Toc

Theory of Constraints and its Thinking Processes - A Brief Introduction

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Preface

The core constraint of virtually every organization The Goldratt Institute has worked with over the past 16+ years is that organizations are structured, measured and managed in parts, rather than as a whole. The results of this are lower than expected overall performance results, difficulties securing or maintaining a strategic advantage in the marketplace, financial hardships, seemingly constant fire-fighting, customer service expectations being rarely met, the constraint constantly shifting from one place to another and chronic conflicts between people representing different parts of the organization, to name a few.

Once the barriers that block those parts from working together as an integrated system are removed, significant and sustainable improvement in each and every problem mentioned above is the result.

What blocks organizations from tearing down these barriers? Organizations are often so consumed by the pressures to achieve their short-term performance targets, that taking the time to plan for the future is a luxury they can’t afford. Or, they have plans for the future, but are faced with the difficulties of balancing the risks of change with the opportunities they create вЂ" “if it ain’t broke, don’t fix it!”

Is it possible to use change to create a competitive advantage? Is it possible to do that quickly, without risk and while creating a reliable platform from which to seize the opportunities of tomorrow?

Process - A Healthcare Analogy

The Theory of Constraints (TOC) applies the cause-and-effect thinking processes used in the hard sciences to understand and improve all systems, but particularly, organizations. The process a clinician applies to treating a patient is an excellent analogy for explaining how TOC recommends going about solving a systems problem. If we were to describe the overall process used by a clinician treating a patient it would look something like:

1. Diagnosis: Knowing the futility of treating the symptoms, a clinician begins with a list of observable symptoms and uses cause and effect to seek out the underlying common cause for all of them, the “disease” or core problem.

2. Design of a Treatment Plan: Considering the uniqueness of the patient and his/her diagnosis, a treatment plan is developed that first and foremost treats the disease. (e.g., surgery), but also suggests what other things must be done alongside that “cure” to ensure the treatment will work (e.g., pain relief and bed rest) and that the best possible health is restored to the patient (e.g., physical therapy). In this process, any potential side effects of the treatment are identified, and the means for preventing or mitigating them become key elements of the treatment.

3. Execution of the Treatment Plan: Taking into consideration, the uniqueness of the patient’s situation, a plan is developed for how to implement the treatment (e.g., surgery and pre-op work are scheduled, arrangements for transportation to and from the hospital are secured, hospital beds to be used at home are ordered).

Applying TOC to Organizations

The TOC processes used to improve the health of an organization (or solve any problem) are almost identical; however, the terminology is changed to better suit the language of problem-solving in organizations. In TOC, the process is described via the use of three questions: What to Change?, What to Change to?, and How to Cause the Change?

1. What to Change?

From a list of observable symptoms, cause-and-effect is used to identify the underlying common cause, the core problem, for all of the symptoms. In organizations, however, the core problem is inevitably an unresolved conflict that keeps the organization trapped and/or distracted in a constant tug-of-war (management versus market, short term versus long term, centralize versus decentralize, process versus results). This conflict is called a Core Conflict. Due to the devastating effects caused by Core Conflicts, it’s common for organizations to create policies, measurements and behaviors in attempts to treat those negative effects (often referred to as band-aid fixes) that, when treating the Core Conflict, must be removed, modified or replaced.

2. To What to Change?

By challenging the logical assumptions behind the Core Conflict, a solution to the Core Conflict is identified. This is only the starting point for the development of a complete solution вЂ" a strategy вЂ" for resolving all of the initial symptoms, and many others, once and for all. As in the Design of a Treatment Plan above, the strategy must also include the changes that must be made alongside the solution to the Core Conflict to ensure that that solution works and that the organization is restored to its “best possible health.” Respectively, these are often the changes to the policies, measurements and behaviors identified in What to Change?, as well as the organization’s strategic objectives. Lastly, the strategy is not complete until all potential negative side-effects of the strategy have been identified, and the means for preventing or mitigating them become key elements of the strategy. Trimming these negatives side-effects allows an organization to intentionally and systematically create strategies that are a win for all those affected.

3. How to Cause a Change?

Taking into consideration the unique culture which exists in every organization, a plan is developed to transition an organization from where it is today to realizing the strategy. In other words, a plan for successfully implementing the strategy is created, including what actions must be taken, by whom and when. Because resistance to change can block even the most perfectly laid strategies and plans, building active consensus and collaboration, or buy-in is crucial.

Overcoming Resistance to Change

TOC has developed a process based on the psychology of change that acknowledges and systematically addresses the questions people intuitively ask when evaluating a change.

a. Is the right problem being addressed - mine?

b. Is the general direction that the solution is heading a good one?

c. Will the solution really