Operational Turnarounds and The Power of Asking “Why”

We were in big trouble. Our VC-backed, high-volume sales business, experiencing rapid hyper-growth, had hit a wall. We were a third-party seller of other companies' products, and much of what we sold wasn’t getting activated and going live. No activation = no revenue. We were stalling, and a nosedive seemed inevitable.

A deeper look into the problem 

We sold these products over the phone in a call center, collecting as much information as we could from the customer during the initial conversation. After that, a separate team would handle order entry to activate those orders.

Sometimes, an order would go live in minutes—everything working as planned. Other times, we'd face issues that required a callback to the customer. One example: at the time, we couldn’t run a customer’s credit on the initial sales call. When we ran it later during the order entry process, the provider might request an upfront deposit due to lower credit. This would require us to call the customer back and collect the money to activate the product. And this was just one of many examples where post-sale reach-back was needed.

Due to our ineffectiveness in activating orders—especially those with headwinds—we were suffering financially, reputationally (customer satisfaction), and internally (no activation = no sales commission). 

We had multiple teams attempt to solve the problem. The usual "causes" were always identified, with most of the blame consistently placed on the order entry team in South America: sub-par training, a lack of accountability, and no focus. The typical stuff. Changes were made, but the results never improved.

I joined the company and was now tasked with solving the problem. We made it a critical initiative for the Revenue Assurance team I led and we used a formal Six Sigma approach to dive deep.

But we didn’t have to look far to find the culprits.

We began by analyzing the data to narrow down the problem and then focused on solving the smaller pieces that had the bigger impacts. Think Pareto Principle.

At the time, I had a 4.5-year-old at home who asked "why" what seemed like 100 times a day. Ironically, it made me question a lot of things we did—why did we do them? In some cases, the reasons no longer made sense.

It also reminded me of a process improvement tool called “The 5 Whys,” which is a simple yet effective problem-solving tool used to explore cause-and-effect relationships underlying an issue. It’s often employed to identify the root cause of a problem. We made sure this was part of our toolkit.

Here’s how it works:

1. Ask "Why?" – Start by asking why the problem occurred.

2. Ask "Why?" again – Once you have an answer, ask why that happened.

3. Repeat – Continue asking "Why" to each answer, usually up to five times (though it's not a hard rule). Each "Why" helps you dig deeper into the cause of the problem, uncovering layers of issues along the way.

The idea is that, after asking "Why" five(ish) times, you'll often uncover an actionable root cause that can be corrected.

So, after narrowing down the problem, we had enough open questions to start asking "Why." We immediately struck gold in our first round of questions.

The root cause problem? Compensation plan misalignment

This is how we got there by asking "why."

We found that some product orders had terrible activation rates, whereas others performed well. Why? First-pass completion on lower-activation orders was still good, but follow up activation on those problem orders (post first-pass) was incredibly low. Why? There was no customer reach-back when issues arose. Why? That was the process dictated by management. Why? Because management was compensated based on an order entry P&L margin metric, and these products had a lower order entry fee. If we incurred additional costs on these lower-revenue orders, our leaders would receive less in commissions. Wait, what?

Let me explain.

On average, we were paid hundreds of dollars for each activated order. But we also received a separate fee from our partners to offset order entry costs—typically between $2.5 - $15 per activated order. The commission plan for Operations leadership (at corporate) only accounted for this tiny slice of order entry revenue, not the hundreds of dollars we earned for an activated order. So, for the products/orders with a low order entry fee, even though we were still paid hundreds of dollars for activation, we were avoiding calling the customer back when there were issues. We were myopically stepping over dollars to pick up dimes.

We immediately adjusted the comp plan to reward overall revenue activation and changed the process to ensure we reached out to customers on all problem orders requiring engagement.

We then used “The 5 Why” tool to make other immediate improvements, such as better early-warning alerts and a redesign of our Customer Care process. We also challenged the sales process and implemented longer-term improvements, like leveraging technology to run customer credit during the initial call.

At the end of the day, we were quickly able to improve our activation rates by 30%, which was a life-saving improvement for our struggling business. I’ve never seen our CEO and CFO so happy.

Takeaways:

• Asking “Why” is a simple and effective way to uncover the root cause of a problem. Don’t wait for a problem to escalate before asking “Why.”

• Ask, “Why do we even need this?” before investing time and resources in improving a process. While you may improve something, if it’s no longer adding value... why?

• Never stop asking why, as tech and AI are constantly changing what’s possible.

• One caveat: be careful of overusing “Why” when trying to build rapport. It can come across like an interrogation. Use open-ended “What” and “How” questions as well.

While curiosity may have killed the cat, regularly asking “Why” can give your business nine lives!

Image by Ross Mann from Pixabay