Looking for issue trees examples

Can anyone help with a drawing or two or maybe a good explanation on issue trees? Thanks

Issue trees are relatively simple to create after some practice - the idea is to break down a problem to root causes in a MECE manner (Mutually Exclusive, Collectively Exhaustive) to pinpoint a client's problem. Here's a pretty good example:

http://faculty.msb.edu/homak/homahelpsite/webhelp/Content/image202.gif

You start with a high-level issue that will likely be the case question you are being asked; in the example above it's that a bank's profitability is declining. There are only two ways profitability can decline; revenue goes down or expenses go up (also note that both can happen simultaneously). Every root cause you can come up with is related to either revenue going up or expenses going down – this is how we will go about running a MECE analysis so that we can pinpoint root causes to declining profitability. Go down the next layer; revenue decreasing can only be caused by two different phenomenon (or both simultaneously)—prices going down or quantities sold going down. Now look at “increased expenses;” the author has selected “non-interest expenses increasing” and “interest expenses increasing” which makes sense because you’re talking about a bank and bank revenues and expenses are closely tied to NIM (net interest margin). Beneath “non-interest expenses increasing” are “VC increasing” and “FC increasing.” This is an interesting point – in most industries this would be the L3 (third level) but, in banking unlike, say, manufacturing, interest expenses don’t have fixed components. Had they been flipped, you would have to include non-interest expenses in both fixed and variable costs and therefore the decision tree would not be mutually exclusive, breaking the principle of MECE. I still don't like "interest expenses increasing" and "non interest expense increasing" because interest also has an effect on revenue so doesn't seem very mutually exclusive.... if I had more time I'd offer a solution but someone else can feel free to chime in.

The purpose of this exercise is to organize your thinking and pinpoint where a company is running into issues. Fairly simple research and analysis can typically pinpoint the company’s issue several layers down the decision tree so that you can attack the root causes of a company’s problems. In your interview, make sure you’re narrating WHY you are breaking down a problem the way you are (there are multiple ways to create a decision tree and there can be multiple “correct” answers) and, just as importantly, explain how as you move up and down the decision tree you are breaking down the problem in a MECE manner to converge on the root cause of the company’s problem. The next step would be to deep-dive into the deep issue(s) you uncover - this would be beyond the scope of a case interview and something an engagement would be built on - you may be asked to opine on solving the root issue by offering up some examples so prepare for that. The deep-dive analysis is then boiled up and put in context of the decision tree to highlight to executives exactly where their problem is and what the effect of resolving it would be.

Hope that helps! Also hope others chime in - different firms treat this differently.