The 5 WHYs – Ultimate Tool for Root Cause Analysis in Finance

Introduction to the 5 WHYs - ultimate tool for Root Cause analysis on a blue and white background with an illustration.

Five whys (or 5 whys) is an iterative interrogative technique used to explore the cause-and-effect relationships underlying a particular problem.

The primary goal of the technique is to determine the root cause of a defect or problem by repeating the question “Why?”. Each answer forms the basis of the next question. The “five” in the name derives from an anecdotal observation of the number of iterations needed to resolve the problem.

The method provides no hard and fast rules about what lines of questions to explore or how long to continue the search for additional root causes. Thus, even when the method is closely followed, the outcome still depends upon the knowledge and persistence of the people involved.


Sakichi Toyoda, the Japanese industrialist, inventor, and founder of Toyota Industries, developed the 5 Whys technique in the 1930s. It became popular in the 1970s, and Toyota still uses it to solve problems today.

Toyota has a “go and see” philosophy. This means that its decision-making is based on an in-depth understanding of what’s actually happening on the shop floor rather than on what someone in a boardroom thinks might be happening.

The 5 Whys technique is true to this tradition, and it is most effective when the answers come from people who have hands-on experience with the process or problem in question.

Also, the method is remarkably simple: when a problem occurs, you drill down to its root cause by asking “Why?” five times. Then, when a countermeasure becomes apparent, you follow it through to prevent the issue from recurring.

Example of The 5 Whys

Delays in sales in a production company:

  1. Why is the turnover lower by 20% when you compare it with the budget?

It’s because we have delays on two major projects.

  1. Why?

Because it takes more time to build the product as normal.

  1. Why?

It is that it is a new product, and there are new technical requirements that need modification before production.

  1. Why?

Because the feasibility of the new technical requirements was not validated beforehand with the production.

  1. Why?

Because to reduce the price and satisfy the client’s demand, we changed the design at the last minute without following the normal process of validating these design changes with the production.


You can complete the 5 Whys test most easily by writing it down on a sheet of paper. The fishbone or the Ishikawa diagram, however, might be useful when first detecting issues.

The graphic may highlight issues that require a closer examination using the five whys. You can gather the links between the underlying causes and their effects. Then, you can assess which of them had the most influence on the initial issue.

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