Theory of Constraints is a methodology that serves to identify the factor that limits the pursuit of an objective within a company. It is a system that serves to identify the limiting factor (the bottleneck, the weakest link), in order to eliminate it and ensure success in meeting the proposed goals.
“Given mission is accomplished mission”. You’ve probably heard that phrase, haven’t you?
Whether in the professional environment or outside it, it is important to face activities with a focus on achieving goals.
However, within companies, often one factor, or a series of them, prevents you or your team from successfully completing what you have been given.
And it’s not uncommon either to not understand why you can’t, as simply to let go of something that was started.
However, the Theory of Constraints exists so that these bottlenecks can be readily identified and eliminated.
It is, without a doubt, a great practice in business management – something you are certainly looking for for your business.
In this article, we’ll talk more about what the Theory of Constraints is, what benefits it brings to organizations, and how you can apply it.
Let’s check it out?
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 task from succeeding.
The next act is to systematically improve this restriction until it is no longer a limiting factor.
For this, a scientific approach is adopted. And the following thought is taken into consideration.
There is a complex system (the whole). It includes the creation processes that are nothing more than a set of multiple activities.
Each acts as a constraint on the system – it could be the weakest link in the whole.
In other words, no matter how well the processes may seem, there will always be some item (no matter how small) weakened.
It can be a step, a professional, a tool. And this bottleneck will determine the pace of what you are developing.
That’s why it’s important to answer 3 basic questions:
- What should be changed?
- How should this be changed?
- How to promote this change?
Ah, let’s not forget an important history chapter. The methodology was created by Dr. Eliyahu Goldratt.
He conceived the TOC through his book “A Meta” – record sales in the year 1984.
Since then, the theory has been in constant evolution and today it is one of the best practices within the administrative management of companies.
Not least 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 path to optimize work and, of course, ensure greater productivity.
When the Theory of Constraints are successfully implemented within companies, the benefits are immediately realized.
Even more within an organization that encourages the DevOps culture and understands that having a customer focus is and always will be important.
Among the advantages, we can highlight:
- Quick improvements. After all, all the attention of those involved with the project will turn to the bottleneck;
- Reduced deadlines. Finding and eliminating the problem will speed 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 don’t have to redo anything and thus you avoid stress and frustration 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 defections that the project presents – no matter how small.
The main objective is the profit of the companies. 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 Constraint (chapter we’ll see a little later), it’s necessary to know the most common types of constraints.
This way, you may already have some assumptions about what is falling short within your processes today.
The restrictions can be of the type:
- Physics – equipment, lack of space, poorly qualified people or professionals, etc;
- Policy – good practices within the work, people who do not adapt to the way of working, internal procedures, union contracts, regulations, etc;
- Paradigm – some belief that prevents quality standards from being high. 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 Constraints in companies? See 5 steps!
Now that you understand what TOC is, its objective, benefits and focuses, you need to understand how, in practice, it contributes to companies.
But not just to leverage results – which is the main thing, of course. But it is a benefit for the organizational climate of any business.
To do any action well – not just 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.
- Identify the current restriction. That is, the part of the process that limits the achievement of your goal;
- Explore to make quick improvements using the features you have today, even if it doesn’t 100% fix the issue;
- Review all process activities to ensure they are in the desired pattern, supporting the constraint’s needs;
- Raise the ruler to look for other actions that eliminate the restriction – if it remained. Consider a capital investment if necessary;
- Repeat the continuous improvement cycle. Once one bottleneck is resolved, the next one must be immediately addressed to be corrected.
Let’s explore these 5 steps further?
1 – Identify and define the main restriction
It’s the initial step. Find out what prevents your company from achieving what you want. What is the source of the problem?
Do 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 you diagnosed.
2 – Explore and focus on quickly fixing the restriction
Once you’ve identified the constraint, it’s time to transform it. To quickly improve or eliminate it.
So for example. If in sales you’ve identified that one of your salespeople is under-performing, you can invest in sales training.
But if it’s the sales process that’s flawed, identify at which stages your conversion rates are low.
Or, if you’re having trouble pinpointing the defection, your sales management is failing.
And then, the digital transformation needs to take place in the company – even before taking the steps of the Theory of Constraints off the paper.
3 – Review and subject all other processes to restriction
Tailor everyone to the same level to ensure the job is done to the required standards.
The restriction cannot stop you from producing. So if you corrected it, it needs to be on a level with the rest of the elements.
For example, if you trained the salesperson, he or she needs to be working the same way as the other colleague in 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 eliminate the restriction
Constraint identified, action taken… was the result efficient? Not? Try one last move and consider a financial investment.
Returning to the example we set. If in-house training was not effective, you might consider hiring a sales consultant.
It’s the crucial moment. The famous and popular “go or crack”. If corrected and productivity returned to ideal terms, great. Life goes on.
If not, then it’s time to make a more energetic decision and replace this professional.
5 – Repeat the process to ensure continuous improvement
Business processes are living organisms. So, it’s not because you’ve identified a problem and solved it that there won’t be any more bottlenecks.
Repeat the whole cycle and try, as much as possible, to anticipate what you think might be a problem.
In this way, your company will always be ahead. People produce more, sell better and obviously ensure the customer’s success with the brand.
So, how can we help you?
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 deals with the Ishikawa Diagram, a tool that serves to identify problems within organizations.