What is the Theory of Constraints?
Theory of Constraints (TOC), as we said, is a methodology that, when applied, helps to achieve the goals and objectives proposed by a company. And it does this by helping to identify the limiting factor: that is, the constraint itself, the bottleneck that is preventing the success of the task. The next step is to systematically improve this constraint until it is no longer a limiting factor. For this, a scientific approach is adopted. And the following thought is taken into account. There is a complex system (the whole). It includes creative processes that are nothing more than a set of multiple activities. Each acts as a constraint on the system – it can be the weakest link in the whole. That is, as much as the processes may seem oiled, there will always be some item (however small) weakened. It can be a step, a professional, a tool. And that bottleneck is who will determine the pace of what you are developing. So it is important to answer the 3 basic questions:
- What should be changed?
- How should this be changed?
- How to promote this change?
Ah, we cannot forget an important history chapter. The methodology was created by Dr. Eliyahu Goldratt. He conceived TOC through his book “A Meta” – record sales in 1984. Since then, the theory has been constantly evolving and today it is one of the best practices within the administrative management of companies. Especially because it prioritizes continuous improvement and, in a work environment where corrections are urgently needed, it is extremely agile and efficient.
Benefits of the Theory of Constraints in companies
Putting this methodology into practice is a paved way to optimize work and, of course, ensure greater productivity. When the implementation of the Theory of Constraints is successful within companies, the benefits are immediately realized. Even more so within an organization that encourages the DevOps culture and understands that focusing on the customer is and will always be important. Among the advantages, we can highlight:
- Rapid improvements. After all, all the attentions of those involved with the project will turn to the bottleneck;
- Reduced deadlines. Finding and eliminating the problem will speed up the delivery of what is being developed;
- Increased productivity. Depending on what is being done, there is more time to produce on a larger scale;
- End of rework. You won’t have to redo anything, so you avoid stress and frustrations internally;
- Increased profit. After optimizing the entire process and producing more, you will also be able to increase sales.
The Theory of Constraints provides the necessary focus to correct the defects that the project presents – however small they may be. The biggest goal is corporate profit. So the less problems she has (and the less she spends), the better.
The most common types of restrictions
To understand how to apply the Theory of Restriction (a chapter that we will see shortly), it is necessary to know the most common types of restrictions. This way, you can already have some hypotheses about what is falling within your processes today. The restrictions can be of the type:
- Physics – equipment, lack of space, poorly qualified people or professionals, etc;
- Politics – good practices at work, people who do not adapt to the way they work, internal procedures, union contracts, regulations, etc;
- Paradigm – any belief that prevents quality standards from being raised. It can be reflected in one or more people, for example;
- Market – when the capacity to produce exceeds the number of sales. The market thus restricts income.
How to apply the Theory of Restrictions in companies? See 5 steps!
Now that you understand what TOC is, its purpose, benefits and focus, you need to understand how, in practice, it contributes to companies. But not only to enhance results – which is the main thing, of course. But it is a benefit to the organizational climate of any business. To do any action well done – not only at work, but in life – you need focus. And focus is what the Theory of Constraints preaches as a methodology aimed at identifying and quickly eliminating bottlenecks. The method is separated into 5 steps that must be strictly followed in order. Are they:
- Identify the current constraint. That is, the part of the process that limits the achievement of your goal;
- To explore to make quick improvements using the resources you have today, even if it doesn’t fix the problem 100%;
- Review all process activities to ensure that they are in the desired pattern, supporting the needs of the constraint;
- Raise the ruler to look for other actions that eliminate the constraint – if it remained. Consider a capital investment if necessary;
- Repeat the cycle of continuous improvement. Once a bottleneck is resolved, the next one must be addressed immediately to be corrected.
Let’s explore these 5 steps better?
1 – Identify and define the main constraint
It is the initial step. Find out what prevents your company from achieving what it wants. What is the source of the problem? Make a close analysis and list, within the types of restrictions, what is really present in your company. By doing this, you can understand that the features are stronger than the specific limitation that you have diagnosed.
2 – Explore and focus on quickly fixing the constraint
After identifying the constraint it is time to transform it. To quickly improve or eliminate it. So, for example. If in the sales industry you have identified that one of your salespeople is working less than he should, you can invest in sales training. But, if the sales process is flawed, identify at what stages your conversion rates are low. Or, if you have trouble identifying the defect precisely, your sales management is failing. And then, the digital transformation needs to happen in the company – before even taking the steps of the Theory of Constraints off the paper.
3 – Review and subject all other processes to restriction
Fit everyone to the same level to ensure that the work is done to the required standards. Restriction cannot prevent you from producing. So, if you corrected it, it needs to be on the same level as the other elements. For example, if you have trained the salesperson, he must be working the same way as the other colleague at the company. If you are producing above, then you will need to qualify the entire industry. Otherwise, one restriction ended up generating another – and the work was practically in vain.
4 – Raise the ruler to improve or remove the restriction
Restriction identified, measures taken … was the result efficient? No? Try one last card and consider a financial investment. Going back to the example we set. If the in-house training was not efficient, you can consider hiring a sales consultant. It is the crucial moment. The famous and popular “go or split”. It was corrected and productivity returned to ideal terms, great. Life goes on. If not, then it is time for a more energetic decision making and replacing this professional.
5 – Repeat the process to ensure continuous improvement
Business processes are living organisms. So, it is not because you identified a problem and solved that there will be no more bottlenecks. Repeat the whole cycle and try, as much as possible, to anticipate what you understand may be a problem. This way, your company will always be ahead. People produce more, sell better and, of course, guarantee the customer’s success with the brand. So, how can we help you? If you were unsure about the content or want to know how technology solves sales bottlenecks, speak to a consultant today. Enjoy and read two articles that will help you have better processes internally in your business. The first talks about using the 5S methodology to eliminate distractions and produce more and better. The second addresses the Ishikawa Diagram, a tool that serves to identify problems within organizations. Good sales! A hug from CWT, your CRM. #RunCWT