Constructing a Goal Tree/Intermediate Objectives Map
A Goal Tree could very quickly and easily be constructed by
a single person, but if the system it represents is larger than the span of
control of the individual person, then using a group setting is always
better. So, with this in mind, the first
step in constructing a Goal Tree/IO Map is to clearly define the system in
which it operates and its associated boundaries. The second consideration is, whether or not
it falls within your span of control or your sphere-of-influence. Defining your span of control and sphere of
influence lets you know the level of assistance you might need from others, if
you are to successfully change and improve your current reality.
Once you have defined the boundaries of the system and your
span of control and sphere of influence you are attempting to improve, your
next step is to define the goal of the system.
Remember, we said that the true owner(s) of the system is/are responsible
for defining the goal. If the true owner
or owners aren’t available, it is possible to articulate it by way of a “straw
man,” but even then, you need to get concurrence on the goal from the owner(s)
before beginning to construct your Goal Tree.
Don’t lose sight of the fact that the purpose of the Goal Tree is to
identify the ultimate destination you are trying to reach.
Dettmer tells us that the Goal Tree’s most important
function, from a problem-solving perspective, is that it constitutes a standard
of system performance that allows problem-solvers to decide how far off-course
their system truly is. So, with this in mind, your goal statement must reflect
the final outcome and not the activities to get you there. In other words, the goal is specified as an
outcome of activities and not the activity itself.
Once the goal has been defined and fully agreed upon, your
next order of business is to develop three to five Critical Success Factors
(CSFs) that must be firmly in place before your goal can be achieved. As I explained earlier, the CSF’s are
high-level milestones that result from specific, detailed actions. The important point to remember is that if
you don’t achieve every one of the CSF’s, you will not accomplish your goal.
Finally, once our CSF’s have been clearly defined, your next step is to
develop your Necessary Conditions (NCs) which are the simple building blocks
for your Goal Tree. The NC’s are
specific to the CSF they support, but because they are hierarchical in nature,
there are typically multiple layers of them below each of the CSF’s. As already stated, Dettmer recommends no more
than three layers for the NC’s, but on numerous occasions I have observed as
many as five layers working quite well.
With the three components in view, you are now ready to construct your
Goal Tree. Let’s demonstrate this
through a case study where a company constructed their own Goal Tree.
The Case Study
Example
The company in question here is one that manufactures a
variety of different products for diverse industry segments. Some orders are build-to-order, while others
would be considered orders for mass production parts. This company had plenty of orders to fill,
but unfortunately, they were having trouble not only filling them, but filling
them on time. As a result, this
company’s profitability was fluctuating between making money one month and
losing money the next. Because of this,
the board of directors decided to make a leadership change and hired a new CEO
to effectively “right the ship.”
The new CEO had a diverse manufacturing background, meaning
that in his career he had split his time between job shop environments and
high-volume manufacturing companies.
When the new CEO arrived, he called a meeting of his direct reports to
not only meet them, but to assess their proficiencies and capabilities. He soon realized that most of the existing
management team had been working for this company for many years and that their
skills appeared to be limited. Before
arriving, the new CEO had concluded that the best approach to turning this
company’s profitability around and stabilizing it would be to use the Theory of
Constraints Logical Thinking Processes (LTP’s).
But after meeting his new team and evaluating their capabilities, and
since time was of the essence, he decided instead to use the Goal Tree to
assess his new company and lay out an improvement strategy.
The CEO’s first order of business was to provide a brief
training session on how to construct a Goal Tree for his new staff. The first step was to define the boundaries
of their system which included receipt of raw materials from suppliers to
shipping of their products to their customers.
Within these boundaries, the team concluded that they clearly had
defined their span of control because they had unilateral change
authority. They also decided that they
could influence their suppliers and somewhat the same with their customers, so
their sphere of influence was also defined.
In advance of this first meeting with his staff, the CEO had
met with the board of directors to determine what the goal of this company
actually was. After all, he concluded,
it’s the owner or owner’s responsibility to define the goal of the system which
was “Maximum Profitability.” After
discussing his meeting with the board of directors to his team and the goal
they had decided upon, the CEO posted the goal on the top of a flip chart as
follows in the figure below:
The CEO knew that the board of directors wanted maximum
profitability, both now and in the future, so he added the future reference to
the Goal box. But before moving on to
the Critical Success Factors (CSFs), the CEO decided that it would be helpful
if he explained the basic principles of both the concept of the system
constraint and Throughput Accounting.
His staff needed to understand why focusing on the constraint would
result in maximum throughput, but equally important, his staff needed to
understand how the three components of profitability, Throughput (T), Operating
Expense (OE) and Investment/Inventory ( I ) worked together to maximize
profitability.
After much discussion, his staff offered three Critical
Success Factors which the CEO inserted beneath the Goal in the Goal Tree. After learning the basics of TOC’s concept of
the constraint and basic Throughput Accounting (TA), his staff knew that
because they needed to increase Net Profit (T – OE), then maximizing throughput
had to be one of the CSF’s. They also
concluded that in order to maximize net profit, minimizing OE had to be another
CSF. And finally, because Return on
Investment (ROI) was equal to Net Profit divided by their Investment (i.e. NP =
(T ÷ I), they needed to include minimum investment as one of the CSF’s.
In my next post we will complete the construction of this company's Goal Tree and then begin a discussion on how to use it to assess the organization's current state.
Bob Sproull
No comments:
Post a Comment