Issue Tree: What It Is & How It Helps You Pass Case Interviews

Liz Kenney
Liz Kenney

Former McKinsey

Issue Tree

 

One of the keys to nailing a case interview is to demonstrate that you can quickly structure your thoughts and that you are a good communicator. In this article, we want to help you add another communication tool to your skillset: issue trees.  

It’s OK if you are not familiar with issues trees, also known as decision trees. Most people haven’t heard of them before they begin preparing for consulting case interviews.

Alas, issues trees aren’t a quirky new holiday tradition where you decorate a festive maple tree with a card asking your uncle to stop sending you chain emails.

Issue trees are visual tools that are used in consulting to help the team:

  • Identify key issues in complex business problems, 
  • Lead their discussions,
  • Determine how the work and resources should be allocated to solve the problem, and 
  • Ultimately lead to identifying a solution.

They look like a (horizontal) tree: they flow from the top of the tree on the left to smaller branches on the right. 

We’ll talk you through the process of putting the right questions at the top of the issues tree, and how to ask questions to get to the root causes on the right side of the page. 

In this article, we’ll discuss:

  • What issue trees are,
  • Why issue trees are important in consulting case interviews,
  • How to build your own issue trees & decision trees,
  • How to use them to pass your consulting interview,
  • We’ll also provide issue tree examples, 
  • Tell you how to incorporate issue trees & decision trees into your case prep, and
  • Provide 6 tips for creating an issue tree.

Let’s get started!

What Is an Issue Tree?

Definition: Issue trees are visual diagrams that you can use to break down a larger problem or question into several smaller questions. You can use the issue tree as a structure for your consulting case interview. 

What about just using the simple outline structure you’ve been using to structure cases? Outlines are great. Issue trees are next level. 

Issue Trees

Outlines and issue trees both organize the questions you’re looking to address. Issue trees also help you communicate more effectively because they visually show relationships between the initial high-level questions and root cause questions. 

When you’ve completed your issue tree, you should have a complete set of the most important areas to explore in order to answer your client’s questions.

Why Issue Trees Are Important In Consulting Case Interviews

In consulting, you’re going to be using a lot of visual frameworks to communicate ideas because it’s easier to communicate with clients and get them on board if there are visual cues for them to anchor on. In the case interview, using an issue tree is your chance to show the interviewer that you are comfortable using a visual framework. 

The issue tree also allows the interviewer to feel confident that your thought process is well-structured, that you’ve covered all key aspects of the case, and that you understand how various components are related to the problem you’re trying to solve. 

There’s another reason to use an issue tree in your cases. You can show off two of your skills in one structure

  • Mastery of business or conceptual theories and how they work together,
  • How you apply unique insights to the problem.

For example, in a consumer goods profitability case – let’s say the retail beer market – you obviously want to dig into the structure of revenue: price and volume. 

That shows you know the profitability framework and revenue drivers. 

But anyone can memorize revenue drivers.  

You can show your own creativity and how you connect concepts to reality. For example, when discussing price, you can ask a few more detailed questions to show that you understand the underlying drivers of price

  • Distribution channels: Are we looking at beer prices in the grocery store or in bars? 
  • Product mix: Are we looking at domestic, mass-produced beers or craft beers? 

These deeper layers are kind of common sense, but when you connect revenue to price to price drivers, it shows that you understand how to relate information back to price and ultimately back to revenue. 

Now let’s look at how to build an issues tree.

How to Build Your Own Issue Trees & Decision Trees

There are many different types of issue trees and decision trees. The most common in case interviews include a series of questions that will help you answer your client’s main questions. 

You can alternately frame the issue tree as a series of hypothesis statements. You typically won’t be able to do this as soon as you’re presented with the case question by your interviewer, but can ask questions during the opening section of the case that will help you identify hypotheses to test.

How to Use Questions to Build an Issue Tree

At this stage, we’re trying to understand the root causes of your client’s problem. 

What’s a root cause? It’s the underlying reason why something has happened. 

There are a few different ways to get to the underlying cause. In our issue trees, we use two types of questions: 

  • Hypothesis questions: these are questions that have an answer of yes or no. Some examples include:
    • Can we grow profits to $100 million per year? 
    • Can we grow market share to over 5%?
  • Open-ended questions: these are questions that can be answered with one or multiple data points. They inform the interviewer of data points you require and will analyze before you reach an answer. Some examples include:
    • What types of beer does the client sell? 
    • How fast is the beer market growing?

In case interviews, it’s best to use hypothesis questions for the first 2 layers, if you can.

By the 3rd or 4th layer of your trees, it’s best to use open questions to encourage exploration and avoid closing yourself off from possible answers. 

A Step-by-step Guide to Building Your Own Issue Trees and Decision Trees

 

  • Start with a blank piece of paper, oriented horizontally.
  1. Note key facts. About one inch from the left side of the page, draw a vertical line down the page. To the left of this line, jot down key facts during the case introduction.
  2. Take about 30 seconds to think about how you want to break down the problem. If you start writing before you think it through, you may run out of space while you’re diving into a specific branch of the tree,
  3. Flesh out your issue tree. It should ideally have 3 – 4 layers across the page, and each layer can have 2 – 5 sub-questions. 
    1. 1st layer: write down the question or problem you are trying to address framed as a Yes/No question, 
    2. 2nd layer: write 2 – 5 Yes/No questions. These questions can align with business frameworks like those listed below or the issues you identify. 
      1. Revenue and expense, supply and demand,
      2. 3 C’s (Customer, Competitor, Company),
      3. 4 P’s (Product, Price, Promotion, Place),
    3. 3rd layer: write another 2 – 4 questions for each 2nd layer box and start to use open-ended questions, 
    4. 4th layer: You won’t always need a 4th layer at this stage. If you do, keep the questions open-ended, 
  4. Add color commentary. Add color commentary in the 3rd and 4th layers of your issues tree. This is where you can demonstrate that you’ve internalized the business concepts and can apply them to this unique situation. Demonstrate your industry knowledge and your understanding of the case facts provided so far. 
    1. Tip: Make sure what you’re adding is relevant and useful to the case, or else you might simply distract the interviewer with color that doesn’t add value. 
  5. Once you’ve drawn all the branches and boxes, step back and look at your tree for a moment.
    1. Is your issue tree MECE? MECE stands for mutually exclusive and collectively exhausting. It means you should cover all key points on the topic and that there should not be overlap between the points. For more on this, see our article on MECE.
    2. Is there a good distribution of sub-questions under each point? If there are too many sub-questions under one branch and none beneath another, you may need to even this out either by adding more sub-questions, or double checking if you have the right branches.

Now that we know how to build a tree, let’s look at how to use it in your consulting interview.

How to Use an Issue Tree to Pass Your Consulting Interview

During your case interview, you should use your issue tree to organize your thinking and as a communication tool.

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Using an Issue Tree to Organize Your Thoughts

Once you’ve confirmed the problem you’re trying to solve and asked any clarifying questions, you will want to structure the problem. This is the time to use an issue tree!

Spend some time – this could be even a few minutes – to organize your thoughts on paper as we described above. You have options for how to organize your issue tree:

  • Boxes vs. no boxes: You don’t have to draw boxes around your questions. It does add a layer of professionalism but don’t sweat it if it stresses you out.

  • Headlines vs. full text
    • You can write out the full question: Will revenue grow more than 5%?
    • You can write out a shorthand reminder for yourself: Rev > 5%?

Using Issue Trees as a Communication Tool

Issue trees are communications tools, not a script. You should not read directly from your tree for five minutes. 

Top tips on how to use your issue tree in a discussion:

  • Use the issue tree to prompt you through different parts of the discussion, 
  • Start on the left, and work your way across and down the page. Avoid hopping all over the page,
  • Communicate using ordinal numbers, such as “We have 4 branches to look at. For the first branch, I want to understand…,” to make it easier for the interviewer to follow you as you walk him through your tree,
  • Refer to the issue tree when you want to see what to discuss next and in case you forgot anything you had written down,
  • Focus on the interviewer as you discuss the details of each question, and
  • Refer back to it as you present your recommendation to ensure you hit all key points.

Some cases, especially in second round interviews, don’t easily lend themselves to issues trees. Don’t sweat it – go back to the outline structure and knock your case out of the park. 

When you use an issue tree, you’re demonstrating next-level communication skills. 

Let’s dive into some examples

Issue Tree Examples

You can use them to examine almost any problem.

Issue Tree Example 1:

Let’s start with a traditional case question: 

Your client manufactures tools for mechanics and auto services companies. They have experienced rising costs in their plant in Bulgaria, and are wondering if they should close the plant and move the production to one of their other facilities. 

Our 1st layer of the tree is the client’s question:

Should our client shut down its only tool manufacturing plant in Bulgaria?

Our 2nd layer of the tree will have three boxes:

  • Financial considerations
  • Operational considerations
  • Branding considerations

Financial considerations

The hypothesis question we want to ask is: 

Will the company be better off financially if they close the plant?  

There are 5 key financial areas to explore in the 3rd layer:

  • Plant operating expenses
  • One-time costs if the plant is closed
  • Distribution expenses
  • Government incentives
  • Revenue
  • Plant Operating Expenses – this branch has a fourth layer of variable and fixed costs: 
    • Variable Costs
      • What are the variable costs per unit?
      • Example color commentary you could make when you discuss this branch of the tree: perhaps labor has gotten very expensive and that is driving the company to consider this move.
    • Fixed Costs
      • What are the facilities costs of the plant?
      • Example of color commentary: Perhaps land/space was cheap when the plant was opened but no longer is. 
  • One-time costs if the plant is closed
    • What are the costs associated with closing the plant?
    • What are severance costs?
    • If the equipment needs to be moved, what are the moving costs?
  • Distribution Expenses
    • What are distribution costs today? 
    • What would distribution cost in the future be if production is sourced from another plant?
    • Will there be different tariffs if the product comes from another country?
  • Government Incentives
    • What incentives does the government offer to manufacturers?
    • Is the Bulgarian government offering any incentives to the company to stay in Bulgaria?
    • Do the incentives go toward existing operations or must they go toward new operations? 
    • Are there restrictions that come along with accepting the government incentives? 
    • Color commentary: The government may require that the company maintain a payroll with a certain number of employees or open for a certain number of shifts in order to receive incentives, etc. 
    • Are there any other tax benefits due to operating in Bulgaria?
  • Revenue
    • Will we lose sales in Bulgaria if we do not make the product there? 
    • Will we lose sales elsewhere if we do not produce the product in Bulgaria?

Operational considerations

The hypothesis question we want to ask is: 

Could the company produce the tools elsewhere? 

  • Capacity in other countries
    • Are there any plants that could absorb all the capacity needed? 
    • Could capacity be distributed to multiple plants?
    • How soon could the other plants ramp up?
  • Implications for distribution
    • Where are the products sold?
    • How would relocation of manufacturing affect lead-time on delivery? 
    • Would a distribution facility be required to meet lead-times required by customers?

Brand considerations

The hypothesis question we want to ask is:

Would the brand suffer if manufacturing was moved to another country? 

  • How much bad press do we expect? 
  • Will the savings from closing the plant be sufficient to offset any impact on the brand?

There you have it, a complete issue tree for this case discussion!

Note how this issue tree is uneven. There are so many more branches to explore in the financial considerations section. That’s okay as long as you’ve covered each branch sufficiently.

As a way to recap your structure, you can even note to your interviewer that the final decision will mainly revolve on financial considerations, but they will be weighed against operational and brand considerations. 

Let’s look at another case that might be more typical in a second round interview.

Issue Tree Example 2:

Sometimes in your second round interviews, partners can get bored with cases they’ve given a million times. So just like Law & Order, your case interview might be ripped from the headlines. Let’s take that approach for this example:

Why was there no toilet paper on the shelves of North American retailers during the first wave of the COVID-19 pandemic? 

Let’s dive into an issue tree for this question. 

If you’re lucky, like we are here, you can layer in a business framework. 

Don’t force a framework if nothing comes to mind. You want to practice structuring enough cases that you’re not gonna miss an obvious framework like this one. 

Our 1st level of the tree will include the question: 

Was demand for toilet paper actually greater than supply in North America during the first wave of the COVID-19 pandemic? 

Our 2nd layer of the tree will have two boxes:

  • Toilet Paper Demand
  • Toilet Paper Supply 

Toilet Paper Demand

The hypothesis question we want to ask is:

Was there a demand shock for toilet paper in North America?

There are three areas to explore in the 3rd layer:

  • Toilet paper usage
  • Consumer shopping behavior
  • Alternatives for toilet paper
  • Toilet Paper Usage: How did toilet paper usage change during the first wave of the pandemic? 
    • How many rolls per week did one household typically use?
    • How much more time were people spending at home during the first wave of the pandemic vs. at work?
    • How did that impact toilet paper usage?
    • Superstar commentary: If you recognize that people are home and awake almost double the normal amount of time, you could assert here that toilet paper used at home may have doubled!
  • Consumer Shopping Behavior: How did consumer shopping behavior change during the first wave of the pandemic? 
    • How often do Americans typically buy toilet paper at a retailer?
    • Did the number of visits increase during the first wave of the pandemic?
    • How did the lockdowns (and anticipation of the lockdowns) impact shopping behaviors? 
    • What role did panic buying play?
    • Superstar commentary: While long-term demand for TP didn’t change, demand for commercial TP (used in businesses and retail stores) dropped substantially because everyone was self-isolating. This was more than offset by the fact that home use of TP probably doubled and actual demand more than doubled due to panic buying.

When you look back at the above, you can see that residential toilet paper usage likely doubled, and purchases increased because of panic buying. Even though we don’t have hard data, we were able to ask the right set of questions and articulate that this probably was a demand shock.

Again – this is a partner-level case question. They want to see how you think but also be engaged in an interesting conversation.

There’s one more question to address on the demand side. 

  • Alternatives for toilet paper: Are there adequate alternatives to toilet paper? 

The answer is no, and this is a great way to transition to the supply chain. 

Can we meet the increased demand by making changes in the supply chain? Let’s take a look at the supply chain for toilet paper.

Toilet Paper Supply

The hypothesis question we want to ask is:

Was there a supply shortage for toilet paper in North America?

Let’s evaluate our options on the supply side. In the 3rd layer, we’re going to look at: 

  • Forecasting
  • Raw materials and other inputs
  • Manufacturing capacity
  • Inventory positions
  • Shipping 
  • Retailer stocking programs
  • Forecasting: Did toilet paper manufacturers forecast this demand surge? 
    • How do toilet paper suppliers forecast toilet paper demand?
    • How much toilet paper do suppliers produce in a year?
    • Superstar commentary: Toilet paper demand has likely been very stable over the past several decades. It’s unlikely that manufacturers have accounted for a spike in demand. 
  • Raw Materials and other inputs: Do suppliers have enough raw materials to meet the demand spike? 
    • What are the main inputs to toilet paper?
    • Is there sufficient supply of pulp to accommodate demand surges? 
    • Were there any barriers to pulp importation due to COVID (e.g., lack of supply due to sick employees or reduced manpower due to social distancing)?
    • Are there any other inputs to toilet paper? 
  • Manufacturing capacity: Can manufacturing facilities accommodate demand surges?
    • What is the utilization of toilet paper manufacturing plants?
    • What is the capacity of toilet paper manufacturing plants? What does it take to ramp up capacity?
    • Can capacity be transferred easily from machines that make TP for the home market vs. the commercial market?
    • Are there other facilities that could be repurposed to produce toilet paper? 
    • Superstar commentary: 
      • Most US manufacturers utilize “just-in-time” manufacturing, meaning they only make as much as they need in the near-term, and do not stockpile extra products. It’s likely that toilet paper is made on an as-needed basis, and that manufacturers would have to redirect capacity from something else in order to ramp up capacity. 
      • Sounds easy, but it’s actually very difficult to repurpose other manufacturing lines to produce toilet paper. Even commercial toilet paper machines can’t easily be repurposed to produce residential TP. Manufacturers had a hard time keeping up. 
  • Inventory positions: Should inventory be increased to accommodate demand surges?
    • Should more inventory be increased at the manufacturing plants?
    • Should more inventory be increased at retailer warehouses and stores?
  • Shipping: Can the shipping industry accommodate demand surges? 
    • Superstar commentary: Given the increase in sales of all grocery products, it’s also likely the shipping capacity got very tight. And who’s to say that toilet paper is more important than Double Stuffed Oreos? (Not me!) 
  • Retailer stocking programs

Looks like you’ve got a pretty comprehensive set of questions and hypotheses to explore. Let your interviewer guide you through the supply questions.

Now that you’ve learned about issue trees and reviewed these examples, what should you do next?

How to Incorporate Issue Trees & Decision Trees into Your Case Prep

Let’s talk about how you can get good at issue trees. 

  • Become fluent in using issue trees for basic frameworks. Here are some basic business frameworks that are helpful to know. Keep them in mind so you can build off them quickly rather than building every one from scratch.
  • Practice. When I was doing case prep, I spent time just practicing issue tree structure. I didn’t finish the cases, just created the trees. Once I was confident with issue trees, I moved on to full cases. 
  • Get creative. Issue trees can be applied to things other than consulting cases. Apply them to decisions you need to make in your daily life.

So now we’ve covered all things related to issue trees! Let’s wrap it up with our top tips.

6 Tips for Creating Great Issue Trees

1. Practice writing out issue trees for all the basic frameworks.
You want to be fluent in issue trees for profitability, supply and demand, and other basic business frameworks.

2. Take time to envision your framework before you start writing.
60-90 seconds is good because you want to leave enough time for your analysis. Don’t stress about the silence while you’re building your framework. It will be worth it to make sure your approach is solid.

3. Make it MECE. You want the interviewer to feel confident that you have all bases covered and that you will approach the problem in an organized way.

4. Aim for 3 – 4 layers in your issue tree.
If you only have 2 layers, you may not be going deep enough to hit key issues. If you go any deeper, you will be in the weeds of the problem.

5. Use your issue tree as a communication tool.
Get comfortable shifting your focus back and forth between the issue tree (to make sure you are covering all your points) and your interviewer (to communicate your analysis and recommendations).

6. Leverage the issue tree throughout the interview.
It’s a tool that should let you shine in the case interview by helping you stay on track as you work toward a recommendation and remind you of the question you need to answer.

In this article, we’ve covered:

  • What Issue Trees Are,
  • Why Issue Trees Are Important in Consulting Case Interviews,
  • How to Build Your Own Issue Trees and Decision Trees,
  • How to Use them to Pass Your Consulting Interview,
  • Issue Tree Examples,
  • How to Incorporate Issue Trees & Decision Trees into your Case Prep, and
  • 6 Tips for Creating Issue Trees.

Still Have Questions?

If you have more questions about creating issue trees, leave them in the comments below. One of My Consulting Offer’s case coaches will answer them.

Other people studying issue trees found the following pages helpful:

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