Eliyahu M. Goldratt and Jeff Cox wrote The Goal: A Process of Ongoing Improvement in 1984.  The Goal is a business novel. It uses the story of Alex Rogo, plant manager, to illustrate the theory of constraints and how the wrong measurement focus can harm an organization. The focus of the re-read to-date has been on the ideas and concepts that affect Software Process and Measurement readers and listeners. The focus we are taking is not meant as a slight to the part of this book that is a novel, but rather to provide focus on the ideas that have shaped lean thinking. Earlier entries in this re-read are:

Part 1                       Part 2                       Part 3

In the next 3 chapters Alex and his team begin to explore how their newly emerging understanding of throughput, inventory and operational expense can be applied in their organization.

Chapter 10

In Chapter 8 Alex and Johan discussed three critical definitions:

Throughput – the rate at which the system generates money through sales.

Inventory – all of the money the system has invested in purchasing things it intends to sell.

Operational Expense – all the money the system spends in order to turn inventory into throughput.

In Chapter 10 Alex and team  discuss whether all of the activities at the plant can be measured by the concepts of throughput, inventory and operational expense. The three definitions equate to money coming in, inventory is money in the system and operational expense is money that leaves the system. The three measures generate consternation and debate. For example, the team spends time debating individual expenses and whether the expense is operational or included in inventory. In the end they conclude that everything can be measured by the three measures. The problem is that they can’t conceive of how the three metrics can be used to turn the plant around. Alex goes to off New York City to meet with Johan the next morning to get some more answers.

Chapter 11

Alex and Johan discuss the problems in the plant over coffee in the hotel restaurant before Johan meets the people he in NYC to visit. Johan guides Alex by asking questions and letting him find the answers for himself (many of us would recognize the techniques Johan uses to help Alex to formulate answers as being very similar to those used in Agile coaching). Key discoveries include the realization that the inventory problem the plant is experiencing is a reflection of over utilization of plant personnel on specific tasks rather than focusing on throughput. The measure of 100% capacity utilization leads to inefficiencies when the parts can’t be used. Conceptually this point is the same as if a software development process that segregates coders and testers, and one group produces more than the other can immediately absorb. For example, coders often keep generating more code even if the testers can’t immediately begin testing the work that is being handed off. The Agile/lean concept of self-organizing teams would attack the problem differently by shifting resources to avoid building excess inventory. The organization’s over-reliance on that single measure of efficiency in isolation has caused disastrous results.

Johan and Alex identify two phenomenon that cause the problems that Alex and his management team are seeing. The first is the idea of dependent events, which is when one event must happen before another. For example, code must be written before the unit tests can be run. The second is statistical fluctuation, said differently all process have some degree of variability. The execution of events vary for many reasons. The book uses an example of a waiter and the variability in the time needed bring the check and pay (Johan was pressed for time and had fit his meeting with Alex into his breakfast). If we consider coding and unit testing as a process, most of us would recognize that coding and and testing any specific piece of work has a degree of variability. Variance could be caused because some problems are harder or the programmer might get hungry and go to lunch before they finish a specific piece of work. When both concepts interact process variability becomes much harder to “plan” out of existence.

Johan leaves Alex with the question of how he can apply these concepts and the three measures to save the plant.

Chapter 12

This chapter could easily be written off as purely back-story. However in the discussion with his wife, she and Alex discuss how to establish a pace that respects both the needs of the businesses and family life. In today’s IT environment we would recognize the discussion as one of sustainable pace. Sustainable pace typically reflects a rate of work that can be consistently performed. It is a concept commonly used when discussing Agile.

Chapters 10 – 12 mark a turning point in the book. Alex has embraced a more systems view of the plant and that the measures that have been used to date are more focused on optimizing parts of the process to the detriment to overall goal of the plant.  What has not fallen into place is how to take that new knowledge and change how the plant works.

Summary of The Goal so far:

Chapters 1 through 3 actively present the reader with a burning platform. The plant and division are failing. Alex Rogo has actively pursued increased efficiency and automation to generate cost reductions, however performance is falling even further behind and fear has become central feature in the corporate culture.

Chapters 4 through 6 shift the focus from steps in the process to the process as a whole. Chapters 4 – 6 move us down the path of identifying the ultimate goal of the organization (in this book). The goal is making money and embracing the big picture of systems thinking. In this section, the authors point out that we are often caught up with pursuing interim goals, such as quality, efficiency or even employment, to the exclusion of the of the ultimate goal. We are reminded by the burning platform identified in the first few pages of the book, the impending closure of the plant and perhaps the division, which in the long run an organization must make progress towards their ultimate goal, or they won’t exist.

Chapters 7 through 9 show Alex’s commitment to change, seeks more precise advice from Johan, brings his closest reports into the discussion and begins a dialog with his wife (remember this is a novel). In this section of the book the concept “that you get what you measure” is addressed. In this section of the book, we see measures of efficiency being used at the level of part production, but not at the level of whole orders or even sales. We discover the corollary to the adage ‘you get what you measure’ is that if you measure the wrong thing …you get the wrong thing. We begin to see Alex’s urgency and commitment to make a change.

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