Of all life’s gifts, time is the most precious. None of us escapes its clutches. As every minute ticks by, our quota is relentlessly reduced by that minute, then the next and the next. Prioritising how we spend our allotted time is one of our most consequential challenges.
[ Listen to audio version, read by David Hodes]
Since most of us spend most of our non-sleeping time at work, let’s focus on the work arena and see how we might make a difference there. If we are to make a meaningful contribution to our organisations, either before we retire, or once it’s our turn to ‘hop the twig’, we clearly have to sift the important from the urgent and then act on those areas of highest leverage.
But how do we know what’s most important? How do we come to grips with what’s important today, and how that changes day to day, week to week and on into the longer horizons?
“Before even taking the first step to plan the work,
we must establish our goal”
If we are going to act by priority, it is essential that we have an understanding of the system as a whole, that system being the organisation within which we do our work. Let us restrict ourselves to thinking about a business, and understand that we generally organise work into strategic business units, and then into portfolios, programmes, projects, workplans and all the way down to tasks.
Those tasks, which are at the lowest level of the work breakdown structure, are how we give explicit instructions to specific people to fulfil a business requirement. The task or quantum packet of work may be part of a project or, equally, could be derived from the week’s production schedule. The tasks may be routine, such as participating in a regular meeting, or could be ad hoc when attending to something broken.
At every level of the business, then, we need to be aware of the two components of managing work—that is, planning and execution. Before even taking the first step to plan the work, we must establish our goal. At least how much of what by no later than when would be a good start. And since we are talking about a business, it will be framed in terms that everyone is familiar with—that is, to provide the shareholders with a sustainable and competitive return on investment. Setting this goal has to be priority number one, because if you don’t know where you’re going, anywhere will do. Establishing a realistic but achievable goal has the effect of aligning people and encourages them to think about what critical success factors will lead to its achievement.
Next comes the issue of how you are going to measure success. If the goal is to deliver a sustainable competitive return on investment, then you need to know how much profit you’re expected to generate and how much capital you’ll need to invest in getting you there. To deliver a healthy profit, clearly the bigger the margin between sales and costs, the better. And, to keep investment to a minimum, you want to minimise work in process by accelerating speed to market.
Now, we’re all set. We know what our system is, we have established a goal, and we’ve got ourselves some critical measures to track how we’re going relative to that goal. Then we encounter the laws of physics in the form of constraints. We can’t do everything; and, indeed, neither can we do all that we have chosen to do all at once. We have to prioritise. But how do we decide how to go about the process of prioritisation? What means can we use that will apply equally at the level of the business as it does through the whole chain of the work breakdown structure—from the portfolios through the programs, projects, workplans and tasks?
“The laws of physics make the idea
of limiting factors incontestable”
Theory of Constraints (TOC) is quite simple. It says that for all systems, the rate at which we create value is governed by very few limiting factors. Often, just one. If our system had no constraints at all, we would have a magical machine that could produce infinite widgets instantly. We would complete our projects’ critical paths in no time, manufacture our replenishment items in an instant and fulfil every request at the moment it’s made. The laws of physics make the idea of limiting factors incontestable. But, it’s easy to lose sight of what it means in reality. Often, a single constraint severely limits the throughput of a system. Prioritising work on the constraint is therefore of the essence when in pursuit of a high-performance result.
There’s another profound—and counterintuitive—consequence that few consider. If we agree there is a constraint, then those people or machines that are not the constraint will, by definition, have capacity to spare. When you know where the constraint is at any given moment, you also see where you have reserve capacity. We should make every effort to deploy non-constrained resources in a systemic and systematic way to focus on supporting and collaborating with the prime resource assigned to work on the rate-determining activity.
Let’s take a simple example. Say there are two tasks to complete on a project, and one of them is on the critical path. The other has some slack. The one on the critical path could go faster if the person working on the one with the slack helped out. Thus, prioritising the work of the latter to help out the former is being systemically responsive to resource constraints. It may be the case that the latter’s KPIs are in jeopardy, but the prioritisation measure has to be to do what is best for the organisation as a whole. Or, as Deming put it, ‘The object of any component is to contribute its best to the system, not to maximise its own production […] Some components may operate at a loss themselves in order to optimise the whole system.’
As a prioritisation mechanism, there is a simple brilliance to the 5-Step FOCUS process used in the practice of the Theory of Constraints:
1. Find the constraint
2. Optimise it
3. Collaborate around the optimisation decision
4. Uplift the constraint
5. Start again
So let’s see if it can help us at all levels of the work breakdown structure. First up is the portfolio of work for the strategic business unit. However we select the work comprising the enterprise portfolio, it will make a demand on the human, material, information and financial resources of the business.
But what will the return be? Typically that is measured by looking at the NPV (net present value) of all future cash flows associated with each project in the portfolio. This method, on its own, is a poor way of prioritising, as it takes no heed of that fundamental of systems thinking—the existence of a constraint.
A much better means of prioritisation is to understand the portfolio constraint—that is, the resource with the highest ratio of load to capacity—then calculate the project octane of every project using this critically constrained resource. The project octane is a measure of how much throughput we generate per unit used of the critically constrained resource used.
If this prioritisation of the pipeline doesn’t deliver the desired organisational goal, then you can readily calculate how much more resource of which type do we need for how long to open the project pipeline sufficiently to deliver the requisite throughput. Applying a constraints-based approach to portfolio selection and prioritisation is the first big step to exceeding what you would otherwise think of as being reasonable and possible. It also sets up the programs of work in the right relationship with each other.
But, what about down at the project level? Well, we all know that the critical path determines the time it takes to complete a project. The longest chain of events from beginning to end. Or is it? Well, not quite. We have to once again take into account whether or not there are any resource constraints. If you’re in the happy position that you can get as many of whatever you need as the plan calls for, then the critical chain equals the critical path.
However, if we extend the lead time of the project by virtue of having to resolve contention for critically constrained resources, then we have a critical chain—a resource-levelled critical path. Through some intelligent management of task variation, we actually define the critical chain as the longest chain of events calculated at the average touch time for a task (eliminating any waiting time) with an aggregated buffer added to the longest chain, equal in time to half as long as that longest chain. Some workstreams feeding into the critical chain can have their own buffers.
What does this have to do with prioritisation? Well, in execution, we monitor not only the rate at which we complete the work on the chain but also the rate at which we consume the buffer. The relationship between the percentage completion of each at any given time is called the critical ratio, and it gives us a clear prioritisation signal for the number-one task. If by virtue of Murphy, a feeding chain has become longer than the critical chain, then that chain assumes the mantle of ‘penetrating chain’. Whether critical or penetrating chain, we can identify rapidly and unambiguously as the priority, the first task in the sequence which makes up the chain.
Production systems, through the use of Drum Buffer Rope (DBR), similarly uses the 5-Step FOCUS to produce a ‘drum’ schedule and execute against that schedule. Buffers are used in a similar way to Critical Chain to create a prioritisation signal. We divide the time between the release of raw materials and the production step on the drum into three zones—green, orange and red. We can keep track of whether or not a task is fully-kitted as it moves towards its targeted time at the drum. If we haven’t fully kitted, we have a means of creating a valid priority signal to the expediting team as to where to focus their efforts.
TOC provides a valid and scaleable answer to the question of how to work by priority, whether the prioritisation question concerns the daily assignment of the humble task or the strategic allocation of resources to the organisational portfolio. Along with the other four commandments of high-performance execution, the application of TOC can create the difference between failure and success—or between the ordinary and the remarkable.
Making mastery of TOC a priority of yours appears to me to be a sensible way to spend at least some of that limited time you have left.
This article is part of our series: Five commandments for high-performance execution
Part 1: Maintain True Data
Part 2: Work Fully Kitted
Part 3: Control Work Release
Part 4: Resolve Issues Rapidly
The change from standard thinking to Theory of Constraints (TOC) is both profound and exhilarating. To make it both fun and memorable, we use a business simulation we call The Right Stuff Workshop.
We’d love to run it with you. To learn more:
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