External Factors Are Not Root Causes
When an external event contributes to a problem, root cause analysis should also examine how the organization anticipated and responded to it. Supplier oversight, changing circumstances and dependence on consultants can reveal weaknesses that the organization can address.
THE IDEA
Summary
- Identifying an external factor should not end the investigation. Examine whether failures to understand, prepare for or adapt to it also contributed to the problem.
- It's important to recognise the different types of external factors that may impact an organisation: e.g. weather, other natural phenomena, suppliers, consultants, distributors, agents, regulators, competitors, customers, patients or other stakeholders.
- When dealing with different countries and cultures, remember that something you might think is unlikely in an environment you are familiar with may be quite possible in another context. No matter what you say in terms of organisational values and ethics, and codes of conduct, every culture has its own interpretation of what is ethical and unethical.
- Recognise that there will always be a temptation to cross a line regarding competitors and dealing with regulators or government officials. This may involve senior staff, or take place through intermediaries, so expect it to be hard to detect.
- A third party or an employee can pass due diligence or a selection process with flying colours at one point in time. They may work for you diligently for years, but that does not mean things might not change over time.16
- Even though a third‐party supplier may be legally required to do things for you according to an SLA and may pay the penalty if they do not do what is needed, your organisation remains accountable for the work they do on your behalf. So, do not get lulled into a false sense of security by dropping your interest in monitoring their work, even when things are going to plan.
- Recognise that some third‐party activities (not just customer entertainment, but participation in forums, etc.) can influence management's opinion favourably towards them.
- Recognise the dilemmas that can arise when using consultants. On the one hand, consultants may be ‘head and shoulders’ above you regarding knowledge and capability, and their input may be invaluable. But, on the other hand, consultants will invariably put a ‘best foot forward’ when it comes to presenting their capabilities, so you need the ability to test what they really know and can do.
- Likewise, beware of developing a dependency on consulting support and be mindful of the ways in which consulting assignments can be weaponised.
When to use it
Investigating both supplier performance and internal oversight after a disruption.
Assessing risk in international operations by considering cultural differences in ethical interpretations and regulatory compliance.
Auditing consultant engagements to ensure knowledge transfer and avoid weaponization of the assignment.
Reviewing due diligence processes for third parties to account for changes over time rather than relying on initial vetting.
FROM THEORY TO EVERYDAY LIFE
In practice
Supplier Delays Blamed on External Vendor
A manufacturer experiences repeated delays from a key supplier. Its investigation finds that the supplier lacked capacity and that the manufacturer had neither checked capacity adequately nor established escalation procedures. The supplier’s failure and the manufacturer’s oversight both matter; identifying the internal weakness gives the manufacturer something to improve.
Sales Decline Attributed to Weather
A retail chain attributes a sales slump to unusually bad weather. Competitors in the same region maintained sales after adjusting inventory and marketing, prompting the chain to investigate its own response. Weather contributed to the disruption, but differences in preparation may help explain the differences in results.
A MOMENT TO REFLECT
Put it to work.
Think of a recent problem involving an external event. What part did the event play, and what could your organization have anticipated or handled differently?
How can you improve your monitoring of third-party activities to avoid a false sense of security when things are going smoothly?
When engaging consultants, what steps can you take to ensure you are not developing an unhealthy dependency or being misled by a polished presentation?
CONTINUE THE CONVERSATION
Source texts
- Beyond the Five Whys Root Cause Analysis and Systems Thinking (James C. Paterson)