Theory of Constraints Step 4: Elevating the Constraint
In our blogs we mentioned the Theory of Constraints (TOC) several times. In short, it is an organizational change methodology with focused improvement of the organizational goal. The main idea of TOC is that every organization, or complex system, must have at least one constraint. If there was no constraint, then the organization would be able to generate unlimited goal units. “A constraint” is a factor that limits or constrains the organization from achieving more goal units. The goal of most “for profit” companies is to make a profit, provide a secure environment for employees, and satisfy the market. Theory of Constraints provides an essential set of tools that help to achieve the defined goal.
The Five Focusing Steps
The essential part of the TOC is called “The Five Focusing Steps”, where the key word is “FOCUS”. These steps are the cornerstone of the Theory of Constraints with its goal to grow profits through sales on the one hand, and control costs and eliminate waste – on the other. Speaking in terms of the TOC, this step by step methodology starts with identifying the constraint.
Step 1, 2 and 3:
In previous blogs we talked about the Theory of Constraints in general and elaborated on the first two steps of it: “Identifying the Constraint” and “Deciding How to Exploit the Constraint”. Third step of the process focusses on ”Subordinating Everything to the Constraint.”
Step 4: Elevating the Constraint
The last few blogs were dedicated to the first three steps of the Five Focusing Steps of the Theory of Constraints, introduced by Dr. Goldratt as a holistic organizational change method used to improve the performance of an organization. At this point, the constraint has been identified, it has been decided how to exploit it and where to place it strategically, and how resources should subordinate to the constraint to make the whole system work more effectively. The importance of subordination in step three is the key for elevating the constraint in step four.
Contrary to popular belief, the concept of elevation in not to increase the capacity of the constraint to the point that the constraint is broken and shifts to a new constraint. The concept in step four is to understand how much protective capacity is available on non-constraints and, more importantly, how much protective capacity is necessary in the non-constraints to maintain a stable system. Therefore, the essential part of step four is not to allow the constraint to move, especially if it has been positioned strategically, and to maintain enough protective capacity in the non-constraints to keep the system in statistical control. My general rule of thumb is to have about 20% protective capacity in non-constraints to keep enough unbalanced capacity to maintain balanced flow. Of course, there are other factors that contribute to the amount of protective capacity necessary to maintain balanced flow, such as the number of dependencies in the system and the amount of variation in the system. The higher the number of dependencies and higher the variability, the higher the degree of protective capacity to maintain balanced flow and stability.
One of the main reasons not to elevate the constraint to the point where it is no longer the constraint is mainly due to the large paradigm shift it takes for organization to operate under the new rules for the non-constraints of “when you have work, work effectively; when you don’t have work, wait.” If the organization continually elevates the constraint and new constraints are constantly emerging, the organization must re-calibrate everyone’s thinking for the new rules to the new constraint. Since most organizations are not very good at communicating, this mode of operating is a recipe for disaster.
A second reason not to elevate the constraint to the point where it is no longer the constraint is because once the system is stabilized, and the organization has established a proper planning process around the capacity of the constraint. If the constraint moves, especially unintentionally, the company must re-do the entire planning process to satisfy the new constraint. Another major change for the organization. Thus, the cornerstone for elevating the constraint is performing the proper subordination; so, when it is decided to elevate the constraint, it does not shift.
Methods of elevating the constraint
There are several methods for elevating the constraint properly. Since there are two types of constraints — internal and external –, the methods for how they should be addressed are different. If the constraint is external, the organization’s main task is to create the “unrefusable” market offer, or an offer to the market that no other significant competitor can offer and reliably deliver. If the constraint is internally, there are multiple ways to elevate it. Those ways include: offloading tasks, integrating tasks, simplifying tasks, or eliminating tasks at the constraint. In addition, it could also include applying Lean and Six Sigma principles to improve effectiveness and utilization of the constraint.
In either case, the leadership team must to work together with the employees in order to understand the appropriate actions to systematically elevate the performance of the organization while maintaining stability and control.
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