A root cause analysis enables businesses to identify underlying problems, rather than treating the immediate causes. This is important if you want to avoid taking action that only removes a symptom, but not the problem itself.
How to conduct a root cause analysis
Conducting a root cause analysis isn't a simple case of cause and effect. Instead, it involves gathering as much information around the problem as possible, in order to define it. The problem could be down to a physical process that has stopped working or is no longer effective (for example machinery or IT services), human error or an organisational issue.
Whilst a root cause analysis is most often used to identify and solve problems, it can also be used to highlight successes in your business.
PerfectTed, one of the UK’s fastest-growing energy drinks brands and renowned global matcha brand, realised there were issues with its website capabilities soon after its launch in 2021. It occurred amid growing interest from consumers and trade for its products. These included not being able to display new product images or upsell and cross-sell goods. Rather than adding functionality or trying to find workarounds, they decided to design and create a brand-new website.
“Instead of just making small, incremental changes to make the website robust enough, we realised that if we changed it at its core and made it a better platform in the long run, it would be able to withstand the requirements of increased traffic,” says PerfectTed Co-Founder and Managing Director Levi Levenfiche.
“As a fast-growing business with nearly 20 employees at present, it’s essential that when we run into problems, we get to the core of them - otherwise any problems we have now are only going to get bigger,” he says. “Solving things at the root is fundamental for businesses, and even more so for an early-stage one such as ours. We know that if the process is not fit for purpose now, it definitely won't be in six or 12 months when the business could double in size.”
Common root cause analysis methods
There are several methods businesses can adapt to execute a root cause analysis. These include the ‘five whys’ problem-solving method where you set out to ask ‘why the problem happened’ and follow this up with further ‘why’ questions until you identify the root cause. Another method focuses on change analysis, which seeks to establish a timeline or time frame of changes and events leading up to a particular incident where a problem occurred.
What are the 5 steps of root cause analysis
Whichever method you adopt, there are typically five main steps to conducting a root cause analysis.
1. Define the problem
Richard Wadhams, a business strategist and owner of accountancy firm Hogbens Dunphy says that as the name suggests, root cause analysis is about identifying underlying issues and challenges, and addressing these with the aim of reducing or eliminating repeat problems.
“As an example, if your business is losing customers or not attracting enough customers, the underlying problem causing this that you need to define could be lack of staff training or poor customer service,” he says.
2. Collect data
As Wadhams outlines, data might relate to when the problem started, the number of times it has affected the business, actual figures such as loss of revenue or customer attrition, or which parts of the business are affected and how. The more comprehensive and accurate the data, the better.
Employing data analysis techniques, such as undertaking a time series analysis, can help ensure you are working from the best available data. There may also be specific analysis techniques relating to the problems you have identified that can help you get closer to the root cause: for example, if there is an issue with production output, measuring labour productivity could help.
Levenfiche recalls another instance when the business carried out root cause analysis, with data key to the process.
“When we initially launched our products, we led with a message based on matcha green tea, but over time we saw that this wasn’t resonating with consumers,” he says. “We stood in stores and watched people, carried out consumer surveys, and looked at energy drinks market data - it was the healthy aspect that stood out and which consumers were interested in. Instead of just adjusting our wording or adding health information on the side [of the can], we carried out a total rebrand, rather than make what we had fit for purpose.”
3. Identify causal factors
Causal factors are those elements (such as events that have happened or decisions taken) that have led to a certain outcome.
Hogbens Dunphy produces a financial summary document that offers an overview of a client’s business and expenditure, enabling both parties to identify causal factors, errors, or discrepancies.
4. Identify root cause(s)
“Once we find these errors or discrepancies we review and check before highlighting these and we would then collect further information and identify causes before developing solutions and implementing them,” says Wadhams.
He adds that it’s vital to spend enough time on this step as otherwise, you run the risk of missing the actual root cause and then the problem could simply repeat itself further down the line. Bear in mind that some problems can have multiple root causes.
5. Implement solutions
This stage can involve significant capital investment, risk and logistical upheaval, depending on what changes you might have to put into place. You may need to involve all parts of the business and ensure different teams are working together towards a common goal.
“Our [rebrand] solution involved considerable capital, for example, we were printing on cans as opposed to labels, and we carried out recipe development,” explains Levenfiche. “But it’s about understanding that this is a long-term investment, that we were going to reformulate and rebrand the product to a better place in the long run. This required the whole business to come together, everyone from our in-house graphic design to operations, to the sales team who were pitching the product to suppliers. Every asset on every website and every social post had to change.”
Cross-team problem-solving and better workforce collaboration means better productivity. Levenfiche says while the rebrand was an expensive time for the business, it managed to relieve some of the pressure of these upfront costs with its American Express® Business Gold Card. This offers businesses a flexible way to manage their money, with up to 54 days payment period on purchases and no pre-set spending limit¹.
“As a young business, the Card helps to extend our cash runway and offers good payment terms and the rewards are very useful for treating our staff and incentivising them,” he says.
For every full eligible £1 spent on the Business Gold Card you can earn 1 Membership Rewards® point to be put towards team perks ranging across retail, travel and dining².
Creating a root cause analysis
While a root cause analysis may lead to something as major as a rebrand, at other times the solutions it arrives at may be much simpler. For example, says Wadhams, solutions could include implementing changes within a particular time frame or training staff - the point is to make sure any solution has an action that will tackle the root cause of the problem.
The root cause analysis itself can feature a range of information, including the factors leading up to an incident, contributing factors, actions taken as a result, relevant data and timelines.
Root cause analysis template
To help you create one for your business, we have created a fully editable and downloadable Root Cause Analysis Template (see below).
 |
1. The maximum payment period on purchases is 54 calendar days and is obtained only if you spend on the first day of the new statement period and repay the balance in full on the due date. If you'd prefer a Card with no annual fee, rewards or other features, an alternative option is available – the Business Basic Card.
2. Membership Rewards points are earned on every full and eligible £1 spent and charged, per transaction. Terms and conditions apply.
