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1.

INTRODUCTION
Cause and Effect Analysis
One of the seven tools of quality, it shows the relationship of all factors (causes) that lead
to the given situation (effect). Brainstorming is important for college students, writers, and
professionals in almost any business. There are two ways to graphically organize ideas for
a cause-and-effect analysis. They vary in how potential causes are organized: (a) by
category: called a fishbone diagram (for its shape) or Ishikawa diagram (for the man who
invented it), and (b) as a chain of causes: called a tree diagram. Let’s learn what it is, and
how to it works!

1.1 What is it?

It identifies major causes and breaks them down into sub-causes and further sub-divisions
(if any)Also called fishbone diagram (because of its resemblance to a fish skeleton) or
Ishikawa diagram, after its inventor Dr. Kaoru Ishikawa (1915-89) of Tokyo's Mushasi
Institute.It is one of six problem solving exercises and involves the following steps:

1.2. Methods of Cause and Effect Analysis

1. Select the problem to analyse (i.e. the effect)

* define the problem clearly - this may involve collecting data and re-definitions using
brainstorming and / or the 5 Why’s or other problem solving exercises.

* write the problem title in a box on the right side of a large page (e.g. flip chart sheet) and
draw an arrow pointing towards it across the page (this can be done vertically if you prefer,
as in the example above)

2. Agree all the major categories of causes

* draw main branch lines from the central arrow, which points to the effect, as many as
categories needed, draw a box at the end of each line and put the category titles in the
boxes.

Because of the shape that is now emerging, sometimes this cause and effect outline is
called a fish bone diagram.

* people
* materials

* machines

* Systems

* Environment

3. Generate possible causes

* Brainstorm for possible causes (e.g. in how many ways might this problem - effect - have
been caused?)

* allocate the causes generated to major categories adding lines to the branch lines as
needed

* stand back and examine the "picture" that emerges and highlight the most likely causes of
the effect (problem) as you see it

* examine the most likely causes using the 5 WHYs problem solving technique

4. Check the logic of the diagram in both directions

That is, your cause and effect analysis will result in decision making about solutions but
will be misleading if it isn't valid.

So, check - e.g. we've written down a chain of cause and effect between each possible
cause and the major categories etc.

the effect and work backwards to the causes listed.

This may involve:

* experiments

* models

Take the most likely verified causes, identified from the above, and critically examine them
for possible solutions.

This may involve using:

* brainstorming (e.g. in how many ways might this problem - effect - be solved?)
* CRITICAL EXAMINATION - one of the problem solving strategies that can also be
used for problem solving in the workplace. It involves asking 20 questions about the known
situation and the possibilities for the future.

2.2 Why Use Brainstorming?

A cause and effect diagram is basically a pictorial display of a list. Each diagram
has a large arrow pointing to the name of a problem. The lines off the large arrow
represents main categories of potential causes (or solutions). Typical categories
are equipment, personnel, method, materials, and environment.

One can create the categories that best fit your problem. Smaller lines,
representing subcategories, are drawn off each main line. The process should be
described and the problem well defined before creating this kind of diagram.
The analysis suggests that inorder to solve a problem an organization is going through, the
firm should try to find out the causes. Only when the causes are discovered and understood
can you prevent the problem from occurring again.

The best way to view the cause and effect was to draw it out like a fish skeleton with the
problem at the head of the fish and the bones, the causes. Causes of problems could be
anything from:

• Manpower
• Machinery
• Materials the firm uses
• Methods of making the product

Or it could be down to one or some of the elements of the p’s in business ( see
below). If you look at this diagram the problem for the company is declining sales,
the causes of declining sales when traced back can be from inefficient processes, to
lack of training for staff. To address the problem of declining sales the causes need

The benefit of a fishbone analysis is it enables the problem to be traced back to the
root causes, with the aim of trying to find long term solutions. A cause and effect
analysis is usually completed in teams, where the fishbone is drawn out and team
member brainstorm possibilities of the problem

Cause and Effect analysis has many benefits and advantages that include:
 Cause-and-effect analysis is a systematic way of generating and sorting hypotheses
about possible causes of a problem.
 Once the root causes of problems are identified, they can be addressed rather than
just the symptoms. Easy to understand - it's not a complicated technique
 It is inexpensive
 If controlled properly it is a quick way of generating ideas
 Encourages creative thinking and thinking "out of the box"
 Generates ideas and solutions that can be used elsewhere
 Provides an opportunity for widespread participation and involvement
1.4 When to use it?

• Defining a problem
• Identifying possible data requirements
• Identifying possible causes
• Developing objectives for solutions
• Narrowing down causes

1.5 What does it achieve?

Problems and their effects can often appear vast, unmanageable and insoluble. One way of
beginning to break down such problems into smaller, more easily handled chunks is to
explore some of the possible causes by using cause and effect diagrams. More specifically,
cause and effect diagrams can be used to:

• Assist both individuals and group to generate ideas

• Serve as a recording for ideas generated
• Reveal undetected relationships
• Call attention to important relationships

1.6 Key steps

• Name problem/effect
• Draw fishbone diagram
• Identify major causes
• Brainstorm for possible causes
• Incubate the ideas
• Analyse and evaluate

1.7 Who uses it?

The team, the users, the manager.
1.8 Why use it?
Using a Cause-and-Effect Diagram forces the team to consider the complexity of the
problem and to take an objective look at all the contributing factors. It helps the team to
determine both the primary and the secondary causes of a problem and is helpful for
organizing the ideas generated from a brainstorming session.
1.9 When to use it?
It is used after the causes have been grouped by relationships (for example, by using a
Causal Table or "Why-Because" Technique). It is a useful diagram for problem analysis.
Therefore, a Cause-and-Effect Diagram should be used before deciding how to deal with
the problem.
1.10 How to use it?
Before constructing the Cause-and-Effect Diagram, you need to analyze the causes. The
steps are as follows:

1. Re-examine the problem by asking:

o What is the problem?
o Who is affected?
o When does it occur?
o Where does it occur?

2. Brainstorm the team's ideas about the causes of a problem using the Causal Table or
"Why-Because" Technique.

3. The list of causes should be grouped by relationships or common factors using an

affinity technique.
4. You can now illustrate graphically the causes grouped by relationships by using a
Cause-and-Effect Diagram where:

o The problem under investigation is described in a box at the head of the

diagram.
o A long spine with an arrow pointing towards the head forms the backbone of
the "fish." The direction of the arrow indicates that the items that feed into
the spine might cause the problem described in the head.

o A few large bones feed into the spine. These large bones represent the main
categories of potential causes of the problem. Again, the arrows represent
the direction of the action; the items on the larger bones are thought to cause

o The smaller bones represent deeper causes of the larger bones they are
attached to. Each bone is a link in a Cause-and-Effect chain that leads from
the deepest causes to the targeted problem.

1.11 Caution
Remember that cause-and-effect diagrams represent hypotheses about causes, not facts.
Failure to test these hypotheses—treating them as if they were facts—often leads to
implementing the wrong solutions and wasting time. To determine the root cause(s), the
team must collect data to test these hypotheses. The "effect" or problem should be clearly
articulated to produce the most relevant hypotheses about cause. If the "effect" or problem
is too general or ill defined, the team will have difficulty focusing on the effect, and the
diagram will be large and complex. It is best to develop as many hypotheses as possible so
that no potentially important root cause is overlooked. Be sure to develop each branch
fully. If this is not possible, then the team may need more information or help from others
for full development of all the branches.

2. Cost of Quality

2.1 Overview:
Cost of Quality ("COQ") is a measurement used for assessing the waste or losses from
some defined process (eg. machine, production line, plant, department, company, etc.).

Recognizing the power and universal applicability of Cost of Quality ("COQ"), PQA has
developed numerous proprietary Cost of Quality ("COQ") systems for ensuring the
effectiveness of Cost of Quality ("COQ") implementations.

The Cost of Quality ("COQ") measurement can track changes over time for one particular
process, or be used as a benchmark for comparison of two or more different processes (eg.
two machines, different production lines, sister plants, two competitor companies, etc.).

Usually, Cost of Quality ("COQ") is measured in currency (eg. Rs.), requiring all losses
and wastes to be converted to their liquidated cost equivalent (ie. man-hrs lost or spent are
converted to Rs. by multiplying by the hourly rate, Rs./hr).

COQ Typical Descriptions (may vary between

Examples
Category different Organizations)
off-cuts, equipment
Costs associated with internal losses (ie. within the
Internal breakdowns, spills, scrap,
process being analyzed)
yield, productivity
Costs external the process being analyzed (ie.
occur outside, not within). These costs are usually
discovered by, or affect third parties (eg.
customers). Some External costs may have customer complaints,
External originated from within, or been caused, created by, latent defects found by the
or made worse by the process being analyzed. customer, warranty
They are defined as External because of where
they were discovered, or who is primarily or
initially affected.
Costs associated with the prevention of future planning, mistake-
losses: (eg. unplanned or undesired problems, proofing, scheduled
Preventive
losses, lost opportunities, breakdowns, work maintenance, quality
stoppages, waste, etc.) assurance
KPI's, inspection, quality
check, dock audits, third
Costs associated with measurement and party audits, measuring
Assessment
assessment of the process. devices, reporting systems,
data collection systems,
forms

2.3 Why is Cost of Quality ("COQ") Important?

Cost of Quality ("COQ") can be used to identify the global optimum for a process, and
monitor that process' progress towards its global optimum. Global optimum is defined as
the best possible outcome from all physically possible operating modes, combinations, and
permutations of the current process.

CNQ (Cost of Non-Quality)

ROQ (Return on Quality, a proprietary system for Cost of Quality ("COQ"), developed by
PQA)
Losses
Waste Measurement
Muda (Japanese for waste)

2.5 Typical Uses

Cost of Quality ("COQ") is used to collect cost data on a sampling basis (eg. all data
occurring during a 24 hr period, calculated once each quarter), or on a continuous basis (eg.
Cost of Quality ("COQ") is calculated with all data occurring in the month, and reported
monthly) .

After confirming that the data is accurate and comprehensive, and consistent with previous
definitions and implementations, it is analyzed for opportunities and trends. Based upon
statistical analysis (eg. regression analysis, indexes, correlations, Pareto analysis, factor
analysis, etc.), conclusions and recommendations are presented to managers of the process
being analyzed.

In some cases (supported by process modeling, heuristics, prior experience, or intuition) the
optimum Cost of Quality ("COQ") can be predicted, and the process design necessary for
achieving this global optimum Cost of Quality ("COQ") can be defined. A plan can then be
defined to modify the current process, phase by phase, so as to move towards this global
optimum process.

Management responsible for the process can decide on if, how, and when they will run the
current process, or modify the process for even better results.
All projects are analyzed for their impact on Cost of Quality ("COQ"), and projects that
show high ROQ are implemented on a priority basis
(ROQ%= Rs. Cost of Quality ("COQ") savings/\$Implementation cost*100%).

COQ Software is often used to enhance the COQ data collection, reduce the cost of running
a COQ system, and ensure excellent data as fast and cheap as possible.

2.6 Typical Results Achieved

When all costs are included, Cost of Quality ("COQ") as a % of gross sales Rs. will
probably be around 30% to 35% for a profit orientated organization, 40% to 60% for a not-
for-profit organization (ie. hospitals, charities, government, etc.). Many organizations take
only a sub-set of the costs, including only those that tend to fluctuate, or that often need
management intervention. The others are assumed to be constant.

When manufacturing companies often earn only 5% NPBT (Net Profit Before Tax), a 35%
Cost of Quality ("COQ") indicates that 40% of gross revenue is generated by the company
as profit, but only 5% of that gets trapped as NPBT. Therefore, the profit yield is only
12.5% (87.5% of the available profit is lost before it gets to the bank).

For improvements in Cost of Quality ("COQ"), some manufacturers have been able to
reduce manufacturing costs by as much as 7.65% per year, every year, for more than 10
years.

For Six Sigma processes, Cost of Quality ("COQ") is usually reduced to less than 1% of
gross sales Rs. This indicates that, as large and unbelievable as Cost of Quality ("COQ") \$
seems to most managers, it is a real number that can be eliminated through hard work and
dedication.

Obviously, as more and more improvements are made, it becomes more difficult to find the
next saving. This is when an excellent Cost of Quality ("COQ") system can help point out
the remaining opportunities.

For organizations that:

• Currently have no Cost of Quality ("COQ") system, but could benefit from a well-
designed & implemented Cost of Quality ("COQ") system.
• Have a Cost of Quality ("COQ") system, but that Cost of Quality ("COQ") system
is poorly designed, or poorly implemented.

• Slow rate of improvement

• Low or no profitability
• Bureaucracy or complexity of business processes continue to get worse and worse
• Changes in one area tend to have disastrous effects in other areas
• Management get personally involved in quality problems only during a major crisis
• Management is running out of ideas on where to cut costs any further
• All employees are not actively and personally involved in driving the Organization's
Mission forward
• Many individuals and departments disagree on what are the top priorities for the
Organization
• Sub-processes and Departments are operated in a manner that is detrimental to the
Organization's overall best interest.
• For organizations not using COQ Software, there are often higher costs for running
the COQ system, inconsistent implementation, and non-optimum results from the
COQ system.

2.8 Typical Problems Encountered

Because of poor design or poor implementation of Cost of Quality ("COQ") systems, the
Cost of Quality ("COQ") systems often suffer from one or more of the following problems:

• COQ data collection is watered-down, or has superficial implementations that

quickly become make-work exercises with little or no benefit, other than to fill
filing cabinets or hard disk drives on computers.

• Efforts are directed at where it is easy to collect data, or easy to implement changes,
instead of focusing on the Cost of Quality ("COQ") priorities (eg. largest cost
category, most variation, largest business risk, etc.)

• The Cost of Quality ("COQ") input data are often incomplete. The Cost of Quality
("COQ") definitions are often un-clear, or not fully understood, resulting in varying
interpretation and implementation over time. This variability tends to add
significant noise to the Cost of Quality ("COQ") data, clouding the interpretation
and hiding significant trends for extended periods of time.

• Management does not actively use the Cost of Quality ("COQ") data in an effective
manner. Decisions are often made without neither realizing nor considering the
impact on Cost of Quality ("COQ"), thereby neutering the Cost of Quality ("COQ")
system to irrelevancy.

• When Cost of Quality ("COQ") is not utilized during project approval decisions, as
management makes changes (supposed "improvements"), Cost of Quality ("COQ")
\$ tend to shift from one category to another, with little net effect. For example, a
new machine is purchased to reduce scrap. Higher setup, first-off, inspection, and
maintenance costs offset the scrap savings, with no net improvement in Cost of
Quality ("COQ").

• Cost of Quality ("COQ") costs oscillate between the four Cost of Quality ("COQ")
categories on a revolving basis, with little or no reduction in the total Cost of
Quality ("COQ"). For example, money is spent to increase surveillance, which
indicates a problem exists with internal &/or external failure costs. Surveillance
costs are stopped, but prevention actions are taken to reduce failure costs, thereby
increasing prevention costs. The preventive actions are not comprehensive or not
consistently implemented, so the internal and/or external failures eventually come
back. The rising internal &/or external failures prompt another round of
surveillance activities, with additional assessment costs incurred.

• The collection of Cost of Quality ("COQ") data becomes more and more costly and
bureaucratic over time, making it slower to respond to significant changes, and less
useful.

• Statistical analysis of Cost of Quality ("COQ") data is not performed. Early

recognition of trends are missed, and random variations are mistaken for significant
signals; starting "wild goose" chases, wasting time & resources, and distracting
everyone from the real issues.

• Cost of Quality ("COQ") system is isolated from other KPI (Key Performance
Indicators) systems, missing the opportunity for more in-depth understanding of
cause-effect relationships for the Cost of Quality ("COQ") results.

• For any measurement system, it should cost less than ~1% of the savings generated
by the use of the measurement.

1. Is the management team committed to making rapid changes for maximum

profitability, within the imposed constraints (eg. Company's Mission, laws &
regulations, stakeholder satisfaction, etc.)?

2. Are there "sacred cows", legacy systems, departmental silos, and empire building
that are exempt from re-evaluation?

3. Are the hard costs (payroll, raw materials, utilities, etc.) more easily measured (or
more important) than the soft costs (morale, employee satisfaction, market share,
plant capacity utilization, customer's losses, supplier's losses, societal losses)?

4. Are the current management measurement systems (eg. KPI's, scrap, rework, excess
freight charges, stock outages, absenteeism, productivity, profitability, etc.)
compatible with Cost of Quality ("COQ")? Can these other systems be adapted to
include Cost of Quality ("COQ") without neither duplication nor conflict?

5. Will people be receiving mixed messages and conflicting signals between Cost of
Quality ("COQ") and the traditional management measurements?

6. Is there management commitment to do something about the Cost of Quality

("COQ") data on a timely basis?

7. Is there COQ Software available that suits your current and future needs for
maximum value from data at minimum cost?

If you or your organization want higher profitability, or significantly improve your

stakeholder satisfaction, a properly designed and implemented Cost of Quality ("COQ")
system may be of interest.
3. Reference:
Websites
• www.wikipedia.com