The Remaining Chapters in This Section

The remaining chapters in this section are as follows.

Theory of Constraints in Professional, Scientific, and Technical Services by John Ricketts. These types of organizations require the selection of a properly customized portfolio of concepts and tools. Our experience shows that in many cases the team leader or the senior partner is the bottleneck and should be managed as such. In addition, the complete kit concept is crucially important, especially at the beginning of the process.

Customer Support Service According to TOC by Alex Klarman and Richard Klapholz. Customer support units are major elements in organizations in telecommunication, insurance, credit cards, and retail. The unique character of these units calls for use of the right subset of concepts and tools described in this chapter.

Viable Vision for Health Care Systems by Gary Wadhwa and TOC for Large-Scale Health Care Systems by Julie Wright. Physicians usually manage medical organizations, either small or large, because in many countries it is required by law. In this industry, the effect of implementing TOC and other managerial concepts have huge leverage on the performance of these organizations. Not only does it enhance the organization's value but also it substantially improves the quality of the medical service.

References

Coman, A. and Ronen, B. 2009. "Overdosed management: How excess of excellence begets failure,"Human Systems Management (forthcoming).

Coman, A. and Ronen, B. 2010. "Icarus' predicament: Managing the pathologies of overspecification and overdesign,"International Journal of Project Management, 28 (3), 237244.

Geri, N. and Ronen, B. 2005. "Relevance Lost: The Rise and Fall of Activity Based Costing,"Human Systems Management, 24(2), 133144.

Goldratt, E. M. and Cox, J. 1992. The Goal: A Process of Continuous Improvement, 2nd ed. Great Barrington, MA: North River Press.

Goldratt, R. and Weiss, N. 2006. "Significance enhancement of academic achievement through application of the Theory of Constraints." In Ronen B. (editor). The Theory of Constraints (TOC): Practice and Research, IOS Press, Amsterdam, The Netherlands.

Goodrich, D.F. 2008. The relationship of the theory of constraints implementation to change management integration in professional service organizations. Nova Southeastern University, Davie, FL. AAT 3312014.

Google Scholar. 2009. http://scholar.google.co.il/Accessed October 8, 2009.

Gupta, M., Baxendale, S., and McNamara, K. 1997. "Integrating TOC and ABCM in a health care company,"Cost Management 11(4):23.

Leshno, M. and Ronen, B. 2001. "The complete kit concept-Implementation in the health care system,"Human Systems Management 20(4):313.

Moss, H. K. 2002. The application of the theory of constraints in service firms. Clemson University, South Carolina. AAT 3057207.

Motwani, J., Klein, D., and Harowitz, R. 1996. "The Theory of Constraints in services: Part 2-Examples from health care,"Managing Service Quality 6(2):30.

Pass, S. and Ronen, B. 2003. "Managing the market constraint in the hi-tech industry,"International Journal of Production Research 41(4):713724.

Patwardhan, M. B., Sarria-Santamera, A., and Matchar, D. B. 2006. "Improving the process of developing technical reports for health care decision-makers: Using the Theory of Constraints in the evidence-based practice centers,"International Journal of Technology Assessment in Health Care 22(1):2633.

Pauker, S. G. 2006. "We all fall down: Goldratt's Theory of Constraints for healthcare systems,"The New England Journal of Medicine 355(2):218219.

Reid, R. A. and Cormier, J. A. 2003. "Applying the TOC TP: A case study in the service sector,"Managing Service Quality 13(5):349370.

Ritson, N. and Waterfield, N. 2005. "Managing change: The Theory of Constraints in the mental health service,"Strategic Change 14(8):449.

Ronen B. and Pass S. 2007. "Upgrading the TOC BOK: Focused Methodologies for the Financial Industry," The 5th Worldwide TOCICO Conference, 37 November 2007, Las Vegas, NV.

Ronen B. and Pass, S. 2008a. Focused Operations Management: Achieving More With Existing Resources. Hoboken, NJ: John Wiley & Sons.

Ronen B. and Pass S. 2008b. "Focused Methodologies for the Telco's Industry," The 6th Worldwide TOCICO Conference, 34 November 2008, Las Vegas, NV.

Ronen, B. and Pliskin J.S., with Pass, S. 2006. Focused Operations Management for Health Service Organizations, San Francisco, CA: Jossey-Bass (an imprint of J. Wiley & Sons).

Ronen, B. and Spector, Y. 1992. "Managing system constraints: A cost/utilization approach,"International Journal of Production Research 24(2):5053.

Roybal, H., Baxendale, S.J., and Gupta, M. 1999. "Using activity-based costing and theory of constraints to guide continuous improvement in managed care,"Managed Care Quarterly 7(1):110.

Schoemaker, T. E. and Reid, R. A. 2005. "Applying the TOC Thinking Process: A case study in the government sector,"Human Systems Management 24(1):21.

Taylor, L. T. III and Churchwell, L. 2003. "Goldratt's thinking process applied to budget constraints of a Texas MHMR facility,"Journal of Health and Human Services Administration 26(3/4):416438.

Umble, M. and Umble, E. J. 2006. "Utilizing buffer management to improve performance in a healthcare environment,"European Journal of Operational Research 174(2):1060.

Wright, J. and King R. 2006. We All Fall Down: Goldratt's Theory of Constraints for Healthcare Systems, Great Barrington, MA: North River Press.

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About the Authors

Boaz Ronen is a Professor of Technology Management and Value Creation at Tel Aviv University, Faculty of Management. He holds a BSc in Electronics Engineering, and an M.Sc and PhD in Business Administration. Prior to his academic career, he worked for over 10 years in the hi-tech industry. His main areas of interest are focused on firms' value enhancement and TOC.

He has consulted with numerous corporations, healthcare organizations, and government agencies worldwide. During the last 20 years, Prof. Ronen has been leading a team that successfully implemented Focused Management, TOC, and advanced management practices of value creation in dozens of industrial, hi-tech, IT, healthcare, and service organizations.

He has been commended numerous times and received the Rectors' award for outstanding teaching. He was also a visiting professor at the Schools of Business of New York University, Columbia University, Stevens Institute of Technology, several Kellogg programs around the globe, and at SDA-Bocconi (Milan, Italy). Prof. Ronen has published over 100 papers in leading academic and professional journals, and has coauthored four books on Value Creation, TOC, and Focused Management. In 2005, he was the editor of the special issue on TOC published by Human Systems Management. His book on healthcare management was recently published by Jossey-Bass/Wiley. His book, Focused Management: Doing More with Existing Resources, was published by John Wiley & Sons in November 2007. Shimeon Pass co-authored both books. His latest book, Approximately Right, Not Precisely Wrong, on decision-making, cost accounting, and pricing, was published in 2008.

Shimeon Pass is a noted expert in applying the philosophy and tools of TOC and the Focused Management methodology. He has consulted numerous corporations, organizations, and government agencies worldwide in industrial, service, retail, and nonprofit organizations.

He holds a BSc and an MSc in Chemistry from the Technion, Haifa, Israel and from the Weitzman Institute, Israel, and an MBA from Tel Aviv University, Faculty of Management.

Working in the past for IBM in the ERP group, Mr. Pass has also specialized in the implementation of advanced managerial methods to enterprise information systems.

Mr. Pass is now specializing in applying TOC in the management of R&D organizations and project management.

He has published numerous papers in leading academic and professional journals, and co-authored two books on TOC and Value Creation.

CHAPTER 29.

Theory of Constraints in Professional, Scientific, and Technical Services

John Arthur Ricketts

Introduction.

Theory of Constraints (TOC) is one of the most widely recognized management innovations of our time. That's quite an achievement, considering TOC creates clear explanations of causes and effects. Although that might sound like TOC is nothing more than common sense, the overwhelming alternative to TOC is conventional wisdom-which is certainly common, but often doesn't make much sense. What sets TOC apart is that it uses knowledge of cause and effect to solve otherwise intractable problems.

For instance, conventional wisdom says the best way to optimize a system is to optimize every element within that system. That's why managers push every worker and every machine to produce as much as possible. Yet, many business and government systems are like chains, and a chain is only as strong as its weakest link: the constraint. Therefore, if the constraint actually limits what a system can produce, conventional wisdom mistakenly calls for lots of process improvement in areas that cannot optimize the enterprise. Indeed, conventional wisdom does not even acknowledge the system constraint, let alone target it for improvement, as TOC does.

TOC is best known in the manufacturing and distribution sectors where it originated, but services are the dominant sectors in mature economies and the fastest growing sectors in emerging economies. Although TOC has been applied in services enterprises, most applications thus far have been limited to services that resemble manufacturing or distribution closely enough that the same applications can be applied. Those applications tend to focus on physical constraints, which are less relevant in most services enterprises, and largely irrelevant in some.

The Professional, Scientific, and Technical Services (PSTS) sector is populated mostly by enterprises where physical constraints matter less than intangible constraints. Indeed, the PSTS sector is substantially different, even from other services sectors, for several reasons.

Copyright 2010 by John Arthur Ricketts.

Professional, scientific, and technical services are usually customized for individual clients. Repeatability can be elusive when every client wants something different.

Professionals, scientists, and technicians are highly educated and frequently work in teams. These practitioners have high degrees of autonomy because they are hired by clients for their resourcefulness at solving hard problems.

Sales are based largely on expertise. Clients expect the experts to have diplomas, licenses, certifications, publications, references, and genuine insights in their fields.

Delivery depends on intellectual capital, not physical inventory. Know-how is vital in labor-based services. Information technology is vital in asset-based services.

These attributes make PSTS a suitable proving ground for TOC for Services because PSTS is the services sector most different from manufacturing and distribution. Since TOC can work in PSTS, there's a good chance it will work in any services business. This chapter summarizes the adaptation of TOC for PSTS.

The roots of that adaptation extend back to the founding of TOC. The Goal (Goldratt and Cox, 1992) is one of the best-selling business books of all time. It tells the story of a beleaguered manager who saves his factory from oblivion-and guides it to prosperity-by applying TOC. It's the seminal work for what's referred to in this chapter as TOC for Goods (TOCG) to distinguish it from TOC for Services (TOCS).

Reaching the Goal (Ricketts, 2008) explains how and why TOCS differs from TOCG. It's the foundation for this chapter, but this chapter focuses more on why TOC has taken so long to reach PSTS and what lies ahead in TOCS.

Background

TOC has been around for decades, so it's reasonable to wonder why it took so long to find an audience in PSTS. The short answer is services are harder to manage than non-services, but unfamiliarity and inertia play big roles as well. So let's start there.

Barriers to Adoption

TOC knowledge is widely accessible in more than 100 books, some of them best-sellers. However, the majority of TOC books are devoted to manufacturing and distribution, while services dominate most economies nowadays. Thus, new readers not only are confronted with unfamiliar TOC concepts and terminology, but also how those concepts and terms apply to services is an exercise generally left to the reader. And that's not an easy translation, even for TOC experts.

Consequently, TOC is like most management innovations in the sense that it generates more talk than action, but TOC is notable because the action it does generate leads to demonstrable results. Leading manufacturers have applied the TOC application for operations management to varying degrees, and there are pockets among smaller manufacturers, so adoption is far from universal. In services, where the TOC application for project management is the most obvious fit, no more than one in ten project managers use it frequently. The benefits of TOC are extraordinary, however. Improvements of 20 to 50 percent (Mabin and Balderstone, 2000) are well documented, and TOC is thereby a source of strategic advantage.

So why is one of the most-promising management paradigms of our time so hard to adopt? It's a journey that cannot be taken one manager at a time. You've got to take your management team with you. Even if you're a chief executive, you can't do it alone, and you can't just assume that making it a strategic initiative will get the job done. Of course, if you're a manager in a services enterprise, you may have to take your clients and subcontractors with you as well, which makes the TOC journey even more arduous.

It's enough to make any rational manager think twice, then thrice, about taking the leap. Yet some have done so-with success-so it's worth considering the stakes. The Holy Grail of management methods nowadays is process improvement, because competition waits for no one. Therefore, managers are on the lookout for improvement, opportunities, to the point that process improvement has become the new business-as-usual.

Typical process improvement methods look for every possible improvement opportunity, on the assumption that they all add up. However, that's a fallacy because most improvements in a local context create offsetting pain elsewhere that effectively cancels out the benefit. If you look across an enterprise, what you often see is that one manager's pain points are another manager's improvements. Nevertheless, it's not a one-to-one relationship. It's common for one manager's improvement to create pain for tens, hundreds, or even thousands of other managers. That's why process improvements are often thwarted, abandoned, rolled back, or endured grudgingly. The unintended pain of process improvement can be too great for others to bear willingly. When the pain extends to customers, suppliers, and employees, the enterprise can spiral downward, even though the managers pushing local improvements have noble intentions.

Fortunately, process improvement is a domain where TOC really stands out. Rather than casting the widest possible net, TOC concentrates on genuine process improvements by recognizing that an improvement anywhere other than the constraint is a mirage. Making a non-constraint more efficient accomplishes nothing if it further overloads the constraint. And if a local change doesn't move the needle at the enterprise level, it's not really an improvement.

Picture a dozen people all struggling at once to push an enormous crate, with no clear sense of direction or cooperation. Now picture three people easily pulling that crate in unison in just one direction. That's what TOC does.

This can make TOC sound too good to be true. After all, if it really worked that well, wouldn't everyone be doing it? Well, no. What the crate analogy left out is everything it takes to get a team pulling in unison. And the obstacles are formidable.

First, there's the "push, push, push" syndrome. That's the longstanding management mindset that the way we've always done things around here is the way it has to be. Push suppliers. Push schedules. Push workers. Push late jobs. Push shipments. Push salespeople. Push customers to buy more. In an environment like that, getting managers to adopt a system where things are pulled along naturally sounds as far-fetched as a workable time machine. Besides, they ask, what's a manager to do if there's nothing to push?

Second, there's the "summer love" syndrome. Every management innovation wins some avid converts, but infatuation often fades with the next management fad. The best TOC adoption programs skip the infatuation and go straight to implementations with staying power. To do that, however, you have to know where the real constraint is. And that's harder than it sounds, as we shall see.

Finally, there's the "shoemaker's children" syndrome. This one is particularly acute in PSTS, where every partner, principal, professional, scientist, and technician is an expert in something. If you're a manager in a manufacturing or distribution enterprise seeking to adopt TOC, you're likely to engage an outside TOC expert because their credentials and reputation earn respect among your peers. However, if you're a manager in a PSTS enterprise, those TOC experts can be right down the hall. Not only are they busy doing billable work for your firm's clients, they don't automatically have extra credibility among your peers, who are experts in their own right-just not experts in TOC. Hence, the shoemaker's children syndrome exists when a PSTS enterprise is more successful at helping clients adopt TOC than it is in embracing TOC itself.