Problem Solving

As a business major, you’ll learn a number of sophisticated problem-solving techniques, and thinking “like a business person” means using those tools systematically to solve problems and make decisions. Missing a step results in “jumping to conclusions,” which brands you as a poor decision-maker. Performing a step incompletely can lead to poor decisions, as well.

Regardless of whether a person is solving finance, management, or marketing problems, professionalism involves clear, systematic attention to the basic structure of the problem-solving process.

The most common structure for business decision making is analysis, a process of "breaking up" a problem or decision into smaller parts for careful examination. Business people are very suspicious of "fuzzy thinking" or "gut instinct" when people claim an answer just popped into their heads. Businesslike thinkers can point to the specific steps they took to break a problem apart, examine each of the elements, and come up with a logical answer.

The basics of analysis follow five steps. Businesslike thinking will not skip any of them, and you should be able to report exactly how you came up with your solution by retracing your thinking through these steps.

Before doing anything else, define the problem in terms of specific, concrete harms that are occurring or some sort of gap between current performance and where the company wants to be. For example, a salesperson might be concerned about finding leads, citing the "problem" that advertising responses are down 47% from the year before. The topic for analysis is the lead-generating capacity of this year's advertising.

A very common thinking error is to skip this problem-definition step, and start examining an assumed cause. Suppose the salesperson looked at his decline in leads and decided to figure out why folks don't like the new slogans in this year's advertising. He'd be "jumping to a conclusion" that a change in the slogan had anything at all to do with the decrease in leads.

There are many ways to look at any problem, and analysis requires selecting and using one of those ways. Every framework will define the component pieces of a topic, along with the standards that guarantee success. For example, The Book of Leads might define good advertising as having a clear message, placement in media that targets the proper market, and offering a clear method for signaling interest in the product. Meanwhile, the Great Leads Website looks at lead generation in terms of the total number of prospects that see the advertising, advertising that directs potential customers to a message that speaks directly to their wants, and the accuracy of customer contact information gathered during by the feedback mechanism.

Each of these frameworks would generate a different solution to the problem, and a businesslike thinker will be able to explain why the tool selected is the best one for the situation. An easy error is to choose an inappropriate framework. It's clear that the Great Leads Website aims to solve problems with electronic commerce. If our salesperson has been advertising in high fashion magazines or on rodeo billboards, this might not be a very useful framework to use.

A common error involves focusing too narrowly on solving a formula and forgetting that it is only a step in the problem solving process. Business majors should pay close attention to the analytical frameworks introduced in each of their classes. A finance major will be learning the components and success criteria to analyze stock performance, including some key formulas to use. Human resources majors will be learning how to analyze the regional labor force, performing a series of calculations. In every case, there is a series of topics to review and criteria for evaluation of each one. When asked to "solve a problem," the task is not merely to plug numbers into a formula; stay focused on using that formula within the overall problem solving process.

Every analytical framework requires evaluating certain kinds of data or performance and deciding whether it meets the criteria for success. This is the "breaking apart" that analysis performs. For example, once the salesperson starts to look at the clarity of the advertising message, he'll need to know how to determine whether a message is clear, or not clear, or sort-of-clear-to-certain kinds-of-audiences. The Book of Leads provides a checklist of what to look for-perhaps a maximum number of words, certain color combinations, or a particular vocabulary level. Our salesperson will then make a systematic comparison of each element of the advertising against the specific criteria described by the book's analytical framework-a checklist of what great advertising looks like.

People sometimes refer to this as "running the numbers" because the analysis of many business topics involves statistical methods or what-if scenarios using spreadsheets. Our salesperson, for instance, might create a spreadsheet with counts of the words, colors, and vocabulary of each of the year's ads-and probably compared against the previous years'. It might take several weeks to gather all the data, look at it all systematically, and decide whether his advertising meets each of the criteria.

Even with a great system for analyzing ads, our salesperson could still fail to be businesslike about the process. A common error is to compare only one or two elements of the framework and ignore others. Complete analysis means to evaluate all listed criteria against the data or performance. Sometimes one criterion will be more important that another, which should be explained, but nothing can be ignored without an explanation.

After comparing every element of the data or performance against the framework's criteria for success, it will be possible to say which element, if any, might be the source of the problem. Suppose our salesperson discovers that this year's ads are just as clear as last year's and provide the same method for expressing interest, but they have been placed in a different magazine. He would be able to conclude that the lead generation has declined because the ads no longer reach the target market.

A very common error involves jumping to a conclusion unsupported by the analysis. For example, our salesperson never looked at the content of the ad, the inventiveness of the company's new slogan, or new sales support procedures being used to process the leads. Therefore, he cannot conclude anything at all about the new slogan or the sales support manager's performance. Those were not even important pieces of information, according to The Book of Leads.

Those might be important factors, and it might be that our salesperson should have picked a better analytical framework-one that allowed him to examine advertising content and sales support practices, However, unless he starts over, his analysis has nothing to contribute on those points.

The final step of businesslike thinking is to communicate a recommendation for action. The recommendation must address the original question, and it must draw on the conclusions actually provided by the analysis.

Similar to jumping to conclusions, a common error involves making extra recommendations. Based on his analysis, our salesperson can only make recommendations for improving the advertising plan-not for adding additional methods of lead generations at trade shows! If the salesperson had wanted to find out whether trade shows would be a good method, he should have defined that as his problem in the first place and found a list of criteria-a framework-for analyzing and selecting alternative promotional methods.

A businesslike recommendation also includes attention to the resources implementation will require. A recommendation that violates cost, technical, social, political, legal, or ethical constraints does not qualify as a legitimate option. Sometimes, a recommendation will include a detailed budget of costs and time required, although that step might involve a new team of experts to complete.

Some jobs require independent analysis of problems, but major business problems require the collective effort of larger groups. As part of a work team, policy committee, or executive team, you will find yourself moving through the same analytical steps. Although the basic steps are the same, working through them collectively requires some additional discussion and agreement.

  • Whether the discussion is oral or in writing, the problem-solving steps are fully articulated to insure that all participants in the process understand and agree on each step. For more on participating in decision-making discussions, hover over Communication and Presentation Skills at your right and select Presentation Skills.
  • In any group, differing interests, priorities, and perspectives create a complex decision-making environment. Every problem, however small, has repercussions across the entire organization. For more on collaborative decision-making, hover over Writing and Reasoning Skills at your right and select Strategic Thinking.

When a group is engaged in analysis, the problem must be clearly defined for everyone involved. This might appear as an agenda item at a meeting, a first paragraph of a memo, or in the introductory context of a presentation. If a group has met to analyze a problem, its first order of business is to clarify what that problem is.

No group will be willing to take action unless it also agrees that there is some warrant for its expenditure of time, energy, and resources. Thus, the first issue that must be resolved is whether there is a problem worth worrying about. A problem must be deemed significant in terms of actual or potential harm to relevant stakeholders.

A great deal of communication might be necessary for a group to quantify the problem, explore the extent of its effect, and determine whether other stakeholders have differing views of the problem. There should be agreement on the definitions and significance of the problem before the decision-makers proceed to finding solutions to it.

Once a group has agreed to address a problem, the collective purpose becomes finding its cause. Individual analysts or researchers often focus on just one aspect of the situation. For instance, the salesperson described in the previous section had a very narrow advertising question to analyze. However, the entire marketing team might be involved in solving the larger problem of falling sales. At this point, the focus becomes deciding why the problem has occurred-locating the cause of the problem.

Typically, multiple different analyses will be required to reach this goal. Sometimes, a large group of researchers, analysts, or technical specialists engages in seemingly independent problem-solving activities, and their communication is indirect. For instance, people might submit reports to a specialist who combines their assessments after a second level of analysis. In decision-making meetings, on the other hand, an explicit agenda item might explore or summarize the analysis of a problem's cause and the group works together to reach agreement.

Symptoms, Problems, and Causes

Conflict often arises in decision-making groups around the distinction between a problem and its cause. Some people prefer to speak of the harmful effects of a problem as symptoms, using the word problem to describe the underlying cause of the harm experienced by the organization.

Regardless of the communication vocabulary, decision-makers must ultimately share an understanding of how the problem came into being before they can proceed to the next stage of locating a solution. The group might agree that multiple causes exist for a particular problem, and considerable discussion might be required to determine their interrelationships.

Coordinated Analytical Frameworks

Often, there are multiple ways to approach a problem, and, as described above, some groups decide to combine the insights of multiple analyses using different resources. A fund management group, for instance, might wish to select stocks based on the advice of several different financial analysts.

  • Take care to insure that the assumptions and conditions of each method are compatible. One analyst might value price stability, while another bases decisions on long-term outlook without any concern for volatility.

  • Determine whether each analytical framework is a prescriptive model of how things ought to be, or a descriptive model of how things actually are. While one analyst might recommend companies based on their environmental records, for instance, another might look only at their actual market performance over time.

Quality of Data

As described above, evaluation of the data involves completely and carefully reviewing each of the items named as important by the analytical framework. The more detailed and objective the criteria, the easier it is to evaluate each component, and the more straightforward the analysis will be. When decision criteria are vague or information is incomplete, the decision-making discussion can take longer and involve more conflict.

When facing a complex problem, groups will often discover that they lack insufficient information to use an analytical model to its best advantage. Sometimes the group will arrange for additional data to be collected; in other situations, decisions get made without ideal information. Either way, the group must clarify the holes in the data. Often a group's most important task involves articulating the decision issues remaining on the table for the next conversation, report, or meeting.

  • Where are we in the overall decision-making process? The group should clarify that all members agree on whether they are defining the problem, determining its cause, locating a potential solution or clarifying its costs.

  • What are the remaining questions of fact? Clearly identify any research or data gathering needs, along with responsibilities and timeframes established to complete the task.

  • What are the remaining questions of interpretation? Clearly summarize any disagreements remaining over the interpretation of the available data. One auditor might feel that a discrepancy represents a significant departure from standards, for example, while another insists the issue is of minor importance. List the disagreements so the group can locate a method of resolving each one.

  • What are the remaining questions of value? Nearly any business decision gets made in spite of disagreements among diverse stakeholders over the relative value of various costs or outcomes. While inevitable, these disagreements deserve acknowledgment and perhaps communication to the organization in appropriate ways. A compensation committee, for instance, might choose to raise all workers' salaries by a set amount, thereby exacerbating wage inequities that already exist. Its final report should acknowledge the value issues implicit in that decision.

In reality, problems usually have multiple causes. In fact, the value of solving problems in a group rests in the variety of perspectives, backgrounds, and values that guarantees seeing that complexity. Still, a business group must reach a decision in order to take action. A perfect solution might not even exist, so groups learn to move forward with real-world answers. At this stage of the decision-making, individuals often use persuasion to communicate the benefits of various alternatives.

Eliminate the Cause

After going to great lengths to analyze the cause of a problem, the group should pick a solution that shows promise for removing or mitigating that cause. Usually, evidence points to one or two major causes with several other less significant contributing factors. The best solution will generally focus on solving the largest causes, although sometimes a group will recommend acting quickly on small but very inexpensive steps.

Accommodate Stakeholders

Good decision-making requires careful articulation of the group's criteria for acceptable actions, including multiple stakeholder expectations, social and environmental responsibilities, and strategic as well as short-term goals. The best solution will achieve a balance among all these various goals, even though it might not maximize any one of them.

Consider Costs

Similarly, the cost of implementing a solution will necessarily pull resources from some other company activity (or from the profit returned to investors). The best solution might not be the cheapest, but it might also forego some advantages in order to reduce its cost. Ultimately, the group needs to agree the solution to the problem does not cost more than the harm it was inflicting.

Stay Focused

Groups, by their very nature, generate ideas, sometimes falling into brainstorming possible actions that cannot be justified by the analysis. A group might become excited about the new low price for a cool piece of software, but low price alone does not guarantee that it will solve the problem-or even that there is a problem worth solving in the first place. Be very careful to distinguish between recommendations drawn from the analysis and "extra" ideas or issues that simply create excitement.

While civic and political groups might end with a recommendation, leaving others to implement the policy or legislation, the action orientation of the pragmatic business environment always requires a final implementation step. This includes both convincing or allowing others to take action and verifying that the expected outcomes actually result (Ireland, 2004). The group decision-making group will often hand this responsibility to a management team, but its final step remains a clear articulation of the goals for the chosen solution. Establish measurable expectations, along with timelines for implementation, and a venue for management to report on the outcome.

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