Holistic Implementation of the Throughput Model: Introduction (1)

Why a holistic approach is the way to go

Improvement initiatives can only demonstrate their full effect if their implementation encompasses the entire organization. It is true that local change initiatives can lead to some improvement (such as in a specific area or location), but unless the whole organization submits to it, a fundamental change initiative will largely be a wasted opportunity. There are several reasons for that:

• TOC – as the name suggests – focuses on the constraint of the business. If the area or department seeking improvement is not the constraint, the initiative will have no effect whatsoever on the throughput (and thus the performance) of the entire organization: the real constraint remains and continues to throttle the business’s throughput.
• In fact, this can even have a damaging effect: having successfully implemented the changes, our area is now likely to have excess capacity. But with other areas still working as inefficiently as ever, the business cannot grow to accommodate these resources – they are at risk of being let go. Staff will now think twice about agreeing to further change initiatives.

 

The same effect can occur even if the true constraint was targeted and has increased its throughput. The constraint will now have moved elsewhere in the business, and unless the whole process is started anew, the business once more stops growing and risks excess capacity. In a similar scenario, we might even increase capacity at the business’s constraint, but fail to ensure that we can find buyers for all this additional output. This too is likely to lead to layoffs and frustration, with staff unwilling to go along with any further change initiatives.
There is also an increased risk of conflicts of interest (more so than usual) if everyone in the business is not aligned in their objectives. A department that has successfully completed the TOC initiative will think in terms of holistic, system-wide goals, while everyone else still works as before, driven by local, self-centered objectives which often obstruct any progress made through the TOC. This has a dampening effect on “our” department’s morale, and they are likely to turn against the rest of the business (and even against the TOC measures that initially served them so well).
It seems obvious now that a successful implementation of the Theory of Constraints in any organization will only make sense if everyone takes part. But, of course, this is easier said than done.

 

How to get there: a paradigm change

Most of what prevents a successful system-wide implementation is purely psychological, and thus very similar no matter what industry or environment you are in. Eli Goldratt recognized this early on and in the late ‘90s created an effective and convincing introduction to holistic TOC implementation. This resulted in a process which involved all important stakeholders of a business or system and would usually take place in a workshop over several days.

• The first step of this process sets out to explain the underlying principles of the Theory of Constraints and to cause two fundamental and necessary paradigm changes in everyone:
  The switch from a cost world (dominated by a defensive mindset and high in stress) to a throughput world able to unlock the full potential of the organization.
• A belief in people’s inherent willingness to change and even make active contributions, provided the change makes sense for them and promises positive results for all involved

In the second step of the process, we apply these principles to our own organization and develop strategies and tactics to put them into practice. At this stage it is important that all participants feel their concerns have been heard and they are making an important contribution to the process.

The following three fundamental questions provide a helpful structure for this second step:
1. What to change?
2. What to change to?
3. How to cause the change?
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At the end of this, we have a full roadmap for the holistic implementation of the Theory of Constraints. In the next two blog entries we will see what this can look like in practice, as well as the lessons that can be drawn from it.

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Source: Dr. Alan Barnard and Raimond E. Immelman: “Holistic TOC Implementation Case Studies, Lessons Learned from the Public and Private Sector” in Cox III, James F., and Schleier Jr., John G., ed. Theory of Constraints Handbook. New York: The McGraw-Hill Companies Inc., 2010. p. 455-498