Hi, Yusufu!

Great question! I’d start by asking what the goal of the restructuring is. For instance, if the goal was increased profitability because profits have been falling gradually over time, I might structure my issue tree around the profitability formula.

Profitability = revenues – costs = (price x quantity) – (fixed costs + variable costs)

Then I’d start digging down into each.

This would be a good direction if the problem was firm-wide, across products and business units. The company’s fixed costs might be getting bloated.

But if there’s a new competitor, a new product, or some big change in the market that’s hurting performance, I might break the issue tree down by product lines or business units, or even just focus on the one or two areas where the insurance company is having the biggest problem.

For instance, if the insurance company is facing rising costs due the change in climate/claims due to severity of storms, I’d focus in increased costs from storm-related damage in each product line or business unit.

I hope that helps! Good luck with your issue tree!

At MCO, we mostly hand draw issue trees because when you’re in a case interview (or coaching people for case interviews), “quick and dirty” is the only option.

When I was at McKinsey, we used PowerPoint, but to be fair, we had help with creating the slides. When I was editing slides myself, I’d pull a page from an old deck with an issue tree that had a similar scale. That way, I wouldn’t need to mess a lot with the number/size of boxes.

Do other readers have software they like better for issue trees? Let us know!

Powerpoint’s hierarchy “smart chart” is a drag.

Ideally you’d have expand/collapse functionality.

Curious as to what you prefer

Thanks so much! We’re glad the article was helpful!

Here are some thoughts on your questions.

1. Is an issue tree always about identifying root causes of a problem (as some call the Why Tree), or does it generally also include possible solutions (the How Tree)?

McKinsey thinks of Issue Trees as the breakdown of the root causes of a problem and Decision Trees as the possible solutions that should be examined to solve the problem. These are separate, but we didn’t want to write a book on it fearing we’d lose people, so we went with the term Issue Trees as an umbrella term for both.

The key issue is ensuring the mutually exclusive, collectively exhausting categorization in each.

2. If an Issue Tree is a combination of the Why and How trees, is there a one-to-one and MECE discipline between the root cause and solution options.

Another good question!

I’d say the Issue Tree covers the root causes and the Decision Tree the solutions if you want to be perfectly clear with your terms. There could be a one-to-one, MECE correspondence between the branches on your Issue Tree and Decision Tree, but there doesn’t have to be.

Example 1 – no correspondence:

Let’s consider our Issue Tree Example of the Plant Closure Case. Our high-level branches were:
• Will the company be better of financially if they close the plant?
• Could the company produce tools elsewhere?
• Will the brand suffer if manufacturing is moved to another country?

Imagine a team was tasked with answering these questions in order to determine if the plant should close, and then following up with a recommendation on the new location for tool production and creating a plan for the move.

You would not need a Decision Tree branch for the first bullet. Once you’ve done the financial calculation and determined that the company would be better off closing the plant, that branch of analysis is finished.

Your Decision Tree could have 2 branches corresponding to the remaining Issue Tree 2 branches:
• Where should the company relocate the productions from the closed plant. This might have sub-branches such as Plant A, Plant B, and Greenfield.
• How could the company minimize the negative impact of shutting the plant. This might include sub-branches such as severance packages for displaced employees, clear communication of the reasons behind the plant closure decision, and a new brand awareness campaign.

Example 2 – one-to-one correspondence:

Let’s try a different example. Imagine there was a need to reduce costs at a corporate level for NextGen Games, a software company, by 10%. Your Issue Tree could breakdown the cost reduction ideas by allocating the savings goal down to the business units and the corporate overhead.

• How can the PC gaming division save 10% or more in costs?
• How can the console gaming division save 10% or more in costs?
• How can the mobile phone gaming division save 10% or more in costs?
• How can the cloud gaming division save 10% or more in costs?
• How can 10% or more be saved in corporate overhead?

The Issue Tree diving into NextGen’s cost problem would have further detail on the cost reduction options that would allow each group to meet the target with the least disruption to its business. These could include a travel freeze, putting off capital expenditures, or even a headcount reduction.

The Decision Tree for implementing NextGen’s cost problem could have the same 1st level branches, a one-to-one correspondence. But the lower-level branches would focus on the savings ideas that were applicable to each part of the business.

I hope this helps!

Best of luck with your problem-solving!