Mid-year reviews bring the highs and lows. The numbers are in, initiatives are in full swing, and the planning from January is showing on the income statement. Executives disagree with the CEO about why results are high or low. Rather than debate causes in full view, try a more inviting approach: test every possible cause against one set of data. It is root cause for executives.
A scenario
EBITDA is up 20% in Eastern Canada for Smith Pharma, well over budget. Nobody on the leadership team really knows why, though everyone has a guess, and they need the cause so they can tell whether it is a blip or something to exploit elsewhere.
What is the problem? Eastern Canada EBITDA is up 20%. Can we be more specific? Only one product, the blood thinner, is up; the other four met budget. Where? Eastern Canada, not Western, which gives a comparison group. When did it start? Q2, exactly when the hotshot salesperson was hired from a competitor. Then the CEO announces: it is the acquisition savings kicking in. We do not need root cause. Meeting adjourned.
Except the acquisition savings applied to all five products in both regions. The data says they cannot be the cause. The hire applied only to the blood thinner in the East. The pattern fits. Nobody had to argue with the CEO; the four questions did it.
The discipline
Gather data for the thing with the problem and for the closest comparison that could have the same problem but does not. Ask what, where, when and how much, for both. Every proposed cause has to explain the whole pattern. Most do not.
Why it is tool seven
This is what the monthly review in the MOVE® system does with every variance, positive and negative. It is the difference between a team that explains its numbers and a team that understands them, and it is the only way the person who is right gets heard when they are not the most senior in the room.
Monday
Take last month's biggest variance. Write the cause everyone has accepted. Then find one place where the same cause was present and the variance was not. If you find it, the cause is wrong.
