Maximizing Profitability Part 32

In my last blog posting we talked about Parkinson’s Law (i.e. Work expands to fill the available time), the Student Syndrome (i.e. procrastination or delaying work on a task because we know there’s safety time imbedded in our estimate) and multi-tasking (i.e. jumping from one project to the other) and how each one extends the time required to complete projects. Although eliminating multi-tasking improves our on-time completion rate, there are other things that can be done to improve these rates even more? Let’s take a look.

As we’ve seen, in CPM task durations are inflated to protect against Murphy’s untimely attacks. What if we could significantly reduce these imbedded safety buffers and still provide the protection that we need? In our example from the figure below, suppose we were able to reduce the estimated duration by 50 % and still protect against Murphy. In other words, if we could complete the tasks in 5 days instead of 10 days, wouldn’t this be a quantum leap in project completion time reduction?

The figure above is a depiction of the reduction in durations of each project. We have just reduced the time to complete these three projects from 30 days to 15 days, but can we do this and safely guard against the uncertainty introduced by Murphy? The answer is, yes we can! But before we explain how to do this, we want to introduce (or re-introduce to some of you) something called the Theory of Constraints (TOC).

TOC came on the scene in the mid-1980’s through its developer, Eli Goldratt. Goldratt taught the world that every organization has at least one (and usually only one) constraint that prevents an organization from coming closer to its goal. And for most companies, the goal is to make money now and in the future. In fact, Goldratt analogized this concept to the strength of a chain being dictated by its weakest link.

In a manufacturing environment, TOC presumes that only one work station, the one with the least capacity, dictates the throughput of the process and to operate all stations at maximum capacity will only serve to create excess inventory in the process. This excess inventory increases the lead time and wastes resources. The best way to understand TOC is to envision a simple, repeatable process as in the figure below.

In our example, Step 3 at 7 days is the slowest resource since it requires 7 days to complete it, whereas all of the others require much less than 7 days. Therefore the maximum throughput of the process in the above figure is 1 unit of product (or service) every 7 days. TOC identifies Step 3 as the constraint and tells us that if we want to improve throughput, then we must focus our improvement efforts on this step.

The question you might have in your mind right now, is why bring up the Theory of Constraints (TOC) when we’re talking about Project Management. The answer is quite simple. TOC recognizes the existence of a constraint and this recognition in a project management environment is absolutely critical to shortening the time required to complete projects.

TOC teaches us that the first order of business is to define your Goal. In a single project, the goal is identified as making the promised project due date while in a multiple project environment, the goal is to maximize the throughput of projects. So how do Goldratt’s 5 focusing steps apply to project management?

Goldratt’s 5 Focusing Steps:

1. Identify the system constraint.

2. Decide how to exploit the constraint.

3. Subordinate everything else to the constraint.

4. If necessary, elevate the constraint.

5. Return to step 1, but don’t let inertia create a new constraint.

Good question and in my next few postings, I will demonstrate how each of the 5 steps apply to a project management environment as well as introducing TOC’s version of project management, Critical Chain Project Management (CCPM).