Monday, May 21, 2012

Focus and Leverage Part 116

Continuing with my series on healthcare and my push for everyone to get a copy of Performance Improvement for Healthcare, let’s now discuss how Constraints Management fits into our healthcare discussion, again using direct quotes from this wonderful book.
“In The Goal, Goldratt details a systematic approach to managing complex organizations by identifying and controlling key leverage points within a system or process. By managing these key control points, healthcare organizations can focus on areas that drive system-level improvement instead of trying to manage every element of a process, which can lead to local optimization without systemic impact.”
“Constraints Management is a systems approach that recognizes that every system has a goal and a set of necessary conditions that must be satisfied to achieve that goal. As such, Constraints Management begins by identifying the critical success factors necessary to realize the goal and aligns the system to attain greater levels of performance while minimizing waste.”
“Goals may range from reaching superior levels of profitability now and in the future for a for-profit organization to increased coverage or availability of provided services for a not-for-profit company or government agency. Because it is grounded in systems thinking, Constraints Management looks at materials, information, and money flows and encompasses techniques useful for production and logistics (e.g., drum-buffer-rope, critical chain project management, and buffer management), performance measurement (e.g., throughput accounting), and problem solving (e.g., thinking processes). It therefore breaks through the “silo mentality” of many organizations, focusing all efforts on satisfying end-user requirements. Dr. Kevin Watson of Iowa State University sees Constraints Management as focused, robust, scalable, and generalizable, as described in the next few paragraphs.” 
“A constraint is anything that limits the system from achieving higher performance relative to its goal. In healthcare, a constraint is anything that impedes the ability or means to provide or deliver care. H. William Dettmer, author of numerous books on Constraints Management, defines seven basic constraint types:”
·         Market
·         Resource
·         Material
·         Supplier/vendor
·         Financial
·         Knowledge/competence
·         Policy
“He also adds that a policy is most likely behind a constraint from any of the first six categories. On the other hand, Dr. Boaz Ronen, a business administration professor at Tel Aviv University and coauthor of the book, Focused Operations Management for Health Services Organizations, defines only four types of constraints in a managerial system”:
·         Resource
·         Market
·         Policy
·         Dummy
“The Theory of Constraints International Certification Organization (TOCICO) Dictionary calls policy constraint a common misnomer because “Bad policies are not the constraint; rather they hinder effective constraint management by inhibiting the ability to fully exploit and/or subordinate to the constraint.” Regardless of how constraints are classified, the Constraints Management body of knowledge provides tools to identify and manage all types of constraints. Constraints Management is focused, recognizing that the system’s ability to attain its goal is inhibited by a limited set of variables or constraints.”
“Constraints Management focuses attention and concentrates resources at the point in the system where they may be leveraged to achieve the highest level of goal attainment. Constraints Management allows the system to achieve optimal output and increase flexibility and responsiveness, all while minimizing waste. This synergistic effect results from subordinating the system to the constraint and creating protective capacity at nonconstrained resources, thereby better enabling the system to deal with the consequences of variability.
Constraints Management tools are robust. Systems managed under Constraints Management strategically buffer against variability, do not impose rigid material-handling rules, and schedule only strategic control points in the system. Therefore, Constraints Management systems are better able to mitigate the effects of uncertainty than similar JIT systems. This makes Constraints Management adaptable for highly variable manufacturing and for the purpose of managing supply chains.
Constraints Management techniques are scalable and generalizable to a wide set of operations and supply-chain environments. Techniques that are useful at the process level are applicable at higher levels of aggregation.  Constraints Management tools are also generalizable to applications far beyond production and logistics as they were presented originally in The Goal.
The thinking processes used in the resolution of unstructured problems are applicable to decision making in such widely varying environments as conflict resolution, quality control, continuous improvement, contract negotiation, policy reengineering, and strategy development. Once managers understand the basic concepts, they are able to apply that knowledge with little additional training to a wide range of applications, for example, manufacturing and supply-chain environments—from control of a manufacturing cell, to project management, to distribution and logistics management.
Constraints Management Tools System improvements under Constraints Management seek to identify (1) what to change, (2) what to change to, and (3) how to cause the change. This follows a process of ongoing improvement (POOGI) comprised of two prerequisites and five steps that underlie all Constraints Management production techniques. The prerequisites for Constraints Management process improvement are (1) define the boundaries of the system and its goal, and (2) determine a means to measure goal attainment. While these steps appear obvious, failure to explicitly identify the scope and purpose of the system and measure how the system performs in achieving that goal can result in dysfunctional behavior. Having satisfied the prerequisites, system improvement proceeds according to the five focusing steps sequence:
1.    Identify the system constraint(s). What limits the performance of the system now? What is the weakest link in the system?
2.    Decide how to exploit the system’s constraint(s). How can the most performance be achieved from a constrained step in the process without additional investment? Here, exploit means “use, develop, make use of, take advantage of, and make the most of.”
3.    Subordinate/synchronize everything else in the system to the above decision. Set up and implement rules to maximize the capacity of the system based on the speed of the system’s constraint. In this step, all parts of the system that are not constraints are required to do whatever they can to support the exploitation plan. Additionally, all nonconstraints must not do anything that would interfere with the exploitation plan for the constraint. And most important, all nonconstraints (most of the system) must recognize that their own efficiency is not as important as supporting the system constraint, which requires measurement changes.
4.    Elevate the system constraint. To physically increase the capacity of the system through the acquisition of or investment in more resources.  Always remember to predict where the constraint will be after elevation and its resulting impact on global performance. The location of any new constraint definitely will affect an organization’s elevate strategy.
5.    Go back to step 1. This will ensure that improvement is ongoing and never ceases. It also helps to avoid inertia by keeping at bay the relentless tendency to accept established precedent. Even the most transformational improvements, once established, become the status quo.
Originally applied to manufacturing organizations, the concepts of Constraints Management have branched out successfully to many business environments, including service organizations, project-based companies, not-for-profits, and most recently, healthcare. By introducing Constraints Management, hospitals can gain significant insight into which areas to focus their performance-improvement efforts.
In my next posting we’ll take a look at a few examples of how this integration has worked successfully in the healthcare field.  My next posting will be my last one in this series on healthcare, so I urge all of you to get this book….you won’t regret it!

Bob Sproull

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