One of the best business books I’ve ever read is The Goal by Eli Goldratt, clearly a forerunner to BPM, Six Sigma, and Lean… and in my humble opinion, remains vibrant and relevant today. It is still an entertaining and enlightening book, written in the mid ‘80s as a fiction novel about a manufacturing plant operation, re-released every 10 years or so, and required reading at many MBA programs.
I stumbled across this book recently, and much to my surprise, found that eight new chapters were added beyond my original edition, thoroughly enjoyed re-reading this classic… and find so much of it meaningful in our quest for “ongoing process improvement”, and effecting positive cultural change within our organizations.
The Goal, while written about a manufacturing environment, provides useful insights for any type of producer, service, or advisory company. The book forces the reader to challenge the conventional thinking about productivity, process improvement, and organizational objectives. Many companies in the past few years have skewed heavily to cost control efforts; however, upon thoughtful analysis, these actions are likely contributing towards unprofitable, and potentially catastrophic, outcomes.
An interesting exercise, central to the book’s theme, is to ask your executives and managers a simple question…
What is the Goal of your company?
That question in itself could yield some interesting answers. Some may say…
- to repeatedly produce high quality products with near zero defect
- to attain a high level of customer satisfaction and loyalty
- to deliver desirable products and services to customers that exceed expectations
- to create a great organization with high employee loyalty
But the author distills everything down to the essential. The goal of your company is to make money, now and in the future. Every decision is rendered from that core conviction. Making poor decisions (regarding operations, customers, employees, vendors,…) will greatly affect the company’s ability to attain its goal.
From a process perspective, the book introduces three core company-wide measurements, listed in order of importance:
1. Throughput - The rate at which contribution dollars (real cashflow) are coming into the company.
2. Inventory and Investment - Everything the company has invested and intends to sell.
3. Operating Expense - All the money the company spends in order to convert Inventory to Throughput. This measurement includes all employee time, which is often not factored into manufacturing production floor decisions.
Armed with these three metrics, the book explores the approach to find and improve processes in the company.
- Identify the process constraints
- Decide how to Exploit the constrant
- Subordinate everything to the above decision
- Elevate the system constraint
- Go back to Step 1, but do not permit inertia to cause a system constraint
Bizappia has applied this approach and these metrics throughout many process innovation and improvement projects, and can attest to their efficacy. Of course, there is so much more to achieve the goal and effect change in an organization; however, keeping the ‘eyes on the prize’ focus, and emphasizing continuous monitoring and adjustment will yield powerful results.
There are, and have been, many reviews, opinions, and debates of The Goal; but for sure, it is a provocative read, and provides an opportunity for everyone in a company to reflect on their company’s true mission and their role and ability to shape, influence, and contribute to The Goal.
A Christmas Gift: For a limited time, if you email Bizappia (email address on this site), we will send you a free e-book copy of this classic.
I think you’ll enjoy discovering answers to the questions, “What is the goal of your company?”, and “Do you have the right measurements to assist you in reaching it?”.
And perhaps just as important… What is your goal?
Filed under: BPM Tagged: | BPM, Innovation, Metrics, Process, Productivity, Strategy
Craig Lashmet
Howard Webb
