Improving the problem formulation is the key

There are few management skills more powerful than the discipline of clearly articulating the problem you seek to solve before jumping into action.

It’s hard to pick up a current business publication without reading about the imperative to change. The world, this line of argument suggests, is evolving at an ever-faster rate, and organizations that do not adapt will be left behind. Left silent in these arguments is which organizations will drive that change and how they will do it. Academic research suggests that the ability to incorporate new ideas and technologies into existing ways of doing things plays a big role in separating leaders from the rest of the pack,1 and studies clearly show that it is easier to manage a sequence of bite-sized changes than one huge reorganization or change initiative.2 But, while many organizations strive for continuous change and learning, few actually achieve those goals on a regular basis.3 Two of the authors have studied and tried to make change for more than two decades, but it was a frustrating meeting that opened our eyes to one of the keys to leading the pack rather than constantly trying to catch up.

In the late 1990s, one of the authors, Don Kieffer, was ready to launch a big change initiative: implementing the Toyota production system in one of Harley-Davidson Inc.’s engine plants. He hired a seasoned consultant, Hajime Oba, to help. On the appointed day, Mr. Oba arrived, took a tour of the plant, and then returned to Don’s office, where Don started asking questions: When do we start? What kind of results should I expect? How much is it going to cost me? But, Mr. Oba wouldn’t answer those questions. Instead he responded repeatedly with one of his own: “Mr. Kieffer, what problem are you trying to solve?” Don was perplexed. He was ready to spend money and he had one of the world’s experts on the Toyota production system in his office, but the expert (Mr. Oba) wouldn’t tell Don how to get started.

The day did not end well. Don grew exasperated with what seemed like a word game, and Mr. Oba, tired of not getting an answer to his question, eventually walked out of Don’s office. But, despite the frustration on both sides, we later realized that Mr. Oba was trying to teach Don one of the foundational skills in leading effective change: formulating a clear problem statement. Since Mr. Oba’s visit, two of the authors have studied and worked with dozens of organizations and taught over 1,000 executives. We have helped organizations with everything from managing beds in a cardiac surgery unit to sequencing the human genome.4Based on this experience, we have come to believe that problem formulation is the single most underrated skill in all of management practice.

There are few questions in business more powerful than “What problem are you trying to solve?” In our experience, leaders who can formulate clear problem statements get more done with less effort and move more rapidly than their less-focused counterparts. Clear problem statements can unlock the energy and innovation that lies within those who do the core work of your organization.

As valuable as good problem formulation can be, it is rarely practiced. Psychologists and cognitive scientists have suggested that the brain is prone to leaping straight from a situation to a solution without pausing to define the problem clearly. Such “jumping to conclusions” can be effective, particularly when done by experts facing extreme time pressure, like fighting a fire or performing emergency surgery. But, when making change, neglecting to formulate a clear problem statement often prevents innovation and leads to wasted time and money. In this article, we hope to both improve your problem formulation skills

How Our Minds Solve Problems

Research done over the last few decades indicates that the human brain has at least two different methods for tackling problems, and which method dominates depends on both the individual’s current situation and the surrounding context. A large and growing collection of research indicates that it is useful to distinguish between two modes of thinking, which psychologists and cognitive scientists sometimes call automatic processing and conscious processing (also sometimes known as system 1 and system 2). These two modes tackle problems differently and do so at different speeds.

Conscious Processing

Conscious processing represents the part of your brain that you control. When you are aware that you are thinking about something, you are using conscious processing. Conscious cognition can be both powerful and precise. It is the only process in the brain capable of forming a mental picture of a situation at hand and then playing out different possible scenarios, even if those scenarios have never happened before. With this ability, humans can innovate and learn in ways not available to other species.

Despite its power, conscious processing is “expensive” in at least three senses. First, it is much slower than its automatic counterpart. Second, our capacity to do it is quite finite, so a decision to confront one problem means that you don’t have the capacity to tackle another one at the same time. Third, conscious processing burns scarce energy and declines when people are tired, hungry, or distracted. Because of these costs, the human brain system has evolved to “save” conscious processing for when it is really needed and, when possible, relies on the “cheaper” automatic processing mode.

Automatic Processing

Automatic processing works differently from its conscious counterpart. We don’t have control over it or even feel it happening. Instead, we are only aware of the results, such as a thought that simply pops into your head or a physical response like hitting the brake when the car in front of you stops suddenly. You cannot directly instruct your automatic processing functions to do something; instead, they constitute a kind of “back office” for your brain. When a piece of long-sought-after information just pops into your head, hours or days after it was needed, you are experiencing the workings of your automatic processing functions.

When we tackle a problem consciously, we proceed logically, trying to construct a consistent path from the problem to the solution. In contrast, the automatic system works based on what is known as association or pattern matching. When confronted with a problem, the automatic processor tries to match that current challenge to a previous situation and then uses that past experience as a guide for how to act. Every time we instinctively react to a stop sign or wait for people to exit an elevator before entering, we rely on automatic processing’s pattern matching to determine our choice of action.

Our “associative machine” can be amazingly adept at identifying subtle patterns in the environment. For example, the automatic processing functions are the only parts of the brain capable of processing information quickly enough to return a serve in tennis or hit a baseball. Psychologist Gary Klein has documented how experienced professionals who work under intense time pressure, like surgeons and firefighters, use their past experience to make split-second decisions. Successful people in these environments rely on deep experience to almost immediately link the current situation to the appropriate action.

However, because it relies on patterns identified from experience, automatic processing can bias us toward the status quo and away from innovative solutions. It should come as little surprise that breakthrough ideas and technologies sometimes come from relative newcomers who weren’t experienced enough to “know better.” Research suggests that innovations often result from combining previously disparate perspectives and experiences.8 Furthermore, the propensity to rely on previous experiences can lead to major industrial accidents like Three Mile Island if a novel situation is misread as an established pattern and therefore receives the wrong intervention.

That said, unconscious processing can also play a critical and positive role in innovation. As we have all experienced, sometimes when confronting a hard problem, you need to step away from it for a while and think about something else. There is some evidence for the existence of such “incubation” effects. Unconscious mental processes may be better able to combine divergent ideas to create new innovations. But it also appears that such innovations can’t happen without the assistance of the conscious machinery. Prior to the “aha” moment, conscious effort is required to direct attention to the problem at hand and to immerse oneself in relevant data. After the flash of insight, conscious attention is again needed to evaluate the resulting combinations.

The Discipline of Problem Formulation

When the brain’s associative machine is confronted with a problem, it jumps to a solution based on experience. To complement that fast thinking with a more deliberate approach, structured problem-solving entails developing a logical argument that links the observed data to root causes and, eventually, to a solution. Developing this logical path increases the chance that you will leverage the strengths of conscious processing and may also create the conditions for generating and then evaluating an unconscious breakthrough. Creating an effective logical chain starts with a clear description of the problem and, in our experience, this is where most efforts fall short.

A good problem statement has five basic elements:

1.     It references something the organization cares about and connects that element to a clear and specific goal;

2.     it contains a clear articulation of the gap between the current state and the goal;

3.     the key variables — the target, the current state, and the gap — are quantifiable;

4.     it is as neutral as possible concerning possible diagnoses or solutions; and

5.     it is sufficiently small in scope that you can tackle it quickly.

Is your problem important? The first rule of structured problem-solving is to focus its considerable power on issues that really matter. You should be able to draw a direct path from the problem statement to your organization’s overall mission and targets. The late MIT Sloan School professor Jay Forrester, one of the fathers of modern digital computing, once wrote that “very often the most important problems are but little more difficult to handle than the unimportant.” If you fall into the trap of initially focusing your attention on peripheral issues for “practice,” chances are you will never get around to the work you really need to do.

Mind the gap. Decades of research suggest that people work harder and are more focused when they face clear, easy-to-understand goals. More recently, psychologists have shown that mentally comparing a desired state with the current one, a process known as mental contrasting, is more likely to lead people to change than focusing only on the future or on current challenges. Recent work also suggests that people draw considerable motivation from the feeling of progress, the sense that their efforts are moving them toward the goal in question.A good problem statement accordingly contains a clear articulation of the gap that you are trying to close.

Quantify even if you can’t measure. Being able to measure the gap between the current state and your target precisely will support an effective project. However, structured problem-solving can be successfully applied to settings that do not yield immediate and precise measurements, because many attributes can be subjectively quantified even if they cannot be objectively measured. Quantification of an attribute simply means that it has a clear direction — more of that attribute is better or worse — and that you can differentiate situations in which that attribute is low or high. For example, many organizations struggle with so-called “soft” variables like customer satisfaction and employee trust. Though these can be hard to measure, they can be quantified; in both cases, we know that more is better. Moreover, once you start digging into an issue, you often discover ways to measure things that weren’t obvious at the outset. For example, a recent project by a student in our executive MBA program tackled an unproductive weekly staff meeting. The student began his project by creating a simple web-based survey to capture the staff’s perceptions of the meeting, thus quickly generating quantitative data.

Remain as neutral as possible. A good problem formulation presupposes as little as practically possible concerning why the problem exists or what might be the appropriate solution. That said, few problem statements are perfectly neutral. If you say that your “sales revenue is 22% behind its target,” that formulation presupposes that problem is important to your organization. The trick is to formulate statements that are actionable and for which you can draw a clear path to the organization’s overarching goals.

Is your scope down? Finally, a good problem statement is “scoped down” to a specific manifestation of the larger issue that you care about. Our brains like to match new patterns, but we can only do so effectively when there is a short time delay between taking an action and experiencing the outcome. Well-structured problem-solving capitalizes on the natural desire for rapid feedback by breaking big problems into little ones that can be tackled quickly. You will learn more and make faster progress if you do 12 one-month projects instead of one 12-month project.

To appropriately scope projects, we often use the “scope-down tree,” a tool we learned from our colleague John Carrier, who is a senior lecturer of system dynamics at MIT. The scope-down tree allows the user to plot a clear path between a big problem and a specific manifestation that can be tackled quickly.

Narrowing a Problem’s Scope

Good structured problem-solving involves breaking big problems into smaller ones that can be tackled quickly. In this “scope-down tree,” developed by John Carrier of MIT, the overall problem of excessive equipment downtime at a company’s plants is broken down first into two types of equipment (rotating and nonrotating), and then further into different subcategories of equipment, ultimately focused on a specific type of pump in one plant. The benefit of reducing the problem’s scope is that instead of a big two-year maintenance initiative, a team can do a 60-day project to improve the performance of the selected pumps and generate quick results and real learning. Then they can move on to the next type of pump, and hopefully, the second project will go more quickly. Following that, they move to the third type of pump, and so on.

Narrowing a Problem’s Scope

Managers we work with often generate great results when they have the discipline to scope down their projects to an area where they can, say, make a 30% improvement in 60 days. The short time horizon focuses them on a set of concrete interventions that they can execute quickly. This kind of “small wins” strategy has been discussed by a variety of organizational scholars, but it remains rarely practiced.

Four Common Mistakes

Having taught this material extensively, we have observed four common failure modes. Avoiding these mistakes is critical to formulating effective problem statements and focusing your attention on the issues that really matter to you and your organization.

1.     Failing to Formulate the Problem : The most common mistake is skipping problem formulation altogether. People often assume that they all already agree on the problem and should just get busy solving it. Unfortunately, such clarity and commonality rarely exist.

2.     Problem Statement as Diagnosis or Solution : Another frequent mistake is formulating a problem statement that presupposes either the diagnosis or the solution. A problem statement that presumes the diagnosis will often sound like “The problem is we lack the right IT capabilities,” and one that presumes a solution will sound like “The problem is that we haven’t spent the money to upgrade our IT system.” Neither is an effective problem statement because neither references goals or targets that the organization really cares about. The overall target is implicit, and the person formulating the statement has jumped straight to either a diagnosis or a solution. Allowing diagnoses or proposed solutions to creep into problem statements means that you have skipped one or more steps in the logical chain and therefore missed an opportunity to engage in conscious cognitive processing. In our experience, this mistake tends to reinforce existing disputes and often worsens functional turf wars.

3.     Lack of a Clear Gap : A third common mistake is failing to articulate a clear gap. These problem statements sound like “We need to improve our brand” or “Sales have to go up.” The lack of a clear gap means that people are not engaging in clear mental contrasting and creates two related problems. First, people don’t know when they have achieved the goal, making it difficult for them to feel good about their efforts. Second, when people address poorly formulated problems, they tend to do so with large, one-size-fits-all solutions that rarely produce the desired results.

4.     The Problem Is Too Big : Many problem statements are too big. Broadly scoped problem formulations lead to large, costly, and slow initiatives; problem statements focused on an acute and specific manifestation lead to quick results, increasing both learning and confidence. Use John Carrier’s scope-down tree and find a specific manifestation of your problem that creates the biggest headaches. If you can solve that instance of the problem, you will be well on your way to changing your organization for the better.

Formulating good problem statements is a skill anybody can learn, but it takes practice. If you leverage input from your colleagues to build your skills, you will get to better formulations more quickly. While it is often difficult to formulate a clear statement of the challenges you face, it is much easier to critique other people’s efforts, because you don’t have the same experiences and are less invested in a particular outcome. When we ask our students to coach each other, their problem formulations often improve dramatically in as little as 30 minutes.

Why American Management Rules the World

Why American Management Rules the World

by Nicholas Bloom, Rebecca Homkes, Raffaella Sadun, and John Van Reenen JUNE 13, 2011

After a decade of painstaking research, we have concluded that American firms are on average the best managed in the world. Over the past decade, a team from Harvard Business School, London School of Economics, McKinsey & Company, and Stanford has systematically surveyed global management. We have developed a tool to measure management practices across operational management, monitoring, targets, and people management. We scored each dimension on a range of practices to generate an overall management score, surveying over 10,000 firms in 20 countries. This has allowed us to create the first global database of management practices.

Well managed firms thrash their poorly managed competitors. They make more money, grow faster, have far higher stock market values, and survive for longer.

Second, when it comes to overall management, American firms outperform all others. This U.S. dominance occurs in the manufacturing, retail, and healthcare sectors (but interestingly, not in high schools). Japanese, German, and Swedish firms follow closely behind. In contrast, developing countries like Brazil, China, and India lag at the bottom of the management charts. Southern European countries like Portugal and Greece appear to have management practices barely better than those of most developing countries. In the middle stand countries like the UK, France, Italy, and Australia, which have reasonable but not brilliant management practices.

While the ranking of countries is certainly eye-catching, the real story lies within the countries. Almost 90% of the cross-country differences are driven by the size of the “tail” of really badly managed firms within each country. Countries like the U.S. that excel have hardly any badly managed firms, while those like India that have low average scores have a mass of very badly managed firms pulling down their averages.

Every country has some world-class firms. But while there are many of these extremely badly managed, every country also hosts some excellent firms. Even bottom-ranking India has dozens of firms that use worldclass management practices. A key takeaway is that individual companies are not trapped by the national environments in which they operate — there are top performers in all countries surveyed. Conversely, being in a world-class environment like the U.S. does not guarantee success. Even in America, more than 15% of firms are so badly managed that they are worse than the average Chinese or Indian firm.

What is the secret sauce of management success? One of the biggest drivers of these differences is variation in people management. American firms are ruthless at rapidly rewarding and promoting good employees and retraining or firing bad employees. The reasons are threefold (1) The U.S. has tougher levels of competition. Large and open U.S. markets generate the type of rapid management evolution that allows only the best-managed firms to survive. (2) Human capital is important. America traditionally gets far more of its population into college than other nations. (3)  The U..S has more flexible labor markets. It is much easier to hire and fire employees.

Many developing-country firms, even while trying to implement new techniques like Lean Management, ignore the fact that labor is different from other “inputs.” Many of the Chinese firms surveyed did not even employ managers who spoke the same language as the workers, relying on interpreters or basic sign-language for communication. As you can imagine, this does not lead to a feeling of mutual support between management and workers.

But the U.S. should not be complacent. Other countries equal or better the U.S. in some of the other areas of management we examined, such as careful monitoring, lean production, and sensible targets. The manufacturing prowess of Germany, has helped it weather the recent downturn so well, is built upon such advantages. Furthermore, although Chinese management practices are well below U.S. standards, they showed the fastest improvement since 2006 of any country we have looked at.

What lessons emerge for others wanting to reach the top of the ranking? Across all countries, organizations that properly incentivize talented workers, whether through promotion, pay, or other rewards, outperform others. As best practices spread and firms continue to implement these techniques they will narrow the existing gaps, reaping huge growth and profitability gains.