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The Cause and Effect Diagram: How to Better Analyze Business Problems Using This Simple Tool

Illustration of man explaining a diagram

Every business has problems. But your organization’s problems don’t need to keep it from succeeding. The trick is to quickly identify the issues that plague your company and then to deal with them in an efficient manner. A cause and effect diagram will help you do that.

In this article, we’ll teach you what a cause and effect diagram is and why it can be so useful. Then we’ll show you how to quickly create one for your own company in four simple steps. Oftentimes the difference between a successful company and a failing one is an organization’s ability to identify and resolve issues.

After reading this post, you’ll know exactly how to do that. 

What’s a Cause and Effect Diagram?

A cause and effect diagram is a business framework that will help you to identify issues in your business. You can then use it brainstorm possible reasons for the problems you’ve identified and solve them more efficiently.

It’s created by drawing a box at one end of a paper and writing the problem in question inside of it. Then, lines are drawn extending from this box representing any contributing issues.

If you’re having a hard time picturing what this looks like, don’t worry. We’ll explain everything in greater detail below.

The cause and effect diagram was refined and popularized in the 1960s by Kaoru Ishikawa, a celebrated Japanese organizational theorist. Because of his work in this area, Ishikawa is often considered one of the founding fathers of modern management.

Fun fact: the cause and effect diagram is also known as an Ishikawa diagram due to its creator, and as a fishbone diagram because the completed chart usually looks like the skeleton of a fish. So, if your boss ever asks you to, “work up a fishbone and send it over,” now you’ll know what she’s talking about!

Can It Really Help Me?

Absolutely! In fact, the cause and effect diagram has three distinct benefits:

Clarity

A cause and effect diagram lists every possible contributing factor to a specific problem. More than that, it shows the links between each of them. By creating and using this tool, you’ll be able to clearly see what the problem areas are in your business and what you need to change to solve them.

Efficiency

When you know exactly what needs fixing, the solution process is much more efficient. Rather than constantly guessing how to resolve issues, you can consult your cause and effect diagram, pinpoint the areas that need your attention, and focus on them.

Team-Building

Lastly, creating a cause and effect diagram can be a great team-building exercise. Not only will this process allow you to glean insights from the rest of your staff, but it will also help your employees develop valuable problem-solving skills in a group environment.

How to Create and Use a Cause and Effect Diagram

Creating and using a cause and effect diagram isn’t difficult. Simply follow the steps we’ve outlined below and you’ll become a pro in no time!

The cause and effect diagram

Step 1: Create Your Diagram Structure

The first step is to simply create the structure for your cause and effect diagram. Draw a rectangle on the right side of your paper or whiteboard. Make sure it’s vertically centered. Write your problem inside the rectangle. Then draw a horizontal line that stretches to the left from the rectangle.

It should divide your writing surface in half. This is the “spine” of your fish. Next, draw numerous lines extending out from the center line. These are the “bones of your fish and will represent different factor categories contributing to your problem. For example, if your problem happens to be low levels of productivity, your categories might include employees, processes, and tools.

Note: some people like to draw their diagram in reverse. Meaning the problem sits on the left-hand side of their writing surface and the “spine” extends out to the right. It doesn’t matter which approach you take. Use whichever you prefer.

Step 2: Brainstorm All Possible Roadblocks

Now that you have the basic structure of your cause and effect diagram completed, it’s time to fill it in.

Look at each of the categories you identified in the previous step and write down causes that may be contributing to your problem. To brainstorm possible causes, ask yourself, “Why is this problem happening?” Returning to our productivity example, possible causes in each category might look something like this:

  • Employees: Bad attitudes and lack of knowledge of company processes.
  • Processes: Cumbersome process and too many people involved.
  • Tools: Outdated equipment and no time-tracking software.

Draw a line off of each “bone” in your cause and effect diagram to represent each cause. If a cause happens to be complex, break it down into smaller bits, each with its own line extending from the category “bone”.

Step 3: Analyze Your Results

At this point, your cause and effect diagram should be completely filled out, which means it’s time to analyze it.

Which of the potential causes is most likely contributing to your problem?

And how do these causes relate to and affect each other?

Once you’ve drawn some conclusions, you can devise experiments to test your hypotheses. But because you took the time to do this exercise, your hypotheses should be quite accurate. Meaning you should be able to strike on a solution rather quickly.

Step 4: Implement Any Necessary Changes

The final step is to implement the changes you’ve decided you need to make.

There really aren’t any special tips and tricks with this step other than to implement your solutions as soon as possible. Not only will this help you solve your problem faster, but it will also allow you more time to adjust your approach if your solution isn’t perfect.

So get to it! Take what your cause and effect diagram has taught you and go change your business for the better.

A Few Tips

And that’s how you create and use a cause and effect diagram. Simple right? Here are a few tips to make the process more beneficial:

Dig Deep

Unless the problem you’re dealing with is very simple and straightforward, a proper cause and effect diagram will have multiple “bones” with many lines stemming out from each of them.

This is good!

The whole point of this exercise is to identify any and all contributing factors to your company’s problem and how they relate to each other.

So don’t hold back.

We recommend using the “Five-Whys” technique when brainstorming potential cause ideas.

This technique basically just encourages you to keep asking why (five times is generally enough) until you get to the root cause of a problem. Let’s take, for example, the problem of a laptop computer not turning on. So we ask “why?”

  • First Why? Because the battery is dead.
  • Second Why? Because the laptop didn’t get charged.
  • Third Why? Because the charger is ruined.
  • Fourth Why? Because the charger is old and needs to be replaced.
  • Fifth Why? Because the owner has owned the laptop and charger for a long time.

Use this technique and dig deep into any possible causes when creating your cause and effect diagram.

Make it a Team Affair

Cause and effect diagrams can definitely be created in solitude. But the results are often better, especially in business settings, when multiple minds are tasked with creating one together.

This will allow you to glean ideas you wouldn’t have had access to otherwise. As a leader at your company, you likely aren’t as hands-on as your employees. You’re not “in the weeds” so to speak experiencing the problems they deal with every day.

By including them when creating your cause and effect diagram, you get valuable insight that will help you better identify the problems your company faces and develop solutions much quicker.

Don’t Make it Permanent

By this we simply mean, don’t start creating your cause and effect diagram with permanent ink. Use a whiteboard with erasable markers. Or a pencil instead of a pen. Many people like to use sticky notes so they can easily adjust things as needed. Your diagram will likely change as you create it.

You’ll determine new causes and realize things you originally thought might be contributing factors aren’t. The entire process is easier when you’re able to quickly adjust your work.

The Cause and Effect Diagram in Real Life

Cause and effect diagrams are pretty straightforward. But before we let you go, we want to really hammer this business technique home for you and illustrate it with an example.

Meet Martha

Martha is the warehouse manager at ABC Industries, a household goods manufacturing company. Unfortunately, she saw a higher than normal employee turnover rate amongst her staff in 2018. She wants to fix the issue so she decides to create a cause and effect diagram.

She first identifies the problem, employee turnover, and writes it down in a small box on the right-hand side of her paper.

Next, she needs to discover every potential contributing factors. She realizes that there are three: the management team, the working environment, and the compensation packages. Inside of each of these categories, Martha lists the following potential causes:

  • The Management Team: Does Martha tend to micromanage her employees? Or does she need to provide more guidance to them?
  • The Working Environment: Perhaps Martha’s employees simply dislike the working environment. Does she need to spruce up the breakroom or improve safety measures?
  • The Compensation Packages: Lastly, it’s possible her staff doesn’t feel adequately compensated for their work. Can she offer better healthcare or end-of-year bonuses?

Now that Martha’s cause and effect diagram has been filled out, she analyzes it to discover the most likely issues she needs to resolve.

She realizes that her team likely needs more guidance. They don’t always know how certain situations should be handled. Therefore warehouse safety isn’t guaranteed and her employees don’t like risking their welfare every day.

They would probably be more willing to do so, though, if the company’s healthcare plan was better. Armed with this information, Martha immediately begins implementing changes.

Fortunately, she hits the nail on the head and after six months, her company’s turnover rate has dropped dramatically. Great job, Martha!

Build a Better Business With a Cause and Effect Diagram

A cause and effect diagram will help you better determine the problems your company faces and the root causes behind them. You’ll then be able to quickly devise solutions and improve your business more efficiently.

Just remember to follow the four-step cause and effect creation plan we outlined above:

  • First, create your diagram structure. Whether you draw your left to right or right to left doesn’t matter. Do what’s comfortable for you.
  • Second, brainstorm all possible roadblocks. What are the potential causes behind the problem your company is currently facing?
  • Third, analyze the results. Now that your cause and effect diagram is filled out, you can study it and devise solutions.
  • And fourth, implement any necessary changes. We recommend doing this as soon as possible. Don’t wait!

If you follow this four-step process and keep in mind the other tips we shared in this article, you’ll be well on your way to success. Good luck!

June 4, 2019

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Every Toggl team member makes hundreds of small decisions about Toggl and its business each month. I am absolutely certain (and our experience also shows it), that these decisions are better informed and motivated if people have a better, more personal understanding of not just their teammates, but also their customers.

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Do you manage a remote team? We’d love to hear from your experience in the comments below.

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