Chapter 6: Guidelines for the Root Cause Analysis

Once the preliminary analysis and the initial stage of stakeholder engagement are complete, the selected country will begin to explore the range of underlying issues that give rise to the binding constraints to economic growth. To do so, the selected country will conduct targeted research and interviews and undertake a structured dialogue with stakeholders to ensure a clear understanding of the constraint and the range and nature of the underlying factors or issues that give rise to it. Through this root cause analysis, the selected country will begin the process of identifying and selecting specific issues that it could address through targeted investments and other activities. These specific issues will become the core problems that lie at the heart of the Concept Notes, the first indication of what the selected country aims to achieve with a compact program.

The remainder of this chapter describes the rationale, process, content and standards for a typical root cause analysis in more detail.

Rationale

A well-designed root cause analysis serves as a critical bridge between the identification of broad binding constraints and the selection of specific issues around which Concept Notes – and eventually proposed projects – can be constructed. Of course, a strong root cause analysis does much more than help a selected county achieve greater focus. It also supports the following goals:

• Generates engagement with a wide array of stakeholders and raises awareness of their different perspectives on the binding constraint and its underlying drivers, leading to a more complete understanding of the issues at stake;
• Separates discussion about the symptoms and manifestations of a problem from analysis of its underlying causes;
• Breaks large, complex, economic development problems into smaller components that can more easily be analyzed, addressed, and managed;
• Builds logical thinking about the cause-and-effect relationships between various factors that contribute to a problem, leading to a framework for understanding where change must occur;
• Compels stakeholders to discuss a wide range of underlying causes, including the role of policies and institutions and the reasons for limited funding and poorly functioning services;
• Helps identify areas in which data, evidence, or other information is needed to clarify the nature, extent, or underlying causes of a particular issue;
• Captures the understanding of the constraint, its underlying drivers and the root causes in a simple, visual representation that can easily be shared with others; and
• Facilitates identification and prioritization of underlying problems and issues that can be addressed through targeted investments and activities.

Preparation and participation

Typically, a Compact Development Team will prepare for a root cause analysis by conducting preliminary research and a series of preparatory interviews with a range of stakeholders to gain a clear, baseline understanding of the constraint and the economic sector or system to which it most closely relates. While the nature of such preparations will vary, a Compact Development Team should use them to build an understanding of the perspectives: of public institutions that govern and organize the sector, subject matter experts, providers of goods and services in the sector, and users or beneficiaries. Preparations should also help the Compact Development Team build a solid knowledge of recent, ongoing, or planned efforts to address the constraint, whether by the selected country government, international development partners, or other actors.

Following these preparations, the Compact Development Team often convenes one or more workshops to foster structured dialogue about the binding constraint and its underlying drivers. A workshop typically brings together stakeholders who are carefully selected from different backgrounds to reflect an array of views and experiences with various aspects of the constraint. Such stakeholders may be drawn from government agencies, universities or research institutes, industry groups or private companies, utilities or other service providers, consumer groups or end users, non-governmental organizations, local officials, or target beneficiaries. International development partners may also make good participants, given their outside perspective and knowledge of conditions in other countries.

To frame the dialogue, the Compact Development Team may find it useful to disseminate some of its initial research and interview findings, in an effort to ensure that all participants in the workshop share a basic understanding of the problem. For this purpose, information on various aspects of the sector or the systems in question may be useful, including relevant laws and policies, the governance and oversight structure, the roles and responsibilities of various public agencies (and in many cases, private companies) that operate in the sector, the role of the sector in the overall economy, the geographic extent or range of services provided to end users, the costs of service provision, the financial condition of utilities or public sector corporations and other technical information, such as estimated levels of technical losses in an electricity or water system or a catalogue of road conditions for a transportation system.

Conducting the root cause analysis

During the workshop, stakeholders discuss the relevant binding constraint identified through the constraints analysis. To start, they often reframe, clarify or refine the binding constraint into a clear, straightforward problem (known as the focal problem) that lends itself to detailed analysis. They then begin to break down the broad constraint into its component parts by posing the question: what causes the problem? Through discussion, dialogue and debate, they ultimately reach agreement around a series of smaller, underlying, causal factors, and through further questioning, proceed to break each of those factors into its underlying causes. They continue with this cause-and-effect analysis until they expose the root causes of the binding constraint.

In pulling apart broad bindings constraints in this way, stakeholders help reveal the unique nature of the problem their country confronts. For instance, in a country where unreliable electricity is a binding constraint, stakeholders may help determine that the power utility’s overloaded transmission lines and outdated equipment are an important contributing factor. Pushing the analysis further, they may note that persistent underfunding of periodic maintenance explains the utility’s poor maintenance, and that extremely low tariff levels are a root cause of the problem, because they allow the utility virtually no budget to invest in new equipment. Yet in other countries with a similar binding constraint, stakeholders may find very different underlying drivers and root causes. For instance, in one country, stakeholders may find that the power utility has state-of-the-art equipment and a regular schedule of periodic maintenance, but that it relies heavily on generation from hydropower facilities concentrated along the main river. Pushing the analysis further, they may note that rapid deforestation along the river has exacerbated variability in the river flow and contributed to silting up the hydropower dams, thus explaining periodic dips in electricity supply. And in a second country, stakeholders may find that sharp peaks in demand for electric power are an important driver of unreliability, requiring more power than the electric grid was set up to support. Pushing the analysis further, they may note that big, inefficient factories make heavy demands on the power system in the late afternoon and evening, at the same time that household demand rises as employees return home from their daily jobs to turn on stoves, washing machines, air conditioners, and other household appliances. In this way, root cause analysis can lead to very different insights into constraints that may seem – at least on the surface – to be very similar.

Beyond disaggregating binding constraints along logical lines, the root cause analysis may also help shed light on the relative weighting or importance of its different underlying drivers. To achieve this end, the Compact Development Team should encourage stakeholders to provide as much data and evidence about the underlying issues and problems as possible. Where sufficient data and evidence is not available, however, stakeholders should note the need for additional information and continue their analysis. Later steps in the process will provide opportunities to collect, generate and validate additional information, where necessary to further understand the nature of the underlying issues.

The specific methodology for this kind of root cause analysis can vary. The Compact Development Team may look to other economic development agencies or international development partners for useful tools or frameworks for the root cause analysis. For example, the Asia Development Bank (ADB) and the German Gesellschaft für Technische Zusammenarbeit (GTZ) use a Results-Focused Project Design strategy, commonly known as a “problem tree” approach. The United Kingdom’s Department for International Development (DFID) employs a Systems Analysis strategy to assess systems that underlie complex economic development issues. And other organizations are following the lead of technology and consumer goods companies by employing Participatory Design or Human Centered Design strategies for continuously testing and refining their understanding of developmental challenges with end users and target beneficiaries.

In the end, the root cause analysis should generate a detailed understanding of a binding constraint, including clarity on the range of underlying drivers and root causes that give rise to it. This understanding should be documented in a simplified, visual format that clearly and easily conveys the root causes and the cause-and-effect relationships by which they lead to the binding constraint. One such representation is a problem tree, a graphic representation that depicts the focal problem in the center as the trunk, with layers of underlying causes as roots and effects or implications above as branches.

Timeline and results

The Compact Development Team should aim to start the root cause analysis as soon as possible after the identification of binding constraints. To do so, it must move quickly to recruit additional staff, including an M&E specialist, an environmental and social performance specialist and relevant sector specialists (as described in Chapter 5). These additional staff will be instrumental in conducting initial research and background interviews.

The Compact Development Team should aim to conduct its first stakeholder workshop within two (2) months following the identification of binding constraints, to dedicate some time to validating the root cause analysis with various groups of stakeholders, and to finalize its problem tree or other visual representation not more than a month later. This will allow the team to identify one or more core problems and then quickly to begin developing and drafting Concept Notes for submission to MCC (as described in Chapter 7).