The Goal

by E M Goldratt

  DW: What distinguishes Theory of Constraints from other man- agement techniques you've looked at?

  RP: I think it can be very easily applied in a simple process. As I have said, the one I use more than anything else is the five focussing steps. A lot of the problems which arise in business are about lacking focus. I guess if people were to describe Positive Solutions, it would be as a very focussed organization. We don't seek to be all things to all people. We stick to what we know will be the most profitable areas to us at any point in time. We've been working on the same constraint for five years.

  DW: And that is?

  RP: Our ability to recruit the right people at a pace which fits our business plan. The more people we have, the more profitable we become. A lot of companies by now would have given up at about 300 advisors, something of that nature. And they'd say the constraint is no longer recruiting people, what we should be doing is trying to improve the productivity of those people, or trying to get a better deal out of the manufacturers of financial products. But we've kept the focus on the fact that as long as the people that you are recruiting

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  are profitable, then why stop recruiting them? Just because it's not getting any easier? Well, it's not actually getting any harder, either. It's just another day at the office. But we can work all of our financials back to simply the number of advisors that we have. Therefore, we don't go any farther.

  DW: That's your focus?

  RP: That's our focus. We've identified the constraint, now let's ex- ploit it, make the most of it. Therefore we have easily one of the best recruiting machines in the UK in this sector. We approach recruit- ment very differently from all our competitors. Our competitors will advertise, they'll try to acquire businesses, for example, rather than the approach that we have, which is to recruit people one by one. Our rate of growth might at first appear to be slow. But because our advisors have been recruited in the right way, we don't lose many of them. That's the beauty of TOC: As you really dig in to identify the constraints, you begin to understand these things.

  DW: Have you thought about what the next constraint will be?

  RP: Of course, at present there is still a market for further indepen- dent financial advisors to join us. There are about 25,000 of these people in the UK and we have less than 1000 of them. Now the qual- ity of some of those 25,000, and the fact that not everybody will join us in any case, means at some point the effort needed to increase the capacity just won't be worth it versus the energy we could put into something else. At that point, you say, "We've now changed our plan. What is the constraint in our new plan?" Frankly, it's about retaining the clients' money. At present what we do is introduce clients to a variety of manufacturers of financial services. The money goes to the manufacturers and they give some of it back to us in the form of commissions or fees. The next step really is for the clients to give us the money, and for us then to give some of it to the fund managers and the life insurers. So once we're a certain size, the constraint will begin to move. We'll have a brand, and the revenue needed to com- municate that brand, so there won't be quite as much effort to get people to join us. At that point the constraint shifts.

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  Interview with Dr. Antoine Van Gelder A South African Hospital

  University of Pretoria

  DW: You're not a typical Eli Goldratt disciple, are you?

  AV: I'm a university professor with a dual appointment, head of the department of internal medicine at the University of Pretoria and head of the department of internal medicine at Pretoria Academic Hospital. In 1992 I got an invitation to attend one of Eli Goldratt's courses in Pretoria. Not one run by him himself but by a subsidiary of the Goldratt Institute. At that time I knew nothing about theory of constraints and I had not read The Goal. I got myself into this out of curiosity more than anything else.

  DW: Why? What kind of help were you looking for?

  AV: Let me put it this way. I was literally sitting in my office, with mv head in my hands, highly frustrated, with piles of paper all around me, going through correspondence. I opened a letter, saw that it was another invitation to a course, threw it away, and as I threw it in mv wastepaper basket my eye caught the price of this particular course. It was the South African equivalent of about $18,000. That caught mv attention. I thought if any course was worth that amount it was worth looking at. This was a two week course in production management, the invitation was addressed to the engineering faculty. It had gotten to the medical faculty by mistake. The course was actually offered free to university professors. So because of my deep frustration with some of the management issues I had in my department, and because I had some time off the next week, I phoned. I planned to only go for the first week, because this was the time I had available. I was told that I had to attend the full two-week course. I said, "Yeah, we'll see about that."

  DW: But you went?

  AV: I went the first week. The course was taught with reference to a production environment and the logic around it. Now you don't find much of this logic-the reality trees and that sort of thing-in The Goal.

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  Quite a lot of that is in It's Not Luck, which was published later. But the logic grabbed me because I was this frustrated man who was run- ning a department of medicine and I had not been trained to do that. I had no insight into management issues. Suddenly I saw that here was a potential way of analyzing my department.

  DW: What were the parallels?

  AV: My department was in chaos, total chaos. Everything coming and going, not knowing what was what-much as things were in the factory that is the setting of The Goal. During the course, The Goalwas mentioned. I bought it, read it through in one night, and I thought to myself, that's my environment. A chaotic system is not necessarily a factory. It could be a hospital with people coming and going. It could be a department with a whole lot of prima donnas-the doctors-that need to be managed. That parallel struck me.

  Now if I can answer your question a bit more precisely. When one is introduced to theory of constraints, the first thing you see is a system where the causality is hidden. In other words, it's chaotic. Things happen, you have no control. Suddenly, though, it becomes a system that can be analyzed in terms of certain key points-leverage points. And one learns that addressing these key points-rather than launch- ing a symptomatic firefight-is the way to exert control over these systems. Remember, this was in the early 1990s, before frameworks like systems theory had moved to the forefront and become part of the main buzz. Though the theory of constraints doesn't talk about systems theory, already it was offering an approach by which a com- plex system could be managed in terms of a few key leverage points.

  DW: Did you wind up attending both weeks of the course?

  AV: Correct. Then I came back to the hospital. There are two points I want to make. The first was that I underwent a mental change. In- stead of thinking that things were too complicated, too complex and not manageable, I now saw that if I could analyze the system cor- rectly, it was manageable. That was the first important breakthrough that I had, and many people I've taught this to subsequently have had the same breakthrough. There is a way-find it!

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  Second, our outpatient clinic, like most hospital outpatient clinics at that time, and even now in many parts of the world, was plagued by inefficiencies and long waiting lists. The more we fought the ineffi- ciencies, the more money we poured into the system, the longer the waiting lists seemed to become. This is the problem with the national health system in Britain as we speak. Now in my department, it seemed to me as though the processing of patients by doctors could really be viewed as a production line, just as in The Goal. The times are differ- ent, and obviously people aren't machines. All of those issues I ac- knowledged. But I saw that parallel.

  DW: How did you attack the problem?

  AV: The manager in charge of that clinic and I sat down and I told her about the principles used in The Goal Between the two of us-with her d
oing most of the work-we identified our constraint. We realized that we lost a tremendous amount of capacity whenever patients or doctors wouldn't show up for scheduled appointments. That time lost was not recoverable. So we developed a call-in list, which we called the patient buffer. A day or two before a scheduled appointment we would phone patients and make sure that they would be coming into the clinic. If not, we would find substitute patients. The result was less loss of capacity. Our waiting list at that time was about eight or nine months long, which is common for this type of waiting list. As a mat- ter of fact in the UK now some of these waiting lists are over one year. In about a six month period we got our waiting list below four months, which was roughly half of what most other hospitals were doing in South Africa at that time.

  DW: Yours is a public hospital?

  AV: Yes, we're part of the state health system. In other words, not for profit. Patients pay only a small amount for services. Later on, after I started consulting with the Goldratt Institute in South Africa, we looked at a large private hospital, 600 beds, a flagship hospital with neuro- surgery and all the high-tech stuff. The issue there was loss of capac- ity in the operating rooms. The spin-off effect of that was that sur- geons were leaving the hospital and going to other private hospitals. It was a serious situation. We found that instead of focussing on local optima-making sure that my little department comes first-the real

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  question people should be asking is, what can I do to achieve the larger goal of the hospital, which is to throughput new patients? It's a simple concept but implementing it took about two months of meet- ing with staff. Each person then developed an action plan aimed at making sure more patients moved through the system more efficiently. In a period of a year, this hospital moved from a 20% shortfall on its budget to where it began showing a profit.

  DW: So you've become a Goldratt consultant yourself?

  AV: Yes. I presented the results from our hospital's outpatient clinic at one of the Goldratt symposia in the early 1990s. This was the first report of a medical implementation of the theory of constraints. Eli Goldratt was there to hear my presentation, and afterwards he in- vited me to join the Goldratt Institute as an academic associate. I was based at the university but involved in the implementations of his consulting company. I did quite a bit of work in the mining industry- nothing to do with medicine! It was pure theory of constraints, straight out of the book. It allowed me to develop my own skills.

  DW: What's a doctor doing advising mining companies?

  AV: It's interesting that you say that. I'm a physician, not a surgeon, In other words I'm a thinker, not a doer. I say that facetiously but as a physician, it's all about diagnosis. And the whole process of diagno- sis, whether it's a patient or an organization, is the application of the scientific method. Eli Goldratt says that his theory of constraints is simply the application of the scientific method. So it's almost natural that an advisor to a mining company-in terms of diagnosing what's wrong and what to do about it-could be a physician. In fact some of the teaching materials that the Goldratt Institute uses refer to the medical model. It asks trainee consultants, How does a doctor ap- proach the problem? It gives them a parallel for how you diagnose problems in organizations.

  DW: That's interesting. Eli has said that his overriding

  ambition in life is to teach the world how to think.

  AV: Right. And nothing he has done in the almost 14 years that I have known him suggests to me that that is a facetious statement. The

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  theory of constraints is about thinking processes, it's a subset of logic. In other words, the scientific method.

  DW: Has any of this made you a better teacher of physicians?

  AV: Absolutely. Absolutely. I've told you that diagnosing a patient and diagnosing a business is the same thing. But a doctor learns to diagnose by watching other doctors. It's not taught as a science. The processes of diagnosis are taught but what might be called the phi- losophy of diagnosis is not taught as it is in the theory of constraints. The traditional approach is, watch what I do. The approach that I've since followed is, let's look at how the scientific method works, then let's see if we can apply this to a patient. Most students take to this very well.

  Interview with Eli Goldratt continued... DW: That will do it

  EG: Please, one more. The jewel in the crown, at least in my eyes, is the usage of TOC in education. Yes, in kindergartens and elementary schools. Don't you agree that there is no need to wait until we are adults to learn how to effectively insert some common sense into our surrounding?

  Interview with Kathy Suerken, CEO TOC For Education,

  An international nonprofit dedicated to teaching TOC think- ing processes to schoolchildren.

  DW: You're a middle school teacher, not a plant manager. How does The Goal fit with the work you do with children?

  KS: Well, it all started almost 15 years ago. I was kind of a new teacher at a middle school but I had been a parent volunteer for a while. I was running a voluntary math program for kids and my husband was giving me advice on how to manage it. The program was already a success, we had 100% participation. I asked him, "Well, what do I do

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  now? Go to a different school?" And he said, "Kathy, you'll have to find another goal." Six months later he said, "There's a book you have to read, we're passing it around at our office and everyone's signing the back if they recommend it." That was my introduction to The Goal. Within six months, I wrote a letter to Eli Goldratt that be- gan, "Dear Dr. Goldratt, if you were to walk into the office of Frank Fuller, Ruckle Middle School's principal, on his desk you would find a copy of The Goal... and thereby hangs a tale." I went on to say how I was using the ideas and concepts to run this project.

  DW: Did you hear back from Eli?

  KS: Within four days, with a copy of his newly revised book. And then within about a week or so I heard from Bob Fox, who was presi- dent of the Goldratt Institute at that time, and they offered to send me to Jonah school on scholarship. So I went through the course. Later I went through a facilitator program on how to become a trainer of Jonah processes. And then I went back and taught a pilot course to kids. By the end of the year my kids were using the thinking pro- cesses, which they learned brilliantly. They were the most Socratic learners and teachers of other kids that you ever saw. It was pretty convincing evidence to me that this stuff works with kids, and it launched me into the role I have now.

  DW: Was it a course about TOC or a course that used TOC methods to teach other content?

  KS: It was a class on world cultures-basically a class on perspectives, which of course this is so aligned with. We used methods derived from TOC to advance the curriculum. Later I taught a critical think- ing skills course that was pure TOC. In that course I was teaching cause and effect as a skill. We used concepts like the conflict cloud to analyze conflicts in real-life situations.

  DW: What evidence do you have that the kids were absorbing the concepts?

  KS: Here's an example. One day I read to the students the section about the hike from The Goal, and then I gave them an evaluation sheet. I asked them, "How is this relevant to real life? What's the

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  weakest link?" Stuff like that. It wasn't a test. I just wanted to know if they were getting it. That night I looked at their answers and I real- ized maybe half of them got it and half of them didn't. So I went back the next day and I asked them again, "What determines the strength of the chain?" I called on one boy-let's say his name was Mike-who I knew was struggling. He was rambling on and on. He did not get it. And I did not know what to ask Mike to get the answer out of him. So then I looked at my other students. And I knew if I called on John, for example, who did get it, he would just tell Mike the answer, and that's not what I wanted. So I said, "No one can give Mike the answer. You can ask Mike a question to help him think of the answer." And that is when one of my other students raised her hand. She said, "Remem- ber when we were do
ing the cloud on teach fast, teach slow? The problem of making sure everyone understands but the fast ones don't get bored?" That's when I saw what was happening. As the other students began asking Mike questions designed to draw the answer out of him, I could see that everyone was engaged. It was a wonderful example of cooperative learning. Because everyone had to think. Even if they already knew the answer, they were thinking hard about how to guide others to the answer.

  DW: How do you introduce TOC to schools where it has never been taught before?

  KS: We usually start with teaching TOC as a generic process, then figure out how to apply it to a specific curriculum. Initially it was easier to get it in through the counseling element of the school-the behavior application. That seemed to be the most obvious way in.

  DW: How do counselors use TOC?

  KS: Let's say the child is sent in to the guidance office with a behav- ioral problem. The counselor who's been trained in TOC will use tools like the negative and positive branch: "What did you do? Why were you sent here?" And then they go into the cause and effect con- sequences of the behavior, and how that leads to negatives for the student. The student will say, "If I do this, I get in trouble, I get grounded, I get sent up here, my parents get called." It's almost pre- dictable, this branch. Then the counselor asks, "Okay, what would happen if you didn't do these things?" Then the student writes the

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  other branch, the positive one. Then the counselor asks, "Okay, which would you prefer? It's up to you."

  One of the first teachers that was using this in a classroom in Califor- nia was working with at-risk students. They were at risk of failing academically and behaviorally. She was teaching the process outright, as a skill. And she had her students do cause and effect branches. One boy did it on, "I'm going to steal a car, go on a joy ride." She went to help him, because he couldn't get the branch started. "She said, "What's the problem?" He said, "This is the first time I've ever thought of something ahead of time." In the end he had to go to the driver education teacher and get some information to finish the branch, which is great. He found out what would happen to him if he got caught, because he didn't really know. How do you quantify the re- sults of something like that?