Identifying your organization’s constraint is the first of the five focus steps when implementing the Theory of Constraints. In his novel, The Goal, Eli Goldratt selects a piece of equipment as the constraint – which serves well to illustrate the bottleneck analogy, with parts piling up before the machine. In reality, however, the constraint is often more abstract: a team, a supply system or even the market. In multi-project environments, the constraint even has a tendency to shift between resources.
These days we often hear management attention mentioned as the ultimate constraint in a business. How can this be? And, more importantly, what can we do about it? Eli Goldratt’s son Rami attempted to explore the answers to these questions in a seminar a few years ago.
A conflict at the coreIn their daily routine, managers are invariably tugged back and forth between different decision conflicts in various areas and strategic layers within the business. Examples include:
- Introducing a new IT system vs. maintaining the current one
- Reducing prices vs. securing profit margins
- Allowing short-term changes to a project vs. protecting due dates and budgets
- Building up stock vs. controlling capital
Behind most of these decisions lies a core conflict with two apparently irreconcilable goals: ensuring long term growth on the one hand and maintaining stability (consistent current performance) on the other. The following conflict cloud illustrates this nicely:
However, these two requirements are only superficially in conflict with one another. Both must be fulfilled in order to achieve the goal of a “successful business”. An unstable business is unlikely to achieve sustainable growth and, in order to remain stable, a business must keep growing.
Day to day, however, managers waste time and energy by oscillating between the two extremes of long-term growth and short-term performance. Management attention is not an infinite resource and, in the vast majority of organizations, demand by far exceeds supply. You will most likely recognize this from your own experience, too.
Because of this, it is vital to use the limited available attention as efficiently as possible. Just as you would not use a constraint resource to build a part that is inessential or unordered, you do not want to apply management attention to something that will not advance the organization (or may even have the opposite effect). It would be pure waste! And yet this is what happens again and again.
Three all-too-human tendenciesHow can it be that so many businesses function so terribly inefficiently? Eli Goldratt identified three fundamental human behaviors as the root cause:
- The fear of complexity: it incites us to (unnecessarily) dissect a system into subsystems and thus create local optima.
- The fear of the unknown: it drives us to force certainty and ever greater detail onto inherently uncertain situations.
- The fear of tug-of-war: in order to avoid conflicts, we accept unsatisfying compromises. The negative effects include:
- Harmful local optima which are not only in conflict with the global optimum, but often with each other as well.
- Inefficient actions and measures reacting to “noise”; sticking to inapplicable rules.
- Conflicts are not eliminated: wasting energies on symptoms with management oscillating between conflict sides.
As a result of these three behaviors, management attention is pulled in all directions, often swinging between the two extremes, and is ultimately very inefficient.
So what should be done? The answer seems obvious.
A simple solution: focus
After identifying management attention as the constraint at the beginning of the process, the next step we are given is: decide how to exploit the system’s constraint.
If the organization’s constraint was a particular team, we would ensure that team does not waste its time on tasks that do not directly contribute to business objectives. We must proceed the same way with management attention: in order to “perform” as efficiently as possible, it requires the necessary focus for every decision. But focus on what exactly?
We have already determined our goal: ongoing stability and long term growth. In order to fulfill these supposedly contradictory goals, Rami Goldratt offers a simple solution. Our focus must be our competitive edge. This can be split into three phases:
- Build the competitive edge
- Capitalize on the competitive edge
- Sustain the competitive edge
It is important to remember that this is an ongoing process! Inertia must never take over. Once the business has built a substantial competitive edge, it uses this as a foundation to prepare the next step, allowing it to continually improve and stay ahead of the competition.
Eliminate obstacles instead of “overcoming” them
While putting this approach into action, we will of course be confronted with the previously identified harmful behaviors. We have now reached the third of the Theory of Constraint’s Focus Steps:
Subordinate everything to the optimal exploitation. Instead of being torn apart by conflicts as we have been so far, we will now strive to eliminate their underlying causes once and for all.
The way to go about this follows from the negative effects we saw above:
1. Align local optima with the global optimum
2. Manage safety buffers – you cannot force certainty on an uncertain situation
3. Solve root conflicts, avoiding compromises
It is clear that this will not be an easy process, as it will be necessary to overcome deeply ingrained behavioral models and undergo a fundamental paradigm change. Luckily, the Theory of Constraints provides us with tools and thought processes to help us on our way.
We should only consider step 4 – elevate the constraint – after having completed all previous steps. Of course, it is possible to hire more management staff but if the root conflicts in the organization remain those additional resources will have a very limited positive effect on productivity.
Once we have successfully performed the steps, we may even find that the constraint has moved on from management attention. We will now start the process anew. Again, we must not let inertia become the system constraint, as step five of the Five Focus Steps reminds us.