Every business runs into problems. How a business deals with them can make the difference between success and failure for the company. You’ve probably heard about problem statements, but may not know what they’re for or how to create one. This article will solve that problem for you by providing great information about problem statements.
We’ll cover the following topics:
What is a problem statement?
How are problem statements used?
How do you write a problem statement?
2 Examples of problem statements
What is a problem statement?
What is a “problem?” Well, a problem can be just about any issue, challenge, or obstacle that is causing trouble. A problem is the cause of a bad outcome or incident. It’s not the incident itself.
For example, say that you have a broken chair. The broken chair itself could be considered a problem, but the real issue is how the chair got broken in the first place. A single issue may or may not be a problem to solve. The problem is the root cause of the issue.
Now that we are clear on what a problem is, then what is a problem statement? It is a clear explanation of the problem, including details about how it happened and why. It should be a fact-based reporting of the problem and not include any conjecture, opinions, or assumptions. Again, the goal is not to deal with a single bad occurrence, but to come up with a permanent solution that will prevent the same thing from happening in the future.
How and why would you use a problem statement?
Problems happen all the time in business. As we already mentioned, the challenge with any problem is to stop it from happening again. A problem statement is a way to objectively collect and present information about the problem to facilitate the resolution of the problem.
Why can’t you just say “...here’s the problem, fix it?” Problems come in all shapes and sizes. If it is a straightforward issue, it may just be a short conversation, and then you fix it. For example, you’ve got a puddle of water on the floor under the sink. The sink is leaking (problem). Fix the leak and the problem is solved! However, most business problems are rarely this simple and require a lot more thought and effort to resolve them.
Many business problems revolve around trying to increase or maintain business. For example, if a company’s sales are slumping, then that should be treated as a problem. A problem statement would help the company to assess the situation and decide on the best course of action to increase sales.
As you can see, there are many situations where a well-written problem statement can be very helpful. Now we’ll get into how you can write an effective problem statement.
What is the best way to create a problem statement?
Writing a problem statement is not complicated, but it can be a daunting task if you’ve never had to create one before. Since we are focused on problems in business, the rules for good business writing apply. The first rule is to keep it brief. You do not want to overwhelm your audience or put them to sleep. Stick with just the necessary facts and don’t include too much detail or over-analysis.
A problem statement is like writing an informational or news article. The best practice for writing these types of articles is to follow the five Ws of writing. You write about the who, what, where, when, and why of a topic. If you can explain all these things, then you will probably have a very sound problem statement.
Who - who is impacted by the problem? Is it customers, employees, vendors, etc.? Be as specific as necessary to understand the problem.
What - what is the problem? What is causing the problem? If there are several issues involved, then explain all of those.
Where - where is the problem taking place? Is it specific to a department or location or product? Explain all the places where the problem is occurring.
When - when does the problem occur? How often does it happen? What are the timeframes involved? Anything relevant to understanding the duration and frequency of the incidents.
Why - why is it a problem? Why is this bad? Why does it need to be fixed?
If you can do a good job of explaining these in a clear and concise manner, then you will have done an excellent job of providing all facts related to the problem.
The last part of the problem statement is action items or the next steps to be taken. Some problem statements are more extensive and include root cause analysis and proposed solutions. However, a pure problem statement does not include these things because it’s intended to provide management with information about a problem that needs to be fixed. Researching the root cause and proposing fixes usually involves additional extensive effort and expenditures, which need to be authorized prior to being completed.
- Stick to what the problem is
- Use only factual information
- Provide the proposed next steps
- Develop a root cause and solution only if that is in scope for the problem statement effort
- Describe the symptoms of the issue rather than the actual problem
- Make assumptions or provide opinions about anything
- Accuse anyone of causing the problem
2 Examples of problem statements
First example: Operating costs have increased 30 percent this year
Problem: Year-over-year costs of operations have increased 30 percent this year. This is nearly evenly distributed across all our worldwide locations and offices.
Details: Our FP&A group has reported that our operational costs are 30 percent more this year than they were last year. They also noted that costs started increasing substantially in Q2 of last year and continued rising for all four quarters of this year. This is in contrast to sales and revenues that have stayed fairly stable, with a consistent increase of around 10 percent per quarter.
Impact: The increase in costs is decreasing overall profits by 18 to 23 percent per quarter. Accounting is forecasting that costs will continue to increase, and, if not corrected, will significantly impact the bottom line.
Next steps: Perform a deep financial analysis of all operating costs for all locations in the company. Identify any cost inefficiencies and bookkeeping errors. Assess accounting and financial management procedures for process issues. Develop and implement comprehensive cost reduction plans to effectively get operating costs under control and improve profitability. Monitor key performance indicators (KPIs) such as overall costs, expenditures, and depreciation to measure the success of the cost control initiatives.
Second example: Product delivery times for West Coast warehouses
Problem: The average fulfillment time for customer orders currently exceeds eight business days for all distribution centers on the West Coast. Customers are complaining that delivery times are too long.
Details: As recently as Q4 of last year, average delivery time for these locations were under four business days. Average delivery times for all of last year were between three and five business days. Customer satisfaction is dropping because of the long fulfillment times, based on customer satisfaction survey results from last quarter.
Impact: Customer orders are decreasing for the West Coast. Customers are buying locally and or taking their business elsewhere. The decrease in customer satisfaction scores is correlated with decreases in orders and overall sales. This could lead to further erosion of revenues and losses in our customer base.
Next steps: Analyze the current warehouse fulfillment workflows and identify bottlenecks. Assess the staffing levels at all warehouses impacted to determine if understaffing is part of the issue. Develop and implement strategies to optimize the shipping processes and reduce delivery times. Evaluate and adjust staffing, if needed. Monitor key performance indicators (KPIs), customer satisfaction surveys, and customer feedback. Reassess performance and make further adjustments as needed.
Understand what the problem is, versus the symptoms.
Include just the facts and don’t include any speculation or opinions.
Follow the five Ws, the who, what, where, when, and why.
Be brief and brilliant - a concise problem statement is most effective and less confusing.
Propose a clear plan with defined action items and instructions on measuring success.