The most important thing about TOC is … Focus (Part 1)

Focus on the constraint

Most managers try to ‘focus’ on everything. But as Eliyahu M. Goldratt, founder of TOC (Theory of Constraints), always used to say: “Focusing on everything is synonymous with not focusing on anything.”

He defined the word focus as:

“Do what should be done AND don’t do what should not be done.”
Sounds easy, right? Well, maybe not…

In almost any organization, there are plenty of actions that will improve its performance. A common view is that management cannot take all beneficial actions because they don’t have enough time or enough money or enough resources, but the more they do, the better it is.

That sounds logical but at a second glance it is quite the opposite! This behavior can actually do more harm than good. It is of the utmost importance to properly select what to do; to choose what to focus on.

In organizations, there are numerous interdependencies and relatively high variability; therefore, the number of elements that dictate the performance of the system—the number of constraints—is extremely small. One might say that in organizations 0.1 percent of the elements dictate 99.9 percent of the result.¹

What is important to notice is that the prevailing notion that “more is better” is correct only for the constraints, but it is not correct for the vast majority of the system elements—the non-constraints. For the non-constraints, “more is better” is correct only up to a threshold, but above this threshold, more is worse, because resources are wasted for something that has no positive effect on the overall performance of the organization.

As already mentioned, the vast majority of the elements of a system are non-constraints. In other words, improving elements of the system without knowing if they are a constraint will not improve the overall performance of the system; it could even make things worse.

But if you identify the constraint of the organization and improve its performance then this translates to an increase in the organization’s overall performance.

Please keep in mind that an hour lost on the constraint is an hour lost on the entire system; an hour gained on a non-constraint is just a mirage. It does not improve the overall performance of the organization.

Now you might asked yourself how you can identify the constraint?

While in manufacturing the constraint is often a machine or another resource, different environments have completely different constraints. The constraint in project environments is the critical path (or, more accurately, the critical chain). The constraint in distribution is either cash (wholesalers) or the number of clients that enter the shop (retail).

As a consultant, I have helped many companies to identify their specific bottleneck or constraint. I have supported them in developing specific steps to optimally utilize and eventually elevate their constraint. Once a constraint is elevated, logic dictates that as a consequence a new constraint appears and the same procedure is used over and over again until operations has been completely optimized. This process is called ‘The five focusing steps’.

You will see that the overall performance of your company will improve quickly and all that without the need for large investments.

Warning.

If you plan to implement TOC in your company, please keep in mind that TOC implementation has to be done holistically. Some traditional elements of business and management practices are not compatible with TOC. A paradigm shift in the entire organization is therefore required.

For example, TOC clashes with traditional cost accounting, since cost accounting encourages any production, even on a non-constraint. As already mentioned, this does not lead to an improvement of overall performance. Therefore, a shift from a cost-based to a profit-based company is necessary. That’s why Throughput Accounting has to be implemented alongside TOC. Instead of calculating costs, this indicator system calculates among others the Throughput, the rate in which the organization produces target units.

Improve the performance of your organization by simply concentrating on what is really important.
Focus!

Learn more about the importance of Focus in Part 2 “Focus on strategy”