My Life Now

 I've received quite a few emails asking me why I've stopped posting articles on my blog. For everyone wondering the same thing, it isn't because I don't want to, it's because of a personal reason. You see, my wife of almost 54 years is suffering from Stage 5 Dementia, so all of my time goes to caring for her. One day in the future, I will start writing blog posts again, but that will be a very sad day. Thanks for everyone's understanding during this very difficult time in my life.

Bob Sproull

The Goal Tree Part 9

The Goal Tree Part 9

Review

In my last post the leadership team was able to convert all of the “red” entities into either green or yellow ones by simply implementing their new scheduling method, Drum Buffer Rope.  As a refresher, the figure below is this team’s final product. 

In today’s post, we will demonstrate how we are able to, using the Goal Tree/IO Map, develop performance metrics to track the organization’s status and progress.

Performance Metrics

Before we develop our performance metrics, let’s first discuss the purposes of an organization’s performance metrics.  In general, we need some type of feedback mechanism that tells us how we’re doing, a way to be able to know that the direction we’re traveling is on course in the event that we need to make any midcourse corrections. These performance metrics should be system related in that they tell us how the system is doing versus how an individual process is functioning. Remember, our focus is on system performance and not individual performance. So what should our performance metrics be? Before we answer that question, let’s talk about their purpose.

Performance measures are intended to serve six important functions or roles:

 

1. First, and foremost, the measures should stimulate the right behaviors.

2. The performance measures should reinforce and support the overall goals and objectives of the company.

 

3. The measures should be able to assess, evaluate and provide feedback as to the status of the people, departments, products, and the total company.

 

4. The performance measure must be translatable to everyone within the organization. That is, each operator, manager, engineer, etc. must understand how their actions impact the metric. Performance metrics are intended to inform everyone, not just the managers!

 

5. The performance metrics chosen should also lend themselves to trend and statistical analysis and, as such, they shouldn’t be “yes or no” in terms of compliance.

 

6. The metric should also be challenging, but at the same time be attainable. There should be a stretch involved. If it’s too easy to reach the target, then you probably won’t gain much in the way of profitability. If it’s too difficult, then people will be frustrated and disenchanted.

So with these functions in mind, let’s now look at how we can use our Goal Tree/IO Map to create our series of performance metrics.

Creating Performance Metrics

If we use the Goal Tree/IO Map as our guide, we should start with our goal, Maximize Profitability Now and In the Future, and create our first tracking metric.  Some posts back I introduced you to Throughput Accounting which defined Net Profit as Throughput minus Operating Expense or NP = T – OE.  The metric of choice for this Goal Tree/IO Map then is NP which we insert into our “goal box.”  In addition, I prefer to give most of the metrics a target to attempt to achieve which in this metric we will include, NP >15% (i.e. Net Profit greater than 15%).  We then look at each CSF and NC and select appropriate performance metric targets for as many as might be appropriate.

Because the operational status of companies varies from company to company, there is no standard set of metrics and targets to recommend, but for the company in this series of posts, the following set of metrics and targets have been inserted.  Your company’s leadership team should be charged with establishing both the performance metrics and targets.

Next Time

This completes our series of posts on the Goal Tree/IO Map.  In my next posting we will begin a new discussion on a different subject.  As always, if you have any questions or comments about any of my posts, leave me a message and I will respond. 

Until next time.

Bob Sproull

References:

[1] Dettmer, H. William. The Logical Thinking Process: A Systems Approach to Complex Problem Solving. Milwaukee, WI: ASQ Quality Press, 2007

 

The Goal Tree Part 8

Review 

In my last post the new CEO and his staff completed the color-coding of their company’s Goal Tree/IO Map.  I explained that we can use three colors, green, yellow and red, to assess the current state of the system we are trying to improve.  I also explained that the color green signifies that no changes need be made; yellow tells us that we do have something in place, but it needs to be improved; and red means that we either have nothing in place or we do, but it isn’t working at all.  As a refresher, here is the final product of their session on color-coding. 

As I explained in my last post, when developing your improvement plan, we always start with the NC’s color-coded as red first and then yellow.  We also focus our improvement efforts on the lowest level NC’s simply because if we make improvements at low levels, the improvement should flow to the next highest NC and continue moving upward until the impact finally impacts the goal.  We will now continue the dialogue between the CEO and his team.

The Case Study Continued

Bright and early the next morning the team met again to discuss their next steps.  Everyone seemed enthusiastic about what they would be doing going forward.  When everyone was seated, the CEO turned to the group and asked, “So how does everyone feel about this process so far?”  The Plant Manager was the first to respond, “I can’t speak for anyone else, but the development of the Goal Tree/IO Map was a real eye-opener for me.  I never imagined that we could have analyzed our organization so thoroughly in such a short amount of time.  I mean think about it, when you add up the total amount of time we’ve spent so far, it’s not even been a full day’s work!”  As he spoke, everyone was nodding their heads in agreement.

The CFO was next to speak and said, “I can absolutely see the benefit from using this tool and one of the things that impressed me the most is that everyone contributed. But what really captivated me is that for the first time since I started working here, we actually are looking at the system rather than isolated parts of it.  One of the things that I will take away from this is that the total sum of the localized improvements does not necessarily result in an improvement to the system.

“OK, let’s get started,” said the CEO.  “Today we’re going to plan on how turn our problem areas, those we defined in red, into hopefully strengths,” he said.  “Does anyone have any ideas on how we can take our bottom three reds into either yellows or greens?”  “In other words what can we do that might positively impact delivery rates, customer service and synchronize production to the constraint and demand?”

The Plant Manager was the first to speak and said, “If we were to come up with a way to schedule our production based upon the needs of the constraint, it seems to me that we could really have a positive result for on-time delivery rates and at the same time it would reduce our WIP and FG levels?” he said more in the form of a question.  The CFO then said, “Since we started this, I’ve been reading more about the Theory of Constraints and it seems that there is a scheduling method called Drum, Buffer Rope (DBR) that is supposed to do exactly what you spoke about,” he said directly to the Plant Manager.

The CEO responded by saying, “He’s right, DBR limits the rate of new product starts because nothing enters the process until something exits the constraint.”  “So let’s look at what happens to the reds and yellows if we were to implement DBR,” he added and flashed the Goal Tree/IO Map up on the screen.  “The way I see it is, if we implement DBR, we will minimize WIP.  If we minimize WIP, we automatically minimize FG’s which minimizes our investment dollars which positively impacts our profitability,” he explained enthusiastically.  “We should also see our on-time delivery rates jump up which should result in much higher levels of customer satisfaction,” he added.  “This should also allow us to be more competitive in our pricing and stimulate more demand and with our ability to increase throughput, we will positive impact profitability,” he explained. 

The Quality Director spoke up and said, “I’m thinking that if we effectively slow down in our non-constraints, we should see our scrap and rework levels improve significantly because our operators will have more time to make their products.  This improvement will reduce both our operating expenses and TVC.  The combination of these improvements will both contribute to our profitability.” 

 

“One other thing is that we should see our overtime levels drop which will also improve profitability,” said the CFO.  “I am just amazed that by making this one change, we could see a dramatic financial improvement,” he added.  

The stage was set for major financial gains by first, developing their cause and effect relationships and by looking at their organization as a system and that’s an important message for everyone to glean from this series of postings.  Not all improvement will happen rapidly like they did in this case study, but it is possible to make major improvements to your organization by looking at it from a holistic point of view.  The fact is, isolated and localized improvements will not typically results in improvement to the system.

Next Time

In my next posting we will take one last look at our Goal Tree/IO Map and demonstrate how to develop performance metrics that support the improvement plan.  As always, if you have any questions or comments about any of my posts, leave me a message and I will respond. 

Until next time.

Bob Sproull

References:

[1] Dettmer, H. William. The Logical Thinking Process: A Systems Approach to Complex Problem Solving. Milwaukee, WI: ASQ Quality Press, 2007

The Goal Tree Part 7

 Review

In my last post the new CEO and his staff completed the construction of their company’s first ever Goal Tree/IO Map.  When we left off, the team thought they were finished with this logic tree, but the CEO informed them that they were not.  In this post I will demonstrate how to take the Goal Tree/IO Map and turn it into an improvement plan for your company.  As a refresher, here is the final product of their session. 

As I have stated in previous posts, I like to learn a new tool and make it my own and the Goal Tree/IO Map fits into this model.  Bill Dettmer never intended to use this tool the way I will be presenting it to you, but this method has absolutely worked for organizations  in which I have used it in this way.  We will now continue the dialogue between the CEO and his team.

The Case Study Continued

Bright and early the next morning, the team began filing into their conference room, full of anticipation on just what they would do with their completed Goal Tree/IO Map.  The CEO hadn’t given them any instructions on how to prepare for today’s work, so they were all eager to have the events of the day unfold.  When everyone was seated, the CEO welcomed them and offered his congratulations again on the great job they had done the day before.  “Good morning everyone,” he said as everyone responded with a “good morning” back to him.  As he scanned the room, he noticed that there was one person missing, the Junior Accountant.  When he asked the CFO where she was, he explained that she was working on the monthly report and wouldn’t be joining them today.  The CEO looked the CFO square in his eyes and told him that nothing was more important than what they were going to do today.  “Go get her!” he stated emphatically.  The CFO left and returned minutes later with the Junior Accountant and the CEO welcomed her.  He then said, “We created this as a complete team and we’re going to finish it as a complete team.”

The CEO explained, “When the Goal Tree/IO Map was originally created by Bill Dettmer [1], it was to be used as a precursor to the creation of a Current Reality Tree (CRT).  That is, he used it as the first logic tree in TOC’s Thinking Processes to help create the CRT.”  He continued, “And although I fully support this approach, I have found a way to use it to accelerate the development of an improvement plan.”  The CEO passed out copies of the completed Goal Tree/IO Map and began.

“I want everyone to study our logic tree, focusing on the lower level NC’s first,” he explained.  “As we look at these NC’s, I want everyone to think about how we are doing with each of these,” he continued.  “We’re going to use a color-code scheme to actually evaluate where we stand on each one,” he said.  “If you believe that what we have in place is good and that it doesn’t need to be improved, I want you to color it green.  Likewise, if we have something in place, but it needs to be improved, color it yellow.  And finally, if each NC is either not in place or is not “working” in its current configuration, color it red,” he explained.  “Does everyone understand?” he asked and everyone nodded in agreement.

The CFO raised his hand and asked, “How will we use our color-coded tree?”  “Good question.  Once we have reviewed our Goal, CSF’s and NC’s we will start with the red entities first and develop plans to turn them into either yellows or greens.  Likewise, we’ll then look at the yellows and develop plans to turn them into green ones,” he explained.  As he was explaining his method the CEO could see heads nodding in the affirmative meaning that everyone understood his instructions.  With that, the CEO passed out green, yellow and red pencils.  “I want everyone to do this individually first and then we’ll discuss each one openly until we arrive at a consensus,” he explained.  “While you’re considering the state of each entity, I also want everyone to also think about a way we can measure many of these in the future,” he said.  “I’ll be back in an hour, so please feel free to discuss your color selections as a group,” he added. With the instructions complete, the team began reviewing their Goal Tree/IO Map and applying the appropriate colors to each entity.

After an hour, the CEO returned and asked how the session was coming.  The Plant Manager spoke first, “I was amazed at how much disagreement we had initially, but after we discussed each item, we eventually came to an agreement on how we believe we’re doing.  Would you like to see our final product?” he asked.

“Did you also discuss what kind of metrics we might use to measure how we’re doing?” asked the CEO.  “Yes we did,” said the CFO.  “And?” the CEO asked.  “We need to do more work on that,” he answered.  “So what’s next?” asked the CFO.  “Let’s take a break and come back in an hour and I’ll explain how we can use this tree to develop our final improvement plan,” said the CEO. 

Next Time

In my next posting we will take the completed, color-coded Goal Tree/IO Map and show you how to turn it into an improvement plan. We will also demonstrate how to develop performance metrics that support the improvement plan.  As always, if you have any questions or comments about any of my posts, leave me a message and I will respond. 

Until next time.

Bob Sproull

References:

[1] Dettmer, H. William. The Logical Thinking Process: A Systems Approach to Complex Problem Solving. Milwaukee, WI: ASQ Quality Press, 2007

 

The Goal Tree Part 6

 Review

In my last post the new CEO, with the assistance from his staff, began constructing their company’s Goal Tree/IO Map and the session was actually going very well.  When we left off, here is what the team had completed.  We will now continue the dialogue between the CEO and his team.

The Case Study Continued

The CEO then said, “Let’s stay with the satisfied customers NC, in order to have satisfied customers, we must have what?”  The Quality Director raised his hand and said, “We must have the highest quality product.”  The Logistics Manager added, “We must also have high, on-time delivery rates.”  And before the CEO could add them to the tree, the Customer Service Manager added, “We must also have a high level of customer service.”  The CEO smiled again and said, “Slow down so I don’t miss any of these everyone.”  Everyone laughed.  The CEO looked at the lower level NC’s for satisfied customers and asked if they needed anything else.  Everyone agreed that if they had the highest quality product with high on-time delivery rates and a high level of customer service, then the customers should be highly satisfied.

The CEO decided to continue on beneath the CSF for maximum throughput and asked, “So what do we need to supplement or support sufficient market demand?”  The CFO said, “We need a competitive price point and by the way, I think would also help satisfy our customers.”  The CEO added both NC’s and connected both of them to the upper level NC of sufficient market demand.  The CEO stepped back and admired the work they had done so far, but before he could say anything, the Sales Manager said, “If we’re going to have sufficient market demand, don’t you think we also need effective sales and marketing?”  Again, everyone nodded their heads in agreement, so the CEO added that NC as well.

Before the CEO could say anything more, the Junior Accountant raised her hand and added, “I was thinking that three of the ways we could have effective sales and marketing would be related to the three lower level NC’s assigned to satisfied customers.  I mean, can we do that in a Goal Tree/IO Map?”  The CFO was the first person to speak and he added, “I think that’s a fantastic idea!”  The Junior Accountant put her hand over her mouth to hide her smile, but she was obviously in the midst of a proud moment.  The CEO thanked her and added the connecting arrows.

The CEO then said, “Great job so far, but what’s a good way for us to minimize TVC?”  Without hesitation, the Quality Manager said, “That’s easy, we need to minimize our scrap and rework.”  The Quality Manager then said, “I think that would also be an NC for one of our other CSF’s, minimum operating expense.”  Everyone agreed, so the CEO added both the NC and the second connecting arrow.  Once again the Junior Accountant raised her hand and added, “I think that we should add another NC to the CSF, minimum operating expense, and that we should say something like optimum manpower levels and maybe also minimized overtime.”  The CEO smiled and added both of the NC’s to the tree.

“So what about our CSF, minimum investment?” asked the CEO.  The Plant Manager raised his hand and said, “How about minimized WIP and Finished Goods inventory?”  The CEO looked for objections, but when nobody objected, he added it to the tree.  He then asked, “What about an NC underneath that on?”  The Plant Manager looked at him and said, “We need to synchronize our production around the constraint and demand.” “What do you mean?” asked the CEO.  “I mean we need to stop producing parts on speculation and start building based on actual orders.  I’ve been reading about TOC’s version of scheduling referred to as Drum Buffer Rope and I think we need to move in that direction,” he added.  And with that, the CEO added his comments to the Goal Tree/IO Map.

When he was finished adding the new items to the Goal Tree/IO Map, he turned to the group and began clapping his hands in appreciation for their effort.  He explained, “I’ve been doing this for quite some time now, but I have never seen a group come together more than you have today.”  He added, “I was a bit apprehensive when we began today that maybe some of you would push back and not contribute, but I was totally wrong.”  The CFO raised his hand and said, “For me, I have never seen this tool before, but going forward I will be using it a lot. I’m very happy to have been here today to complete this exercise.”  Everyone else agreed with him.  The CEO then said, “Ladies and gentlemen, this exercise is not over yet.”  “What else is there to do?” came a question from the CFO.  “We’ll get back together tomorrow morning and I’ll explain the next steps,” he explained.

So there it was, a completed Goal Tree/IO Map that everyone was proud of.  “But what will we do next?” everyone thought.

Next Time

In my next posting we will take the completed Goal Tree/IO Map and show you how to turn it into an improvement plan.  As always, if you have any questions or comments about any of my posts, leave me a message and I will respond. 

Until next time.

Bob Sproull

References:

[1] Dettmer, H. William. The Logical Thinking Process: A Systems Approach to Complex Problem Solving. Milwaukee, WI: ASQ Quality Press, 2007

The Goal Tree Part 5

 Review

In my last post the new CEO, with the assistance from his staff, began constructing their company’s Goal Tree/IO Map.  The CEO felt it was very important for his staff to understand Throughput Accounting, so he presented the basics of TOC and TA.  It was important for his staff to understand the concept of the system constraint as well as the basics of TA before beginning to build the Goal Tree/IO Map.  The team established the following Goal and three Critical Success Factors before breaking for lunch.

The Case Study Continued

When his staff returned from lunch, they reviewed what the CEO had presented on Throughput Accounting (TA), just so it was fresh in their minds as they began again to review and construct their Goal Tree/IO Map.  The CEO started, “So, in order to maximize profitability now and in the future, we must have maximum throughput, minimum operating expense and minimum investment which is mostly inventory.”  “Are there any others?” he asked.  His staff looked at each other and agreed that these are the three main CSF’s.  The CEO knew that what was needed next were the corresponding Necessary Conditions (NCs) so he started with, “In order to have maximum throughput, what do we need?”  His CFO put his hand up and said, “We need to maximize our revenue.”  Everyone agreed, but the Junior Accountant immediately raised her hand and said, “That’s only half of it!”  The CEO looked at her and said, “Tell us more.”  She said, “Well you explained that Throughput was revenue minus Totally Variable Costs, so minimal totally variable costs has to be a Necessary Condition too.”  The CEO smiled and said, “So, let me read what we have so far.”  “In order to have maximum Throughput, we must have maximum revenue and minimal TVC’s.” Everyone nodded their heads in agreement as the Junior Accountant swelled with pride.

The CEO continued, “In order to maximize revenue, what must we do?”  The Operation’s Manager said, “We must have satisfied customer,” and before he could say another word, the Marketing Director added, “We must also have sufficient market demand.”  The CEO smiled again and added these two NC’s to the Goal Tree/IO Map.

Next time

In my next posting we will complete the construction of this team’s Goal Tree/IO Map by completing the formulation of the Necessary Conditions (NCs).  As always, if you have any questions or comments about any of my posts, leave me a message and I will respond. 

Until next time.

Bob Sproull

References:

[1] Dettmer, H. William. The Logical Thinking Process: A Systems Approach to Complex Problem Solving. Milwaukee, WI: ASQ Quality Press, 2007

The Goal Tree Part 4

Review

In my last post I expanded on the purpose of each component and presented some tips on how I go about constructing this logic diagram.  I also presented a visual representation of the Goal Tree’s structure to be used as a reference diagram which I have also included in today’s post.  In today’s post we will begin constructing a Goal Tree/IO Map in conjunction with the case study details I presented at the end of my last post.

The Case Study Refresher

 

In my last post I described a company that manufactures a variety of different products for diverse industry segments.  I explained that some orders are build-to-order while others would be considered orders for mass production parts and although this company had plenty of orders to fill, they were having trouble not only filling them, but filling them on time.  Because of not being able to fill the orders on time, this company’s profitability was fluctuating between making money one month and losing money the next.  The board of directors decided to make a leadership change and hired a new CEO to “right the ship.”

 

When the new CEO arrived, he had called a meeting of his direct reports to meet them and assess their capabilities.  Before arriving, the new CEO had decided that the best approach to turning this company’s profitability around and stabilizing it would be to use the Theory of Constraints Thinking Processes.  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/IO Map to lay out an improvement strategy.

The First Meeting

The CEO’s first order of business was to provide a brief training session on how to construct a Goal Tree/IO Map to 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 would be.  After all, he concluded, it’s the 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:

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.

The CEO explained that Throughput was equal to Revenue minus Totally Variable Costs (TVC) and that Net Profit was equal to T – OE.  Finally he explained that Return on Investment (ROI) was equal to NP/I.  With this brief training behind them, he then challenged his staff to tell him what they needed to have in place to satisfy this profitability goal both today and tomorrow.  That is, what must be in place to maximize net profit now and in the future?

After much discussion, his staff offered three Critical Success Factors which the CEO inserted beneath the Goal.  After learning the basics of TOC’s concept of the constraint and 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 one.  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.  The CEO felt very good about the progress they had made with their first Goal Tree/IO Map, but it was time for lunch so they decided to break and come back later to complete the Goal Tree/IO Map.

Next time

In my next posting we will continue with the construction of this team’s Goal Tree/IO Map by developing the Necessary Conditions (NCs).  As always, if you have any questions or comments about any of my posts, leave me a message and I will respond. 

Until next time.

Bob Sproull

The Goal Tree Part 3

Review

In my last post I introduced you to the basic structure of the Goal Tree (a.k.a. The Intermediate Objectives Map).  I also expanded on the purpose of each component and presented some tips on how I go about constructing this logic diagram.  And finally, I presented a visual representation of the Goal Tree’s structure.  The figure below is what I presented and I am inserting it as a frame of reference for today’s post as we begin to construct a Goal Tree by way of an actual company’s case study.

As we proceed, it’s important to understand that the real value of a Goal Tree/IO Map is its capability to keep the analysis focused on what’s really important to system success.  Dettmer [1] tells us that a “Goal Tree/Intermediate Objectives Map will be unique to that system and the environment in which it operates.”  This is an extremely important concept because “one size does not fit all.”  Even two manufacturing companies, producing the same kind of part will probably have very dissimilar Goal Trees. 

Constructing a Goal Tree/Intermediate Objectives Map

A Goal Tree/IO Map 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.  Another important 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 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 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/IO Map.  Don’t lose sight of the fact that the purpose of the Goal Tree/IO Map is to identify the ultimate destination you are trying to reach.  The Goal Tree/IO Map’s most important function, from a problem-solving standpoint, 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 in a previous post, 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/IO Map.  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 mentioned in my last post, 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 place, you are now ready to construct your Goal Tree/IO Map.  Let’s now look at a case study where a company constructed their own Goal Tree/IO Map.

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 “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 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 Thinking Processes.  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/IO Map to lay out an improvement strategy.

Next time

In my next posting we will discuss how this new CEO and his team developed their Goal Tree/IO Map. The next series of posts will be written as though you were actually leading the construction of the Goal Tree/IO Map in your own company.  I’m presenting it this way to add a flavor of realism to the discussion.  As always, if you have any questions or comments about any of my posts, leave me a message and I will respond. 

Until next time.

Bob Sproull

References:

[1] Dettmer, H. William. The Logical Thinking Process: A Systems Approach to Complex Problem Solving. Milwaukee, WI: ASQ Quality Press, 2007

 

The Goal Tree Part 2

Review

In my last post I introduced you to a tool referred to as the Goal Tree (a.k.a. The Intermediate Objectives Map).  I also explained that many people who have gone through a workshop/training exercise on TOC’s Thinking Processes (TPs), have come away feeling inadequate or ill-prepared to apply what they had supposedly just learned.  The good news is, exposure to the Goal Tree, for many people, has restored their confidence and given them a renewed sense of confidence.  In this posting we will lay out the foundation for this brilliant tool.

The Goal Tree Basics

In past posts I have explained that when using any of TOC’s TP’s, there are two distinctly different types of logic at play, sufficiency and necessity.  Sufficiency logic tools use a series of if-then statements that connect cause and effect relationships between undesirable effects.  Necessity logic uses the syntax, in order to have x, I must have y or multiple y’s.  The Goal Tree falls into the category of necessity based logic and is used to lay out strategies for successful improvement.

Bill Dettmer [1] explained in a white paper he wrote that, “The Intermediate Objective (IO) Map dates back to at least 1995 when it was casually mentioned during a Management Skills Workshop conducted by Oded Cohen at the A.Y. Goldratt Institute, but it was not part of that workshop, nor did it ever find its way into common usage as part of the Logical Thinking Process (LTP).   It was described as a kind of Prerequisite Tree without any obstacles.” 

Dettmer continued, “I never thought much about it for the next seven years, until in late 2002, when I began grappling with the use of the Logical Thinking Processes (LTP) for developing and deploying strategy.”  At that time, Dettmer had been teaching the LTP to a wide variety of clients for more than six years, and had been dismayed by the number of students who had substantial difficulty constructing Current Reality Trees and Conflict Resolution Diagrams (CRD) of sufficient quality. According to Dettmer, they always seemed to take a very long time to build a CRT, and their CRD’s were not always what he would characterize as “robust.”  He claimed they lacked reference to a “should-be” view of the system—what ought to be happening.  It occurred to Dettmer that the IO Map he’d seen in 1995 could be modified and applied to improve the initial quality of CRTs. As time went on, Dettmer began to realize that the IO Map could serve a similar purpose with CRD’s.  In 2007 Dettmer published a book, The Logical Thinking Process: A Systems Approach to Complex Problem Solving that introduced the world to this wonderful tool.

Dettmer tells us that one of the first things we need to do is determine the system boundaries that we are trying to improve as well as our span of control and sphere of influence.  Our span of control means that we have unilateral change authority while our sphere of influence means that at best, we can only influence change decisions.  Dettmer explains that if we don’t define our boundaries of the system, we risk “wandering in the wilderness for forty years.”

The Goal Tree Structure

The hierarchical structure of the IO Map/Goal Tree consists of a single Goal and several entities referred to as Critical Success Factors (CSFs).  CSF’s must be in place and functioning if we are to achieve our stated goal.  The final piece of the Goal Tree are entities referred to as Necessary Conditions (NCs) which must be completed to realize each of the CSF’s.  The Goal and CSF’s are worded as though they were already in place while the NC’s are stated more as activities that must be completed.

The figure below is a graphic representation of a Goal Tree with each structural level identified.  The Goal sits at the top with three to five Critical Success Factors directly beneath it.  The CSF’s are those factors which must be in place if the Goal is to be realized.  For example, if your Goal was to create a fire, then the three CSF’s which must be in place are (1) a combustible fuel source, (2) a spark to ignite the combustible fuel source and (3) air with a sufficient level of oxygen.  If you were to remove any of these CSF’s, there would not be a fire.

The Goal

Steven Covey [3] suggests that we should, “Begin with the end in mind,” or where we want to be when we’ve completed our improvement efforts which is the purpose of the Goal.  A Goal is an end to which a system’s collective efforts are directed.  It’s actually a sort of destination which implies a journey from where we are to where we want to be.  Dettmer also makes it very clear that the system’s owner is who determines what the goal of the system should be.  If your company is privately owned, maybe the owner is a single individual.  If there’s a board of directors, they have a chairman of the board who is ultimately responsible for establishing the goal.  Regardless of whether the owner is a single person or a collective group, the system's owner(s) ultimately establishes the goal of the system.

Critical Success Factors and Necessary Conditions

There are certain high-level requirements which must be solidly in place and if these requirements aren’t achieved, then we simply will never realize our goal.  These requirements are referred to as Critical Success Factors (CSFs).  Dettmer recommends no more than three to five CSF’s.  Each of the CSF’s have some number of Necessary Conditions (NCs) that are considered prerequisites to each of the CSF’s being achieved.  Dettmer recommends no more than two to three levels of NC’s, but in my experience, I have seen as many as five levels working well.  While to Goal and the CSF’s are written as terminal outcomes that are already in place, the NC’s are worded more as detailed actions that must be completed to accomplish each of the CSF’s.

The relationship among the Goal, CSF’s and the supporting NC’s in this cascading structure of requirements represents what must be happening if we are to reach our ultimate destination.  For ease of understanding, when I am in the process of constructing my Goal Trees, the connecting arrows are facing downward to demonstrate the natural flow of ideas.  But when my structure is completed, I reverse the direction of the arrows to reveal the flow of results. In keeping with the thought of learning a tool and making it my own, I have found this works well, even though this is completely opposite of Dettmer’s recommendations for construction of a Goal Tree.

Next time

In my next posting we will begin construction of a Goal Tree and begin to demonstrate why it is perhaps one of the best tools ever developed for achieving excellence in your company. As always, if you have any questions or comments about any of my posts, leave me a message and I will respond. 

Until next time.

Bob Sproull

References:

[1] Dettmer, H. William. The Intermediate Objectives Map – White Paper, Goal Systems International, 2007

[2] Dettmer, H. William. The Logical Thinking Process: A Systems Approach to Complex Problem Solving. Milwaukee, WI: ASQ Quality Press, 2007

[3] Covey, Stephen R. The Seven Habits of Highly Effective People: Powerful Lessons in Personal Change. NY: Simon and Schuster