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MECE Framework / Principle – What does it mean? Why

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 Victor Cheng  10 Comments

MECE = Mutually Exclusive Collectively Exhaustive

MECE stands for Mutually Exclusive Collectively Exhaustive. The MECE Principle is a framework used
by management consulting firms to group data into categories that following a two specific rules. This categorization
makes it easier to analyze and derive useful conclusions. The two data categorization rules of MECE are: Mutually
Exclusive – An item or data record can only be in one category at a time and Collectively Exhaustive – All items or data
records must be included in one category (e.g., your categorization structure can not exclude an item or data record)

To put it in “plain English,” a data set (such as customer data) is categorized in a MECE way when a record only appears in
one category and all categories combined include all records of the data set.

The “Mutually Exclusive” part represents the idea that a single record can not appear in two categories (e.g., your height
can’t be greater than 150 cm and less than 150 cm at the same time).

The “Collectively Exhaustive” means the categories used is completely exhaustive — meaning you didn’t forget a category
(e.g., your height categorization structure includes both the shortest and the tallest person in the data set). MECE is much
easier to understand via an example.

MECE Segmentation and Planning

MECE segmentation can be applied to any type of business or personal concern. It has clear practical advantages that help
you to think analytically about the problem at hand.

Some examples of mutually exclusive collectively exhaustive segmentation include grouping customers by:

Defined age brackets where there is no category overlap

Country of Birth, assuming no geographical overlap
Highest level of education obtained
Defined revenue brackets
Number of employee brackets
MECE Segmentation Example: Age Brackets

You might have a customer list segmented according to the following age brackets:

Age 0-15
Age 16-30
Age 31-45
Age 46-60
Age 61-75
Age 76+

With these categories, you have covered all possible ages of customers, and no individual can appear in more than one
category, no matter when the analysis is performed. Notice that about 15 years are represented in each category, making
them easily comparable.

Depending on the specific characteristics of your customers, you may be able to use a smaller number of categories that
cover a broader range of ages. Some management consultants prefer this approach since it’s easier to manage fewer
categories. But, having more categories helps ensure that the underlying similarities between the categories are clear.

Choosing Exhaustive Categories for MECE Segmentation

Consultants planning to use the MECE principle to their advantage must think through the categories carefully and
challenge their initial response. Until you have practice with MECE thinking, it is common for the first categories you
develop to need reworking.

Making the MECE Principle Work in Practice

There are some best practices that can make MECE easier to use. It’s important to understand each of these points before
using MECE in your case interview with McKinsey or other top consulting firms.

There are five principles:

1. The Small Elements of a Set Cannot Overlap

If items appear in multiple categories, the framework will not work correctly. Take time to think of any atypical situations
that may put a person in more than one category.

In the age bracket example, it would be easy to accidentally create a non-MECE framework with just one year of overlap in
your age brackets. In many situations, an overlap is caused by a simple typing error or oversight, so always double-check
your materials.

2. The Sum of Parts Must Equal the Whole Group

For a framework to be collectively exhaustive, it must represent the whole group. This may require you to consider a
typical customer use cases. For example, a restaurant might have walk-in, online, and drive-through customers. They may
also have customers who order through third-party apps like Uber Eats or Door Dash. These customers must also be
represented.

3. Small Elements Must Parallel One Another

Categories in MECE classification should be directly comparable whenever possible. You would not want to compare the
customers in the Boston metropolitan area with those in the whole state of Wyoming, even if the number of customers in
each category is approximately the same.
 4. You Should Always Leverage the Magic of Three

The “Rule of Three” describes the fact that sets of three items tend to be memorable and intuitive. Although this is not an
absolute requirement of MECE, it is easiest for people to remember sets containing four items or fewer. This will make the
framework easier to understand.

5. Look Out for Logical Errors and Inconsistencies

MECE is a potent tool, but it is not the only tool. It doesn’t protect you from all possible oversights or fallacies that you
might come across. Always examine your assumptions closely, even if your MECE framework feels like it’s perfect.

The Shortcomings of Non-MECE Segmentation

Decision-makers in any job often make the mistake of using non-MECE grouping structures, particularly when thinking
about their clients and customers. This leads to duplication of labor and makes it less likely that data collected will be
relevant.

Non-MECE segmentation may seem intuitive at first. The data collected may be useful in other contexts, but it won’t solve
your problem. If you get stuck on this data, it can lead to incorrect patterns of thinking that don’t address the strategic
issues.

Some examples of non-MECE segmentation include listing customers according to:

Hobbies and interests

The colleges they graduated from

Non-MECE Example: Hobbies

Why do these examples fall short? Let’s use the list of people separated by their hobbies as an example. A business might
attempt to categorize their customers as involved in indoor hobbies or outdoor hobbies. Initially, this seems to have some
logic to it. Looking closer, however, it also has clear drawbacks:

It is not mutually exclusive since individuals may be involved in both types of hobbies.
It is not collectively exhaustive since it does not address those not involved in hobbies.

MECE in Management Consulting Example:

The MECE principle is a foundational part of thinking through problems at management consulting firms. As a candidate,
you will hear about it consistently throughout the recruiting process and will have to apply it in many scenarios. Luckily,
these scenarios tend to mimic real-life situations closely.

During case interviews, you’ll often find yourself facing situations where you have very little data to act on. In these
moments, recruiters are testing the limits of your ability to understand the situation and work through it in a fast-paced,
uncertain environment– just as you will with your future clients.

The Profitability Framework

The most common example of MECE thinking-in-action is known as the profitability framework.

Using predefined frameworks in your case interviews can be problematic. They often fall short and fail to grasp the
nuances of a real-world situation. However, the profitability framework is different. It is an efficient, precise approach
utilized daily to decipher the root of a profitability problem. Revenues and costs are the key factors to be aware of.

Every step of the profitability framework is based on MECE thinking:

First, profits are broken down into revenues and costs.

Then, revenues are broken down into volume and price per unit (PPU).
Costs are broken down into fixed costs and variable costs.
 Variable costs can be further broken down into volume and cost per unit.

This is the beginning of our issue tree. Each individual item is defined and kept separate from the rest. Then, operations
can be performed on each, individually. In this case, the “operation” involves questioning items to try to find the source of
the decline in profit.

The profitability framework, in particular, is helpful because it demonstrates how multiple data sets within your MECE
analysis can be applied to a problem.

Within the profitability framework, looking at year over year volume and price per unit may help you determine if revenue
declined over a certain period. While this is vital information, it doesn’t provide you with the complete picture. Costs could
have increased over the same period of time, adding factors that you need to take into account.

MECE allows you to perform multiple analyses while keeping each analysis separate. This prevents mistakes that might be
caused by incorrectly assuming there is a relationship where there isn’t one. In the end, you will have a full understanding
of each individual piece of the problem. These all come together to form a bigger picture that will help you reach your
conclusion.

How to Use MECE in a Case Interview

Case interviews are typically structured around a hypothetical problem that the interviewer will ask you how to
solve. Frameworks are a good place to start in these situations but may not always apply.

Sometimes I start with a business situation framework, but then have to switch to a supply/demand framework. Other
times, I’ll start with a standard framework, and then have to make up a new one on the fly.

In these situations, remember that your priority is to give a high-level answer that is organized in a way that is easy to
follow way. If you panic and just start listing off half-developed ideas with no follow-up information, your interviewer will
get lost.

This is where the MECE principle comes into play. MECE will help you focus on major categories and develop ideas from
the top down. It essentially will give the interviewer an overview of your potential solutions.

Let’s say that the interviewer asks you, “How can this company grow?”

Here are some possible ways to organize your answer to that question:

Products/Services – Existing vs. New

Customers – Existing vs. New
Distribution Channels – Existing vs. New

From here, you can narrow down your ideas based on the interviewer’s follow-up questions/information. There may still
be overlap in these primary areas, but sometimes you won’t be able to get around it.

You may find that your interviewer is speaking in vague terms or unwilling to help you unpack a question. This could be
because the interviewer doesn’t want to give away the answers they are looking for by giving examples. Restructure the
question you ask or confirm that you understand correctly before attempting to answer the question.

Also, the interviewer may not have the expertise in some areas to answer your questions or give you more information.

While consultants like to have a clean MECE framework, sometimes being MECE-enough is all you can come up with on
the spot. All you can do is narrow it down as far as possible. Before you resign to the MECE-enough approach, make sure
you’ve explored all your other options.

In terms of practicing your MECE skills, use the framework in everyday life as much as possible. It may sound absurd for
everyday life, but it will help you think like a consultant.

Maybe your spouse asks you “Where should we go to dinner tonight?”

You break down your options like this:

Restaurants you both have been to

Restaurants one of you have been to
Restaurants none of you have been to

You may not want to use this approach out loud in a social setting — just think that way in your head. Eventually, it will
become second nature to solve problems this way.

Conclusion

The Mutually Exclusive Collectively Exhaustive (MECE) principle will make you a better decision-maker and problem-solver.
It helps you see the situation more clearly and reach conclusions that are really going to help your business. Do you see
how the next time you are faced with a complex issue, using the MECE framework will assist you with working out the
possible causes and lead you to the best solution? How would you use the mutually exclusive collectively exhaustive
principle to solve a business or personal problem you are currently faced with?

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10 thoughts on “MECE Framework / Principle – What does it mean? Why do
consultants find it useful?”
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ASHISH
JANUARY 8, 2022 AT 10:15 AM

Hiee,
Actually I am also not getting a point how MECE works to categories and build a frame work kindly explain.

Reply

DAVID HOGARTY
JANUARY 5, 2022 AT 4:34 PM

Your profitability example is not really mutually exclusive: # Units sold is shared between the revenue and cost side of the tree. This article fails to clarify or
illustrate the benefits of mutually exclusive versus overlapping categories, and most real data is network (overlapping) rather than tree (mutually exclusive)
structured.

Reply

MALA JOHNSON
DECEMBER 7, 2021 AT 6:48 PM

Hello,

Regarding mutually exclusion, you give the example that segmenting people according to indoor and outdoor hobbies is not mutually exclusive. But how is
the mutually exclusive problem of this segment different than segmenting based on restaurant customer types — Walk in, Drive in, Internet Order, Phone
Order, or 3rd party app? Just as a person can be involved in both in-door and out-door hobbies, a person can also be a walk-in, drive-in, or internet customer.
It’s mainly a matter of context — when, where, and why for that particular event. And it applies to both examples.

So I’m confused. Please explain. Thank you.

Reply

VICTOR CHENG
DECEMBER 7, 2021 AT 7:35 PM

Hi Mala – You wouldn’t categorize people based on walk-in, drive thru, phone order, or 3rd party app. However, you would categorize orders by walk-in,
drive-thru, etc… Instead, you would categorize people by factors like age. Someone over 50 years old is not simultaneously under 50 years old too. -Victor

Reply

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