Learn in this summary of "The Goal" one of the most successful methods for implementing a process of continuous improvement: the Theory of Constraints.
The authors Eliyahu Goldratt and Jeff Cox tell a fictional story to teach that will help you identify the problems that are keeping you from achieving the expected results within your organization.
Do you want to put your company on the track of continuous improvement? Keep reading to know how!
About the book "The Goal"
Written by Eliyahu M. Goldratt and Jeff Cox, the book "The Goal" was originally published in 1984 and continues to be reprinted to this day, given the timeliness of the approach.
Over the years, it has been adopted for study in many business administration courses and is much sought after by market professionals. The work has more than 2 million copies sold, with translation into almost 30 languages.
Written in the form of a novel, the characters and plots serve as a background for the presentation of Theory of Constraints (TOC), an important reference in management and continuous improvement programs. By the way, Eliyahu Goldratt is the main creator and promoter of TOC.
About the authors Eliyahu M. Goldratt and Jeff Cox
Eliyahu Moshe Goldratt (1931-2011), Israeli, was a physicist and management consultant. He is the main creator of the Theory of Constraints and also the author of several books on logistics, strategic planning, project management, accounting, finance, information technology, marketing, and other topics.
His writing adopts the novelized narrative style, always evading the format of essentially technical manuals.
Jeff Cox is a writer, considered a master of the art of conveying business concepts through stories. He is the co-author of several titles that have become best sellers in the field. Besides business literature, Cox is also dedicated to writing novels.
To whom is this book indicated?
The book "The Goal" is indicated for managers and leaders who want to improve their processes, achieve objectives, and solve the company's persistent problems.
Main ideas of the book "The Goal"
The protagonist of "The Goal" faces many personal and professional challenges to achieve his goal: making the factory for which he is responsible productive, because it is in danger of closing in three months
Some important points made by the authors Eliyahu M. Goldratt and Jeff Cox are:
- Productivity refers to every effort made to bring the company closer to its goal;
- A company's goal is ultimately to make money;
- To achieve this goal, that is, to make money, the company must balance earnings, inventory, and operating cost;
- These three measures also represent a new way of understanding the company's accounting;
- To balance the three essential measures, processes need to be understood and tailored;
- In turn, the adequacy of processes requires the manager to exercise logical reasoning, which begins with the diagnosis of the necessary changes;
- A good starting point for the diagnosis is the identification of bottlenecks, that is, restrictions that prevent the company from reaching satisfactory levels of effectiveness in its processes;
- This sequence of steps that brings the company closer to its goal can be a process of continuous improvement.
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Overview: Demystifying the notions of productivity and goals
The plot of the book "The Goal" is about a manager responsible for one of the factories of a large corporation being charged for the poor results of the unit, which is compromising the business as a whole.
Pressured by the need to present positive results in three months, the manager goes in search of solutions. In the casual encounter with an old college colleague and now a physicist, the trail that will lead the manager to solve his problem begins.
Shortly after reporting the problems of the factory he runs, the manager is asked about his notions of productivity and goals.
Surprisingly, leaving out more elaborate definitions, the physicist/consultant presents a straightforward way of understanding these concepts.
Productivity is defined as anything that helps a company to approach its goal. That is, if an action brings the company closer to its goal, it is productive; otherwise, no.
The goal setting is even more straightforward: a company's goal is ultimately to make money. That simple.
Of course, as the authors Eliyahu M. Goldratt and Jeff Cox affirm, this will need to be broken down into increased net income, return on investment, or even cash flow.
Either way, this kind of understanding helps managers gain a clearer view of their reality.
Overview: Three reference measures for the pursuit of the company's goal
Continuing to be surprised by the concepts adopted by his unexpected consultant, the manager is introduced to a new vision about the company.
Thinking about how to achieve the company's goal, the authors Eliyahu M. Goldratt and Jeff Cox expose the flow of money in three different measures:
- Earnings: corresponds to the money actually generated by the sales of what the company produces;
- Inventory: all the investment the company makes in its ability to produce. Mainly includes raw materials, machinery, and facilities;
- Operating cost: the expenses required to transform inventory into earnings.
Note that this classification of measures offers an interesting insight into the accounting and the internal constitution of a company.
Overview: The balance between measures
The company's goal is achieved by balancing the three measures.
An interesting example cited in the book "The Goal", which expresses this statement well, is the use of robots at certain stages of the production process.
Because there was no adjustment in the processes, the simple introduction of robots didn't bring the gains that the company expected. Why?
The activities to which the robots were assigned didn't represent process bottlenecks. As a result, robots produced a lot, but that didn't speed up the process as a whole. Bottlenecks located elsewhere made the high production of the robots unhelpful.
Thus, the introduction of robots represented only an increase in inventory, without the corresponding generation of earnings.
Overview: The importance of bottlenecks (or constraints)
Without making an explicit nominal citation, the authors Eliyahu M. Goldratt and Jeff Cox present the basis of the Theory of Constraints.
The processes in a company form a sequence of events dependent on each other. For an event to happen, the previous ones must have been successful.
Due to this dependence, more restrictive events tend to dictate the pace of the process as a whole, creating bottlenecks.
These bottlenecks can be of different natures, such as:
- Physical: inefficient equipment, poor quality materials, inadequate physical space, lack of qualified personnel, etc.;
- Policy: usually linked to regulations and legislation for carrying out procedures;
- Cultural: common sense paradigms within the company ( "It has always been done this way, why change?");
- Market: the level of demand can determine the need to adjust the internal processes of a company.
In other words, the processes in a company are like a chain and the bottlenecks are its weakest links, which end up compromising the capacity of the whole.
More generally, the constraint represents any form of limitation that prevents the company from achieving effective earnings, as it is explained in the book "The Goal".
Overview: A method to reach the goal
The robot example illustrates the need to study changes carefully before implementing them.
To be sure about the necessary changes, managers must have logical reasoning as their basic tool and be able to answer, satisfactorily, the following questions:
- "What needs to be changed?";
- "What is the new desired scenario?";
- "How will this change be accomplished?".
The first question can be efficiently answered by identifying constraints in the processes.
The following questions should be answered in such a way as to lead to an increase in the flow rate of the bottleneck or even a breach of the restriction imposed by it. This is always based on the balance between earnings, inventory, and operating expenses, as the authors Eliyahu M. Goldratt and Jeff Cox reinforce.
Going back to the example of robots mentioned in the book "The Goal", a study with this rigor would have shown that there was no bottleneck in the tasks for which they had been requested.
Overview: Method repetition and continuous improvement
The method, which begins with the identification of a bottleneck and ends with the achievement of goals, can become a continuous improvement program. It just needs to be executed as a sequence of cycles.
According to the book "The Goal", once the change introduced has increased or broken limitations, the bottleneck that gave rise to it ceases to exist. Thus, the next step may be to identify another bottleneck, restarting the cycle.
The authors Eliyahu M. Goldratt and Jeff Cox affirm it is also possible that each new change will be the source of future new bottlenecks and so the company will adjust to keep growing.
What do other authors say about it?
In the book "The Effective Executive", Peter F. Drucker clarifies that executives can be brilliant, imaginative, and informed, and yet be inefficient. Effective executives are systematic. They work hard in the right areas and their results define them. They are professionals who help the company achieve its goals.
Eric Ries, in "The Lean Startup", says you can't change quality for time. If you are experiencing quality problems now, the resulting defects will delay you in the future.
Engaging on the subject of continuous improvement, the author of "Scaling Up", Verne Harnish, gives some tips for pursuing continuous improvement, such as collecting feedback from employees and establishing a communication rhythm.
Okay, but how can I apply this to my life?
Perhaps the most remarkable lesson in the book "The Goal" is identifying bottlenecks as a focus for the effective solution of problems. It is a great exercise for everyday issues.
Think, answer, and act: What is the bottleneck that keeps you from achieving your goals?
Some other important lessons from the authors Eliyahu M. Goldratt and Jeff Cox are:
- Know well the goals you want to achieve;
- Count with the guidance of a mentor;
- Establish a method for solving problems.
Did you like this summary of the book "The Goal"?
Are you ready to get rid of the constraints that keep you from reaching your goals?
To learn more with the authors Eliyahu M. Goldratt and Jeff Cox, you can buy the book by clicking on the image below: