leveraged throughout the organization. Frequently, similar problems are present in other departments or other geographic locations. If this is the case, institutionalization might involve transferring the newly developed practices to these new settings.

SEE ALSO: Project Management

Daniel R. Heiser

Revised by Badie N. Farah


Deming, W. Edwards. Out of the Crisis. Cambridge: Massachusetts Institute of Technology, Center for Advanced Engineering Study, 1992.

Ketola, Jeanne and Kathy Roberts. Correct! Prevent! Improve!: Driving Improvement Through Problem Solving and Corrective and Preventive Action. Milwaukee: ASQ Quality Press, 2003.

National Institute of Standards and Technology. "Award Recipients." Malcolm Baldrige National Quality Award Program, 1999. Available from

Rasiel, Ethan M. The McKinsey Mind: Using the Techniques of the World's Top Strategic Consultants to Help You and Your Business. New York: McGraw-Hill, 2001.

——. The McKinsey Way—Understanding and Implementing the Problem-Solving Tools and Management Techniques of the World's Top Strategic Consulting Firm. New York: McGraw-Hill, 1999.

Smith, Gerald F. Quality Problem Solving. Milwaukee: ASQ Quality Press, 1998.

Also read article about Problem Solving from Wikipedia

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