Chapter Two

Problem Definition/Formulation
Chapter Outline Chapter Objectives
2.1 Research Problem and problem 

Definition: Meaning and Importance 
2.2 The Problem-Definition Process o 

o Understand the business situation o 


o Identify key problem(s) from

symptoms
o 
o Identify the relevant variables

o Write research questions and/or o 
research hypotheses 
o Determine the unit of analysis o 
Chapter Objectives 

2.1. Research Problem and problem Definition: Meaning and Importance

What is a research problem?
A problem does not necessarily mean that something is seriously wrong with a current
situation that needs to be rectified immediately. A problem could simply indicate an interest
in an issue where finding the right answers might help to improve an existing situation. Thus,
a problem can be best described as any situation where a gap exists between the actual and
the desired ideal states.

A problem occurs when there is a difference between the current conditions and a more
preferable set of conditions. In other words, a gap exists between the way things are now and
a way that things could be better. The gap can come about in a number of ways:
1. Business performance is worse than expected business performance. For instance, sales,
profits, and margins could be below targets set by management. This is a very typical
type of problem analysis.
2. Actual business performance is less than possible business performance. Realization of
this gap first requires that management have some idea of what is possible. This may
form a research problem in and of itself.
3. Expected business performance is greater than possible business performance.
Sometimes, management has unrealistic views of possible performance levels—either too
high or too low.

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2.2. The Problem-Definition Process
The problem-definition process involves several interrelated steps. Sometimes, the
boundaries between each step aren’t exactly clear. But generally, completing one step leads
to the other and by the time the problem is defined, each of these steps has been addressed in
some way. The steps are
1. State the problem
2. Determine the relevant variables
3. Write research questions and/or research hypotheses, and research objectives
4. Determine the unit of analysis
2.2.1 Write “The problem Statement”
Problem Statement
A problem statement is the description of an issue currently existing which needs to be
addressed. It provides the context for the research study and generates the questions which
the research aims to answer. The statement of the problem is the focal point of any research.
A good problem statement is just one sentence (with several paragraphs of elaboration).

The problem statement is therefore the axis, which the whole research revolves around,
because it explains in short the aim of the research. The statement of the problem involves the
demarcation and formulation of the problem, i.e., the who/what, where, when, why.
What are key components of the statement problem? Problem statements often have three
elements:
1. The problem itself, stated clearly and with enough detail to establish why it is
important
2. The method of solving the problem, often stated as a claim or a working thesis
3. The purpose, statement of objective and scope of the project being proposed.
These elements should be brief so that the reader can get the idea easily. One page is enough
for a statement problem.
Criteria for Research Problem Statements:
o The statement of the problem should clearly indicate what is to be investigated.
o The actual statement may be in a declarative or in a question form.
o The statement should indicate the variables of interest and the specific relationship
between the variables that are to be studied
Examples of Well- defined problems:
o "The frequency of job layoffs is creating fear, anxiety, and a loss of productivity in
middle management workers."

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 o What factors were responsible for the lower labour productivity of Ethiopia’s
manufacturing industries during the time 20-to 20-relative to other African countries?
o To what extent has the new advertising campaign been successful in creating the high
quality, customer-centred corporate image that it was intended to produce?
o What are the effects of downsizing on the long-range patterns of companies?
o Does expansion of internal operations result in an enhancement of the firm’s image and
value?
2.2.2. Determine the relevant variables
What things should be studied to address a decision statement? Researchers answer this
question by identifying key variables. The term variable is an important one in research.
A variable is defined as anything that varies or changes in value. Variables can exhibit
differences in value, usually in magnitude or strength, or in direction. In research, a variable
is either observed or manipulated, in which case it is an experimental variable.

The converse of a variable is a constant. A constant is something that does not change.
Constants are not useful in addressing research questions. Since constants don’t change,
management isn’t very interested in hearing the key to the problem is something that won’t or
can’t be changed.
Types of Variables
1. Quantitative vs. Qualitative variables
Quantitative variable (Discrete and Continuous variables)
A discrete random variable may assume either a finite number of values or an infinite
sequence of values. A continuous variable is one that can take on a range of values that
correspond to some quantitative amount. Sales volume, profits, and margin are common
business metrics that represent continuous variables.
Qualitative / Categorical variable
Categorical variable is one that indicates membership in some group. The term
classificatory Variable is sometimes also used and is generally interchangeable with
categorical variable.
2. Four other types of variables
a) dependent variable (also known as the criterion variable)
b) independent variable (also known as the predictor variable)
c) Moderating variable
d) Intervening variable

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This distinction becomes very important in understanding how business processes can be
modeled by a researcher. The distinction must be clear before one can correctly apply certain
statistical procedures like multiple regression analysis. In some cases, however, such as when
only one variable is involved in a hypothesis, the researcher need not make this distinction.
A) Dependant Variable
The dependant variable is the variable of primary interest to the researcher. The researcher’s
goal is to understand and describe the dependant variable, or to explain its variability or to
predict it. In other words, it is the main variable that lends itself for investigation as a viable
factor. Through the analysis of the dependant variable (i.e. finding what variables influence
it) it is possible to find answers or solutions to the problem. For this purpose, the researcher
will be interested in quantifying and measuring the dependant variable as well as the other
variables that influence this variable.
Example 1
A manager is concerned that the sales of a new product introduced after test marketing it do
not meet with his expectations. The dependant variable here is sales. Since the sales of the
product can vary-can be low, medium, or high-it is a variable; since sales is the main focus of
interest to the manager, it is the dependant variable.
Example 2
A vice president is concerned that employees are not loyal to the organization, and in fact,
seem to switch their loyalty to other institutions. The dependant variable in this case is would
be organizational loyalty.
B) Independent Variable
An independent variable is one that influences the dependant variable in either a positive or
negative way. That is, when the independent variable is present, the dependent variable is
also present, and with each unit of change in the independent variable, there is a change in the
dependent variable also.
Example 1
Research indicates that successful new product development has an influence on the stock
market price the company. That is, the more successful the new product turns out to be, the
higher will be the stock market price of that firm. Therefore, the success of the new product is
the independent variable, and the stock market price the dependent variable.
Example 2
Cross-cultural research indicates that managerial values govern the power distance between
superiors and subordinates. Here, power distance is the subject of interest and hence the

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dependant variable. Managerial values that explain the variance in power distance is the
independent variable.
C) Moderating Variable
The moderating variable is the one that has a strong contingent effect on the independent-
dependent relationship. That is, the presence of a third variable (the moderating variable)
modifies the original relationship between the independent variable and the dependent
variable.
Example
A prevalent theory is that the diversity of the workforce (comprising people of different
ethnic origins, races, and nationalities) contributes more to organizational effectiveness
because each group brings its own special expertise and skills to the workforce. In this case,
organizational effectiveness is the dependant variable which is positively influenced by
workforce diversity-the independent variable. However, the effective utilization of different
talents, perspectives, and electric-problem solving capabilities for enhanced organizational
effectiveness is contingent on the skill of mangers in acting as a catalyst. This managerial
expertise then becomes the moderating variable.
D) Intervening variable
An intervening variable is one that surfaces between the time the independent variable start
operating to influence the dependant variable and the time their impact is felt on it. There is
thus a temporal quality or time dimension to the intervening variable.
Example
Where the independent variable workforce diversity influence influences the dependent
variable organizational effectiveness, the intervening variable that surfaces as a function of
the diversity in the workforce is creative synergy. This helps us to understand how
organizational effectiveness can result from having diversity in the workforce.
2.2.3. State the research questions and/or research Hypotheses, and research
objectives
Both manager and researchers expect problem definition efforts to result in statements of
research questions and research objectives
Research questions
A research question is the researcher’s translation of the business problem into a specific
need for inquiry. These research questions assume two forms: a central question and
associated sub questions. The central question is a statement of the question being examined
in the study in its most general form. A researcher asks one or two central questions followed
by no more than five to seven sub questions. Several sub questions follow each general

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central question and the sub question narrow the focus of the study but leave open the
questioning.

Example 1
“The problem is to determine the best ways our company can train existing and potential
users of networked personal computers.” (Problem Statement)
This problem statement led to the following research questions:
RQ1: How familiar are employees with the various software applications?
RQ2: what attitudes do employees have toward these software packages?
RQ3: How important are the various factors for evaluating the use of a PC?
RQ 4: How effective are training efforts in increasing knowledge and use of the new
applications?
Example 2
Should the organization offer outplacement services? (Research problem/central question)
RQ 1: Are managers aware of out placement questions?
RQ 2: How concerned are managers about out placement services?
RQ 3: Do employees prefer out placement services?
Research Hypothesis
Hypothesis is an unproven proposition or possible solution to a problem which can or may
not be real solutions. They are declarative statements that can be empirically tested.
Statements of Hypotheses: Formats
1. If----then statements
Example
o If employees are healthier, then they will take sick leave less frequently.
o If worker’s attitudes towards an organization climate are changed in positive direction,
there will be an increase in organizational effectiveness
2. Directional and non-directional Hypotheses
If, in stating the r/ship b/n variables or comparing two groups, terms such as positive,
negative, more than, less than and the like are used, then these hypotheses are directional
because the direction of the r/ship b/n the variables is indicated.
Example
o Sales person who show the highest job satisfaction will the most productive
o Opinion leaders are more effected by mass media communication sources than are
non leaders

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On the other hand, non-directional hypotheses are those that do not postulate a r/ship or
difference, but offer no indication of the direction of these r/ships or differences.
Example
o There is a r/ship b/n age and job satisfaction
o There is a d/nce b/n the work ethnic values of American and Asian employees.
3. Null and alternate Hypotheses
Null hypothesis
It states that the population correlation b/n two variables is equal to zero or that the difference
in the mean of two groups in the population is equal to zero (or some definite number). In
general, the null hypothesis is expresses as no (significant) r/ship b/n two variables or no
(significant) difference b/n two groups.
Alternate Hypothesis
It is, the opposite of null, a statement expressing a r/ship b/n two variables or indicating
d/nces b/n two groups.
Example (Standard use of languages in stating null hypotheses)
1. There is no relationship between utilization of ancillary support services and
academic persistence for non-traditional women college student.
2. There is no relationship between family support systems and academic persistence for
non-traditional aged college women.
3. There is no relationship between ancillary support services and family support
systems for non-traditional college women.
Research hypothesis differs from research questions in that
o Hypothesis predict the nature of the answer
o Hypothesis proposes a relationship between two or more variables
o Questions are interrogative, whereas research hypotheses are declarative.
o At times in research, particularly in exploratory research, a proposal can only offer
research questions. Research hypotheses are much more specific and therefore require
considerably more theoretical support
Characteristics of hypothesis: Hypothesis must possess the following characteristics:
o Hypothesis should be clear and precise. If the hypothesis is not clear and precise, the
inferences drawn on its basis cannot be taken as reliable.
o Hypothesis should be capable of being tested
o Hypothesis should state relationship between variables, if it happens to be a relational
hypothesis.

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o Hypothesis should be limited in scope and must be specific. A researcher must
remember that narrower hypotheses are generally more testable and he should develop
such hypotheses.
o Hypothesis should be stated as far as possible in most simple terms so that the same is
easily understandable by all concerned. But one must remember that simplicity of
hypothesis has nothing to do with its significance.
o Hypothesis should be consistent with most known facts, i.e., it must be consistent with a
substantial body of established facts. In other words, it should be one which judges accept
as being the most likely.
o Hypothesis should be amenable to testing within a reasonable time. One should not use
even an excellent hypothesis, if the same cannot be tested in reasonable time for one
cannot spend a life-time collecting data to test it.
o Hypothesis must explain the facts that gave rise to the need for explanation. This means
that by using the hypothesis plus other known and accepted generalizations, one should
be able to deduce the original problem condition. Thus hypothesis must actually explain
what it claims to explain; it should have empirical reference.
Research Objectives
o The research objective is the researcher’s version of the business problem. Once the
research question and /or hypotheses have been stated, the research objectives are
derived. These objectives explain the purpose of research in measurable terms and
define standard of what the research should accomplish.
o In some instances the business problem and the research objectives are the same.
Objectives specify the information needed to make a decision.
o The number of research objectives should be limited to a manageable quantity. The
fewer the study objectives, the easier to ensure that each will be addressed adequately.
o Statement of the business problem influences the research objectives. The specific
objectives, in turn, are the basis for the research design.
Example 1
“The problem is to determine the best ways our company can train existing and potential
users of networked personal computers.” (Problem Statement stated as a broad/general
objective)
RO1: To identify how far employees are familiar with the various software applications
RO 2: To describe employees’ attitudes towards the available software applications
RO 3: To determine the importance of factors that affect ----------

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 RO 4: To measure the effectiveness of the various training methods/efforts in increasing
the knowledge and use of new applications
Example 2
Should the organization offer outplacement services? (Research problem/central question)
RO 1: To determine managers’ awareness using aided call
RO 2: To measure managers’ satisfaction with existing personnel polices
RO 3: To identify employees’ preferences in outplacement concern.

2.2.4. Determine the unit of analysis

Unit of analysis (UOA) indicates what or who should provide the data and at what level of
aggregation. Researchers specify whether an investigation will collect data about individuals
(such as customers, employees, and owners), households (families, extended families, and so
forth), organizations (businesses and business units), departments (sales, finance, and so
forth), geographical areas, or objects (products, advertisements, and so forth). Our research
questions determine the unit of analysis.
Examples
o The chief financial officer of a manufacturing firm wants to know how many of the staff
would be interested in attending a 3-day seminar on making appropriate investment
decisions. For this purpose, data will be collected from each individual staff member and
the unit of analysis is the individual
o In studies of home buying the husband/wife dyad typically is the unit of analysis rather
than the individual because many purchase decisions are made jointly by husband and
wife.
o In studies of organizational behaviour (group level), cross-functional teams rather than
individual employees may be selected as the unit of analysis.
o Proctor and Gamble wants to see which of its various divisions (soap, paper, oil, etc) have
made profits of over 12% during the current year. Here, the profits each of the divisions
will be examined and the information aggregated across the various geographical units of
the division. Hence the unit of analysis will be the divisions.
o An employment analyst wants to see the proportion of the workforce employed by the
health care, utilities, transportation and manufacturing industries. Thus the unit of
analysis, in this scenario, are the industries.

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o The CEO of a multinational corporation wants to know the profits made during the past 5
years by each of subsidies in England, Germany, France and Ethiopia. Unit of analysis-
countries.

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