The Goal – The Beginning of the Theory of Constraints

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The Goal was the beginning for me. The lecturer, at the USB SDP**, read The Goal to the class in two days, and we played the dice game.
Eliyahu M Goldratt and Jeff Cox wrote the original edition of The Goal in 1984. The Goal has sold several million copies in several languages, including Japan. The Goal is available in e-format, audio formats, movie and as “A Business Graphic Novel“.
The Goal lays the foundation for a significant part of the body of knowledge of the Theory of Constraints. The first question we must ask is,
“What is the Goal of the system?”
Once we know what the goal is, we can define a measurement system and embark on a process of ongoing improvement.
The Goal summarises the Process of Ongoing Improvement as:
  1. IDENTIFY the system’s constraint(s).
  2. Decide how to EXPLOIT the system’s constraint(s).
  3. SUBORDINATE everything else to the above decisions.
  4. ELEVATE the system’s constraint(s).
  5. WARNING!!!! If in the previous steps a constraint has been broken go back to step 1, but do not allow INERTIA to cause a system’s constraint.
The Goal also puts a wooden spike through the evil of cost accounting. Johnson and Kaplan declared cost accounting dead in their book Relevance Lost, 1987:
Corporate management accounting systems are inadequate for today’s (Septemeber 1986) environment. In this time of rapid technological change, vigorous global and domestic competition, and enormously expanding information processing capabilities, management accounting systems are not providing useful, timely information for the process control, product costing, and performance evaluation activities of managers.
The Goal also gives the definitions for the Throughput Accounting parameters:
Throughput is the rate at which the system generates money through sales.
Inventory is all the money that the system has invested in purchasing things which it intends to sell.
Operational expense is all the money the system spends in order to turn inventory into throughput.
Throughput Accounting allows managers to make managerial decisions. These decisions yield real system results.
The Goal explains the generic solution for operations. In operations statistical variation and dependent steps exist. We refer to the worst statistical variation “Murphy”. The Drum-Buffer-Rope solution applies to many systems – especially to scouts on a hike.
I have much to learn about the Theory of Constraints and something to teach. I will return to this subject again.
** I want to thank the University of Stellenbosch (USB) and Bridgestone Firestone South Africa for exposing me to the Senior Management Development program and The Goal.
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