Re-Read Saturday: The Goal: A Process of Ongoing Improvement. Part 6

The Goal: A Process of Ongoing Improvement, published in 1984, is a business novel. The Goal 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 is less on the story, but rather on the ideas the book explores that have shaped lean thinking. Earlier entries in this re-read are:

Part 1                         Part 2                         Part 3                         Part 4                      Part 5

This week I attended the CMMI EMEA conference.  Kirk Botula, CEO of the CMMI institute delivered a great speech about developing and managing capability.  Capability is ability to do something.  Without capabilities, individuals, teams and organizations are powerless. Tools like the CMMI, Agile and lean provide frameworks to decide which capabilities are important and then to measure the level and impact of current capabilities. During Kirk’s talk he referenced two books.  The first was Out of the Crisis by Edwards Deming and The Goal: A Process of Ongoing Improvement by Jeff Cox and Eliyahu Goldratt.  Deming’s work defined the continuous process improvement movement, while Goldratt framed the lean movement.  Later during the week I asked a group of C-level executives if they were familiar with The Goal and the Theory of Constraints.  Unfortunately the answer was not a resounding yes.  The limited awareness is problematic because that leads to a focus on cost containment and efficiency as the most important goals over effectiveness and throughput. Over focusing on cost and efficiency leads sub-optimal performance and in the long run market failure. In this installment of Re-read Saturday we begin to encounter the nuts and bolts that make the Theory of Constraints an effective tool for structured process improvement.

Chapter 17

After dealing with the complications of a household in turmoil (Alex’s household is a reflection of a series of dependent events and statistical variability), Alex arrives at the plant to find an order for an important client is late. Alex explains how dependent events and statistical variability will lead to the sub-optimal performance of a system. Despite Alex’s revelations from observing the scout troop, his team believes they can deliver the parts in time to make the last truck at 5 PM. Alex places a ten dollar bet that the parts will not be ready ship that day due to variations in the production process.  The production of the parts requires two steps. The first step in the production process averages 25 parts per hour. In this case the production started slowly, however by the end of four hours 100 parts had been completed. Therefore the process had averaged 25 parts per hour. The production ranged from 19 parts to 32 parts. While the second step in the process had the same 25 parts per hour capacity, because of the variability of the first processes the capacity of the second process was exceeded on two occasions, therefore all 100 parts were not completed.

Chapter 18

Alex and his now attentive staff (the performance on late order has gotten their attention) attempt to determine how to control the flow of work thought the steps in the process (dependent events) as they are subject to statistical variability.They consider longer lead-time as a method to smooth the flow, because longer lead times would generate higher inventories to reduce efficiency. As a group they elect to call Johan, who introduces another new concept: bottleneck and non-bottleneck resources. A bottleneck resource is any resource that has a capacity that is equal to or less than the demand placed upon it. Any variability in the flow of work that is beyond the capacity of the bottlenecked resources will generate a backlog. While The Goal was written from the point of view of a manufacturing plant, bottlenecks can occur in any type of project. Any resource that is planned to 100% capacity is a bottlenecked resource. Through discussion with Johan the team discovers that like the scout troop the capacity of the plant is governed by the step with the least capacity. In the plant, the team needs to discover the bottlenecks that are blocking their ability to deliver effectively.

Bottlenecks are neither good or bad in their own right. A process with infinite capacity at all steps will not be efficient because resources would be under utilized. Bottlenecks can be used to generate a predictable process. This a reflection of how Alex used the slow scout in Chapter 15. Also understanding the capacity and variability of the bottleneck step will help make the process predictable.

When the staff discovers the bottleneck, it generates a process of discovery in which the team discovers that they really don’t know the process well and that the time accounting data is less than perfect. The big revelation is that looking for steps in the process with build-ups of work-in-process waiting to be addressed are an indication of a bottleneck. In this case the team finds two culprits. The first is the industrial robot that is darling of senior management and the second is the heat treatment step. The bottlenecks cannot be moved to the head of the column like Alex did to solve the problem with the boy scouts, nor can extra capacity be generated by increasing staff or buying machines. The workday ends with Alex searching for a solution.

The affect of the combination dependent events and statistical variability on the plant floor is obvious. In a manufacturing plant where processes are heavily automated variability might be low, however it still exists. In software or product development same interaction of process steps and variability exits although because the work tends to be more discovery-oriented, the variability is probably higher making the impact more substantial and less predictable. The variability in flow through the process exposes bottlenecks that limit our ability to catch up, making projects and products late or worse generating technical debt when corners are cut in order to make the date or budget.

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.

Chapters 10 through 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. The introduction of the concepts of dependent events and statistical variation begin the shift the conceptual understanding of what measure towards how the management team can actually use that information.

Chapters 13 through 15 drive home the point that dependent events and statistical variation impact the performance of the overall system. In order for the overall process to be more effective you have to understand the capability and capacity of each step and then take a systems view. These chapters establish the concepts of bottlenecks and constraints without directly naming them and that focusing on local optimums causes more trouble than benefit.

Note: If you don’t have a copy of the book, buy one.  If you use the link below it will support the Software Process and Measurement blog and podcast. Dead Tree Version or Kindle Version