In contrast to TDD, T/D and IDD are more valuable to unit managers than senior management for two reasons: 1. Both T/D and IDD are unit-specific-they depend on the unit's goal and the specific types of intra-unit projects and tasks that are required to accomplish the unit's goal. Therefore, T/D and IDD generally are not comparable across units the way TDD is.

2. T/D and IDD are relative rather than absolute measures. TDD for a period is meaningful by itself, whereas T/D and IDD for a period can only be evaluated in relation to prior periods.

As seen in the example of the Boeing PCIP group, measuring T/D and IDD can have a significant impact on unit results. There is significant benefit to the units and the organization as a whole of adopting these measures even if they are not as useful to senior management due to the lack of comparability across units. Senior management, however, when evaluating individual units, would still review the trend of T/D and IDD to evaluate unit performance.

The Usefulness of Dollar Day Measures in General

Goldratt (1990) introduced TDD and IDD as measures of performance related to physical goods and the measures have been used in the TOC Supply Chain Solution. The concept of dollar days can be applied to entities other than Throughput and Inventory and can provide management useful information not previously reported. In one of Goldratt's early discussions of IDD (Goldratt, 1988a), he compared it to common inventory measures such as inventory turnover and pointed out how IDD may be more useful to management in evaluating inventory levels. The same concept applies to accounts receivable (A/R). The normal way of describing A/R is by aging, which shows the total amount of A/R that are current, 030 days past due, 3060 days past due, etc. Reporting receivable dollar days would provide management similar information condensed into one number. Another application of dollar days would be to measure lateness in paying suppliers. The payable dollar days (PDD) in this case would just be the invoice amount multiplied by the number of days it was paid late. Paying on time is critical for suppliers and PDD would provide senior management with a quick measure of how well the Finance department is taking care of vendor relationships.

A Breakthrough Injection Is Critical, but It Is Rarely Sufficient

Having everyone in the organization who has a significant impact on Throughput measured by the same simple measure (that aligns all the actions of the organization with the goals of the organization) is very important and will solve many of the problems of complex organizations. Having all units adopt T/D and IDD measures tailored to unit goals is also extremely helpful. However, two additional supporting injections are needed. The first involves Conflict Resolution and the second applies to Resource Allocation.

Figure 33-5 alludes to the widespread conflicts between organizational elements within any organization where different elements have different goals and needs even though they must all work together. Having everyone who has a significant impact on Throughput measured by TDD eliminates most of the conflicts. Having a common measure means that the goal at the top of the organization is the same as the goal at the bottom of the organization. Both senior management and unit managers want the total TDD to approach zero. This creates a new organizational culture where everyone wants the same thing and it gives a measurable understanding to the concept of balance. Those at the bottom of the organization can now feel confident that those at the top of the organization are doing the right things for the whole organization. This means job security, stability, and growth. In other words, those at the bottom of the organization want those at the top of the organization to succeed in their goals (minimizing TDD of the whole organization). Those at the top of the organization want everyone at the bottom to achieve the same goal. Cooperation happens.

Still, conflicts will exist between different elements of the organization as each part tries to improve TDD. There needs to be an effective identification, communication, and implementation tool to resolve these conflicts quickly, easily, and correctly.

Tools for Resolution

Previous chapters of this handbook have addressed the TP tools, and specifically the management skills. These include the EC, the Negative Branch Reservation, and the Prerequisite Tree (or Ambitious Target Tree). These three tools are sufficient to resolve the conflict at all levels. They work because they are not negotiation tools but tools to discover and communicate truth.

The EC addresses the combined goal (objective A) of two parties and the needs (Requirements B and C) of both sides. The conflict (D and D) comes when one side needs to act in a specific way to meet its need but this specific action impinges upon the need of the opposite side. By examining the needs of both sides and the assumptions, a suitable injection can always be found for common conflicts.

The Negative Branch Reservation exposes how even the best of intentions can lead to negative effects. Communicating the causes of these negative effects highlights where the system can be improved. Moreover, the additional injections needed to eliminate the negative effects always improve the system as a whole. When a chronic conflict surfaces, using the EC and Negative Branch Reservation, with the parties working together, creates a new level of understanding and cooperation.

The Prerequisite Tree (or Ambitious Target Tree) is a very effective tool to overcome the obstacles facing any new initiative. Groups that work together to overcome the obstacles develop significant teamwork skills and achieve ambitious targets.

Controlled Resource Allocation

Another needed injection addresses the need to allocate resources correctly. Initially TDD will highlight areas that require senior management attention; however, once unit managers learn what the capabilities of their local resources are and how to manage effectively using DBR and CCPM, they will be making fewer commitments that cannot be met. Increasingly there will be requests for commitments from customers and other organizational units that cannot be met immediately due to capacity constraints. It will be critical for the organization to allocate resources in such a way as to maintain the balance of flow in the organization, develop the resources of the organization, and use the most critical resources in the most effective way.

In Reaching the Goal (2008, Chapter 4), Ricketts elegantly describes the management of the resource bench. Assigning critical resources from a central pool according to the needs of different parts of the organization makes very good use of the resources. Managing the central resource pool to accommodate returning resources, attrition, and acquisition of resources in advance of the need is handled with a resource buffer. This resource pool concept works exceptionally well when those using the resources are encouraged to return unused resources to the resource pool as soon as they are no longer used (an IDD measure encourages this). This will only work when project and department managers know they will receive an adequate number of resources when needed.

Carrying Rickett's resource bench to the next level helps project managers and department leaders make even better use of their limited resources. Too often, the best, most qualified resources are overloaded and unable to offload work to other less qualified resources. This situation delays the development of the less qualified resources and prevents the organization from fully benefiting from the expertise of the most qualified.

The solution for this problem involves separating a small group of the most qualified resources (10 to 20 percent of like resources is sufficient) from the everyday duties of the work. This local expert group acts as a local resource bench to move in and out of the day-today activities as the need arises. This way, the less qualified resources can do the day-to-day activities and develop capabilities. If a less qualified resource runs into a problem that cannot be resolved within the allotted time (when TDD is threatened), then the experts from the local resource bench come and help. This develops the less qualified resource right at the time the resource is ready to learn, protects the due date, and allows a few experts to use much of their free time on improving the local processes. When on-time delivery is an absolute necessity, all resources of a group may need to participate in an all-out effort (Washington State University, 2009). Such efforts by the experts and others create extreme teamwork.

Challenge of the Future

When complex organizations have TDD in place along with the other supporting injections, the organization is positioned to deliver in ways that other competitive complex organizations cannot match. When there are few conflicts in the organization and resources are available as needed, the organization is in a position to follow its strategy as never before. This success creates its own challenges. Rapidly improving organizations soon hit a roadblock to growth when the leadership teams are stretched too thin. Reliable leadership quickly becomes the constraint. Figure 33-1612 shows that during periods of rapid growth, the frequency of making key decisions increases at the same time as the seriousness of each decision. Management has less and less time to make more and more important decisions. There is less and less time available for analysis and evaluation.

FIGURE 33-16 Decision steps under continued growth. (Used with permission of John Thompson.)

The Value of Everyone Measured by the Same Simple Measures

Under the ever-flourishing conditions of continued growth shown in Fig. 33-16, the leadership teams must feel confident that they are making correct decisions and moving in the right direction. Moreover, they must feel confident that the organization as a whole can continue to accept and meet the new challenges facing them. The breakthrough 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)-will go a long way toward providing the confidence needed. In a rapidly growing organization, promotions occur frequently. Those who are experienced with the TDD, IDD, and T/D measures and other TOC approaches within the new organizational culture are those best suited for leading the organization up the growth curve. However, it is often difficult to determine the effectiveness of the management team until after too many errors are made.

Leadership Certification

To solve this problem, organizations are strongly encouraged to develop or use external certification organizations to validate that members of the leadership team are aligned and all moving in the right direction at the same time. The Theory of Constraints International Certification Organization13 offers such certification. TOCICO maintains an online TOC Dictionary as the standard vocabulary across all functions, divisions, and companies. Many certified TOCICO members are teachers and consultants who offer services needed by complex organizations. TOCICO certification is readily available worldwide and is updated continually to current technology. Their exams meet the needs of all parts of the organization. The most valuable element is to have most managers certified so they all speak the language (a common language), and have the same goals, measurements, and understanding of the strategic direction of the system. However, employees of any organization implementing TOC should take the TOCICO Fundamentals exam, which would ensure that they understand the basics of all TOC applications and day-to-day use of the TOC TP. Management could then be confident that all employees share a common language and understanding of management instructions and the reasons for them.

Summary

Complex organizations are composed of many individual units and departments that all depend upon each other for the orderly execution of their processes. While each unit is trying to improve and do its best, there needs to be an overall management system to get the complex organization moving and keep it moving and improving. The four Supply Chain Flow Concepts (Goldratt, 2009) set the direction for the solution. TDD, one of the TOC Supply Chain measures, provides the common measure for all units of the organization that have a direct impact on Throughput and is the mechanism for reliable and effective operation across many interconnected elements of the organization. For units and departments that do not have a direct impact on Throughput, T/D and IDD are useful for measuring progress toward unit goals. Using the three measures, complex organizations can achieve ever-increasing growth with more and more stability at the same time.

References

Barnard, A. 2003. "Insights and updates on the theory of constraints thinking processes." Paper presented at the Annual TOCICO Conference, September 9, 2003, London, England.

Chambers, P. V. 2003. A Theory of Constraints and Six Sigma Application to Improving Cost Reduction Performance. Pullman, WA: Engineering & Technology Management, Washington State University.

Goldratt, E. M. 1987, 1988, 1989, 1990. Essays on the Theory of Constraints. Great Barrington, MA: North River Press.

Goldratt, E. M. 1988a. The Theory of Constraints Journal, 1(3). New Haven, CT: Avraham Y. Goldratt Institute.

Goldratt, E. M. 1988b. Executive decision-making workshop. New Haven, CT: Avraham Y. Goldratt Institute.

Goldratt, E. M. 1990. The Haystack Syndrome: Sifting Information out of the Data Ocean. Great Barrington, MA: North River Press.

Goldratt, E. M. 1994. It's Not Luck. Great Barrington, MA: North River Press.

Goldratt, E. M. 1999. Goldratt Satellite Program Session 8: Strategy & Tactics. (Video series: 8 DVDs) Broadcast from Brummen, The Netherlands: Goldratt Satellite Program.

Goldratt, E. M. 2008. The Choice. Great Barrington, MA: North River Press.

Goldratt, E. M. 2009. "Standing on the shoulders of giants". The Manufacturer. June http://www.themanufacturer.com/uk/content/9280/Standing_on_the_shoulders_of_giants [Accessed Feb. 4, 2010].

Goldratt, E. M., Goldratt, A., and Ihnen, A. R. 20032006. TOC insights into distribution and supply chain. Goldratt's Marketing Group, http://www.TOC-Goldratt.com.

Johnson, J. 2009. Personal interview with Jenni Johnson, Purchasing Team Leader. August. Shippers Supply Company.

Mortensen, W. 2002. Application of the Theory of Constraints Supply Chain Solution to the Product Cost Improvement Process. Pullman, WA: Engineering & Technology Management, Washington State University.

Ricketts, J. A. 2008. Reaching the Goal: How Managers Improve a Services Business Using Goldratt's Theory of Constraints. Upper Saddle River, NJ: IBM Press.

Sullivan, T. T., Reid, R. A. and Cartier, B. 2007. TOCICO Dictionary.

http://www.tocico.org/?page=dictionary Taylor, L. J. III, Moersch, B. J., Franklin, G. M. 2003. "Applying the theory of constraints to a public safety hiring process," Public Personnel Management, 32(3).

Thompson, J. 2009. Instruction Seminar. June. Tacoma, WA. http://www.globalfocusllc.com/ Washington State University. 2009. The assembly game. http://www.vancouver.wsu.edu/fac/holt/em530/Docs/Assembly.ppt.

About the Authors

Dr. James R. Holt is a Clinical Professor of Engineering Management at Washington State University, focusing on practical application of Organizational Behavior, Operations Research, Statistics, Engineering Economics, Simulation, Information Systems, and Constraints Management to better organizations and complex systems. He has taught Theory of Constraints principles for 20 years at WSU as a consultant, a faculty member of Goldratt Schools, and at the Air Force Institute of Technology. He is currently President of TOCICO, the Theory of Constraints Professional Certification Organization. He is happily married to Suzanne for 37+ years; they have five children and nine grandchildren.

Dr. Lynn H. Boyd has been a member of the Department of Management at the University of Louisville since 1997 and is currently Associate Professor of Management. Prior to entering academia, Dr. Boyd was a CPA with Deloitte & Touche for 14 years and also worked for the U.S. Department of Veterans Affairs for two years. He is certified as a Jonah by the Avraham Goldratt Institute. Dr. Boyd teaches operations management in both the undergraduate and graduate programs, and teaches classes in managerial decision-making and statistics.

Dr. Boyd has published articles in the Journal of Cost Management, Production and Inventory Management Journal, International Journal of Production Research, International Journal of Operations and Production Management, Journal of Education for Business, and Industrial Management. Dr. Boyd lives in Crestwood, Kentucky, with his wife Rose and children Lisa and Derek.

CHAPTER 34.

Applications of Strategy and Tactics Trees in Organizations

Lisa A. Ferguson, PhD