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