The Goal: A Process of Ongoing Improvement, Third Revised Edition
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Aegon group, one of the world's largest insurers.
DW: How have you made use of The Goal?
DH: In a couple of ways. First and foremost we use the five focus-
ing steps almost instinctively now, in that we seek to identify the
constraint in any problem before we do anything else. That's sort of
been my mantra, if you like—before we go any farther, let's identify
the constraint.
Beyond that, a big part of what we do is acquire new independent
financial advisors-we want people to join our organization, and the
people we use to recruit them we call our business consultants. Oded
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RP: In a couple of ways. First and foremost we use the five focussing
steps almost instinctively now, in that we seek to identify the con-
straint in any problem before we do anything else. That's sort of been
my mantra, if you like—before we go any farther, let's identify the
constraint.
Beyond that, a big part of what we do is acquire new independent
financial advisors—we want people to join our organization, and the
people we use to recruit them we call our business consultants. Oded
Cohen, of Goldratt UK, helped us build a process for that. He broke
it down into very discrete steps and helped us program software which
helps us track how each of our business consultants is succeeding, or
not. At any point in time they may have 150-200 people they're hav-
ing conversations with about joining Positive Solutions. We've got
them to think of each of those people as a project. That streamlined
the process and also got our business consultants to think in a more
logical fashion.
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 t
ime 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 running 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 different, 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 doing 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 Institut
e 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