Finding The Pinch Points

The Theory of Constraints was first described by Dr Eliyahu Goldratt in his iconic book The Goal. Goldratt advocates taking a holistic view of organisational performance whether the entire business or some subdivision of it is being examined. As you might anticipate, constraints are limits. They restrict what can be done in a particular set of circumstances. A constraint is like the pinch point in an hour glass. It determines the rate at which the organisation moves towards its objective. Goldratt’s thesis is that constraints are points of leverage which when manipulated will result in performance changes which are out of proportion to the effort used.

There Is only One Weakest Link

Goldratt describes organisations as ‘chains of action’ where a chain is only as strong as it’s weakest link. Strengthening the weakest link improves the strength of the entire chain. Conversely, strengthening the other links has no effect on overall strength. There can only be one weakest link in each independent chain and so looking at the organisation as a whole, where the number of independent chains is probably small (think of them as core processes), there are likely to be very few constraints which matter. On the other hand, maximising local efficiencies in each part of the organisation without thought to the effect on end to end flow is unlikely to have a corresponding effect on results. By strengthening links other than the weakest, all you are doing is creating additional capacity which, because of the limiting effect of the constraint, will never be called upon. The secret to achieving major increases in throughput therefore is the identification of constraints and the elimination of their root causes. As might be expected, there are a number of constraints which occur regularly. One such is policies which are inappropriate or out of date yet still in force . Another problem area frequently encountered, is the rate at which work flows across organisational boundaries. Others might be related to resource availability ( people, cash or materials) or capacity, competence or market demand. There is no shortage of possibilities.

Underutilisation Is Necessary and Good

One unintuitive consequence of the focus on these leverage points is that the performance of some parts of the end to end system (the stronger links in the chain) will be subordinated to the bottleneck. By definition, it is the system constraint that sets the rate of flow in organisation. The only part of the system that ever operates at full capacity is the constraint itself and it is the function of the non constrained elements to feed it at a rate which keeps it 100% utilised for as long as customer demand requires maximum throughput. This has to happen even though they some parts of the organisation are under utilised. This can be problematic when considering the way that rewards systems usually work. Persuading departmental managers to ‘under perform’ when their bonuses depend on exceeding targets laid down at the beginning of the year can be a tricky proposition.

Putting The Theory To Work

So how to go about maximising throughput? Prior to doing anything it is vital that the system under consideration is understood in terms of its boundaries and its purpose (the goal). It is also helpful to understand where the constraint ought to be. With those prerequisites in place, Goldratt defined five focussing steps which have stood the test of time:

1. Identify

Find the constraint which is limiting performance. It may be internal (capacity or skills shortages) or external (inadequate market demand or availability of materials). Finding it may be as simple as identifying where there are backlogs and queues. If the constraint can be broken without too much effort or resources, do it and start again. Otherwise proceed to step 2.

2. Exploit

Optimise what you have got. Eliminate all waste at the constraint and inspect WIP as it reaches the constraint. Measure the constraint’s output. Can throughput be increased by living with the constraint, but doing things differently? For instance, if the constraint is not enough people with specialist knowledge in a particular area, can training more people to a basic level of knowledge, free up the specialists to deal with the more difficult questions which they alone are equipped to deal with?

3. Subordinate

This step ensures optimisation of the entire system rather than its component parts. Subordination changes the organisation’s policies, rules,norms, behaviours and measures to support the constraint. The organisation’s processes are changed so that non-constraints are relegated to the role of feeding the constraint, but only at the speed necessary to ensure that the constraint is not starved of work and where required, operates at full capacity. In other words, local productivity is sacrificed.

As a result, most processes will have spare capacity. This can be hard to accept as the implication is one of waste and as we have said, it can be very difficult to persuade departmental managers that they have to slow down when their pay and bonus structure encourages over-performance.

4. Elevate

By this point, the organisation should be performing as well as it possibly can short of taking ambitious action to remove the constraint by increasing capacity. This could mean for instance, acquiring more or better equipment or people or enhancing a product. Elevation means that significant investment is made in order to improve performance. Naturally, This will require consideration of all available options and being clear about the implications of eliminating the constraint, especially understanding the amount of performance improvement which can be expected before the effects of the next constraint makes itself felt.

5. Start Again

Working on the basis that there will always be a constraint, whether internal or external to the organisation, at this point, the new performance levels resulting from the previous steps are baselined and then the cycle starts again, with the next constraint and its effects being identified and dealt with.

Make Sure You Find the Real Constraint

It is worth emphasising two crucial things to get right in the above steps:
  • Correctly identifying the constraint to be sure that when action is taken it will make a difference; and
  • Understanding where the next constraint is. It would be unfortunate if a lot of money was spent breaking the immediate constraint yet the return on investment remained limited because the next constraint in line prevented the anticipated step change in performance.
In The Goal, you could tell where the constraint was by the piles of WIP queued up in front of it. Organisational performance problems are rarely that straightforward to unravel, not because the organisations themselves are particularly complicated; complex and dysfunctional behaviour can emerge from very simple systems. What makes diagnosis difficult is dynamic complexity, which emerges from the organisation’s structure, feedback loops, accumulations, time delays decision making processes and behaviours. To find the constraint in the midst of these elements, we turn to the use of system dynamics modelling.

Legal | Privacy