Goldratt, E. M. 1999. Goldratt Satellite Program Session 6: Achieving Buy-in and Sales. (Video series: 8 DVDs) Broadcast from Brummen, The Netherlands: Goldratt Satellite Program.

Sullivan, T. T., Reid, R. A., and Cartier, B. 2007. TOCICO Dictionary. http://www.tocico.org/resource/resmgr/files-public/toc-ico_dictonary_first_edit.pdf Wright, J. and King, R. 2006. We All Fall down-Goldratt's Theory of Constraints for Healthcare Systems. Great Barrington, MA: North River Press.

About the Author.

After training in the field of engineering and working for many years as an award-winning business troubleshooter in the UK, Julie Wright found TOC while augmenting her business skills as a mature student. At the Avraham Goldratt Academy in New Haven, Connecticut, she was given the opportunity to combine her business experience with her passion for healthcare and committed to a long-term personal goal that would lead to the publication of We All Fall Down-Goldratt's Theory of Constraints for Healthcare, which she describes as the "What to Change" of the TOC improvement cycle for healthcare. After successfully implementing her findings in the UK, she is now working out of Dallas, Texas as the Director of Education for TOC-Healthcare Inc., introducing TOC to large-scale healthcare facilities in the United States and beyond.

As a long-time volunteer for TOC for Education, and like most other TOC practitioners, she claims to spend far too much time travelling and working in front of a computer and far too little time exploring the wonderful locations she visits for TOC events and work.

SECTION VIII.

TOC in Complex Environments *

CHAPTER 33.

Theory of Constraints in Complex Organizations

CHAPTER 34.

Applications of Srategy and Tactics Trees in Organizations

CHAPTER 35.

Complex Environments

CHAPTER 36.

Combining Lean, Six Sigma, and the Theory of Constraints to Achieve Breakthrough Performance

CHAPTER 37.

Using TOC in Complex Systems

CHAPTER 38.

Theory of Constraints for Personal Productivity/Dilemmas *

Here, examples of TOC implementation and benefits for particularly complex environments, such as the large for-profit corporations, not-for-profit organizations, and other environments are discussed. The TOC Thinking Processes, The Strategy and Tactic Tree, TOC measurements, the Five Focusing Steps of TOC, and other TOC elements are brought to bear in real case examples showing how they work together as an integrated system of tools for sustainable improvement. Wide-ranging applications include manufacturing, a church environment and how to improve personal productivity. Integrating TOC with Lean and Six Sigma; why and how to do it is also covered.

In a large complex corporation, how can the flow of ideas needed for development, production, sales and distribution of a new product be planned and tracked across organizational silos? How can executives at the top know that ideas are flowing as they should and that interorganization commitments are being met? How can they see issues coming before it is too late to recover? These topics are covered in this section. Then, how are Strategy and Tactic Trees used to frame the strategic direction of a company moving to make dramatic improvement in profit? Generic Strategy and Tactic trees are discussed with one examined in detail to show how the strategy is shaped and then used to knit the organization together with a unified focus on its strategic direction.

CHAPTER 33.

Theory of Constraints in Complex Organizations

James R. Holt and Lynn H. Boyd

Overview

What makes an organization complex? What are the unique problems of complex organizations? How can the Theory of Constraints (TOC) help solve those problems? This chapter attempts to answer these questions. We start by providing a definition of complexity and then describe the core conflict of complex organizations, which we believe results from the need for both continual growth and organizational stability. One of the defining characteristics of complex organizations is that they have many independently measured units that are all trying to maximize local measures. The significant problem complex organizations face is coordination of these independent yet interdependent units. We make the assumption that the independent units and departments within complex organizations use Drum-Buffer-Rope (DBR) and Critical Chain Project Management (CCPM) to manage their internal processes, and we propose a key injection-"Everyone in the organization who has a significant impact on Throughput is measured by the same simple measure (that aligns all the actions of the organization with the goals of the organization)"-and show how it invalidates several of the assumptions underlying the core conflict. TOC provides measures for supply chains to achieve coordination. We believe that TOC Supply Chain measures can be used in complex organizations to create an effective method of coordination between units and departments and to give senior management new insight and greater ability to manage independent units. These Supply Chain measures are discussed and examples of their application to complex organizations are provided. We also address additional injections related to "Conflict Resolution" and "Resource Allocation" along with a negative branch about "Leadership Certification."

Definition of Complexity

There are many possible ways to define complexity. For this chapter on TOC in complex organizations, let us define complexity not according to size of the organization, nor to its technology, nor flow complexity, but rather according to its TOC complexity. With this criterion in mind, we have the following four levels of organization: Copyright 2010 by James R. Holt and Lynn H. Boyd.

Simple Complicated Complex Chaotic If the solution for the organization can be implemented with a single TOC tool (such as DBR or CCPM), we will call it a simple organization. If the solution for the organization involves the interrelationship of two or more TOC tools (such as DBR and TOC Replenishment seamlessly integrated into one package), then we will call it a complicated organization. If the organization has many independent yet interdependent elements each needing an individual TOC implementation responding to ever-changing product demands, we will call it a complex organization.1 This typically occurs when the organization has many independent business units, each with its own independent resource pools and individual profit/loss statements and yet the whole organization's effectiveness depends upon the successful contribution of many of the other business units. Complex organizations are characterized by multiple interactive constraints in a quickly changing environment aggravated by many near constraints operating within local optima guidelines without a clear, overriding schedule. A hospital is an example of a complex organization. Doctors, clinics, wards, laboratories, pharmacies, nurses, maintenance, housekeeping, imaging, record keeping and other functions, departments and units all try to perform at their best independently while also having to integrate many of their processes for effective organization performance. On top of the hospital's normal processing of patients, there are numerous improvement and new product development projects going on. Projects require communication and coordination between departments. Each department's capacity can be divided into capacity to meet current patient demand plus protective capacity. Protective capacity must be available on demand to support the constraint (current T) when unplanned demand occurs or Murphy strikes. However, at times when not confronted with these demands protective capacity is available for ideas projects, that is, future Throughput. Recognize, however, that if management is in the Cost World, when a resource is idle it is a perfect candidate for any cost-cutting initiatives.

An aircraft manufacturer is another example of a complex organization. Producing and assembling current models and producing spare parts for out-of-production models is a complex task, but added to it are the demands of numerous and continual product and process improvement projects and the demands of developing new aircraft. In addition, these companies may compete in a number of markets including commercial, military, aerospace, and others. Maintaining these two major processes, one focused on current T and the other on future T, requiring many of the same resources, is extraordinarily complex.

Entities or systems that go beyond the definition of complex organizations, that is, those that are quite unpredictable and lacking even a rudimentary flow structure (such as in sociology or politics) we will refer to as chaotic systems. A chaotic system has many processes, policies, and procedures that frequently change and confound the solution space. While elements of the TOC proven solutions may help find a solution in chaotic systems, there is not a generic solution. Such systems require the TOC Thinking Processes (TP) to develop a solution.

In complex organizations, as in most organizations, the various departments or units each focus on maximizing the performance of their own limited resources. This aspect of the definition of complexity can apply to small organizations, such as an elementary school (each teacher trying to do the best for his or her classroom), or huge organizations like a country's armed services (and many other types of organizations in between). One could argue that complicated organizations without a single strong, integrating TOC solution often appear as complex organizations. As a result, the solution for complex organizations may be helpful in some complicated organizations.

Major Problems with Complex Organizations

Complex organizations suffer the same problems with on-time delivery, quality performance, sales, inventory management, and unstable workloads that have been discussed in earlier chapters of this handbook. Those issues, however, are exacerbated by the problems of connecting the different parts of the organization and motivating local managers to maximize global Throughput rather than local measures. The problem of multiple interactive constraints in a quickly changing environment is aggravated by many near constraints operating within local optima guidelines and without a clear, overriding schedule. This problem is similar to the significant shift from single project CCPM to multiple-project CCPM (as discussed in previous chapters). In single-project CCPM, all conflicts are removed in the planning stage and Buffer Management (BM) manages the task variability in execution. In multiple-project CCPM, eliminating every conflict is a poor solution that is inefficient, too long, expensive, temporary, and impractical.2 In complex organizations, the different product divisions, departments, resource silos, supporting plants, subcontracting entities, and other individual business units within the organization cannot all be synchronized for the same reasons that multiple projects cannot be synchronized in multiple-project CCPM. In addition, while the resources in one business unit are not always available to assist other business units, the effectiveness and efficiency of the overall organization are tied to the availability and allocation of resources and cooperation between all interested elements. In the economics literature, these problems are referred to as diseconomies of scale-problems of communication, coordination, and control that eventually overwhelm economies of scale as organizations grow larger and cause companies to become uncompetitive. Let's focus on those areas.

Undesirable Effects of Complex Organizations

Complex organizations frequently experience these typical undesirable effects (UDEs) to a varying degree: 1. Most of the experts are heavily overloaded.

2. Resources are not available when needed. Project managers hold on to experts, saving them for their next project.

3. Much work has to be done by less qualified experts.

4. There are too many needless delays.

5. Too often, the promised content is not achieved.

6. It is very difficult to respond quickly to every customer demand.

7. There is a frequent mismatch between what the customer wants and the resources available to perform the tasks.

8. Sometimes, our very expensive resources are left idle.

9. Promises are made without confidence in our ability to deliver.

10. The organization is not sure it will be able to deliver everything the customer wants.

11. Marketing frequently feels compelled to make promises that the company cannot keep.

12. It is difficult to replicate what appear to have been random successes.

13. Our reputation is tarnished.