Practically no problem in life or in business or elsewhere ever presents itself as a case on which a decision cannot be taken. What appears at first sight to be the element of the problem rarely are the really important or relevant things. They are at best symptoms. And often the most visible symptoms are the least revealing ones.
Management may see a clash of personalities; the real problem may well be poor organization structure. Management may see a problem of manufacturing costs and start a cost reduction dive; the real problem may well be poor engineering design or poor sales planning. Management may see an organization problem; the real problem may well be lack of clear objectives.
The first job in decision making is therefore to find the real problem and to define it. And too much time cannot time cannot be spent on this phase. The books and articles on leadership are full of advice on how take fast, forceful and incisive decisions. But there is no more foolish – and no more time wasting advice than to decide quickly what a problem really is.
Symptomatic – the method used by most managers is no solution. It is based upon experience rather than upon analysis which alone rules it out for the business manager who cannot systematically acquire this experience. We cannot put sick businesses into a clinic and exhibit them to students as we do with sick people. We cannot test whether the manager has acquired enough experience to diagnose correctly before letting him loose on actual problems. We can and do use cases to prepare men to make business decisions. But the best of cases is still a dead specimen preserved, so to speak, in alcohol. It is no more a substitute for the real business problem that the specimens in the anatomical museum are a substitute for the live patient in the clinical ward.
Moreover, symptomatic diagnosis is only permissible where the symptoms are dependable so that it can be assumed that certain visible surface pertain to certain definite diseases. The doctor using symptomatic diagnosis can assume that certain symptoms do not, on the whole, lie (though even the physician today tries to substitute strict, analytical methods for symptomatic diagnosis doctor using symptomatic diagnosis). The manager, however must assume that symptoms do lie. Knowing that very different business problems produce the same set of symptoms, and the same problem manifests itself in an infinite variety of ways, the manager must analyze the problem rather than diagnose it.
To arrive at the definition of the problem he must begin by finding the critical factor. This is the elements (or elements) in the situation that had to be changed before anything else can be changed moved acted upon.
A fairly large kitchenware manufacturer bent all management energies for ten years toward cutting production costs. Costs actually did go down; but profitability did not improve. Critical factor analysis showed that the real problem was the product mix sold. The company’s sales force pushed the products that could be sold the easiest. And it put all its emphasis on the most obvious sales appeal: lower price. As a result the company sold more and more of the less profitable lines where its competitors made the least efforts. And as fast as it reduced manufacturing costs it cut its price. It gained greater sales volume but the gain was pure fat rather than growth fluctuations. Only by defining the problem as one of product mix could it be solved at all. And only when the questions was asked: What is the critical factor in this situations could right definition of the problem be given.