The Goal: a process of Ongoing Improvement

Protagoras
.’’
"It’ll be interesting to hear your opinion tomorrow.’’ I say skeptically. "If it’s

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still positive, maybe I’ll read it, too.’’
"Yeah, when pigs fly,’’ she says. Before I can answer, she stands up, "Let’s
hit the sack.’’
I yawn and join her.

---

36
We’re getting started a little late since Stacey and Bob have to deal with
some problematic orders. I wonder what’s really happening; are we drifting
back into trouble? Is Stacey’s warning about her Capacity Constraint
Resources starting to materialize? She was concerned about any increase in
sales and, for sure, sales are slowly but constantly on the rise. I dismiss these
thoughts; it’s just the natural friction that should be expected when your
material manager moves her responsibilities to her replacement. I decided not
to interfere; if it evolves into something serious they won’t hesitate to tell me.
This is not going to be easy. We all are action-oriented and searching for
basic procedures is almost against our nature, no matter how much Bob tells
me that he’s been transformed.
So when, at last, they all take seats I remind them about the issue on the
table. If we want the same movement that we’ve succeeded in starting here to
happen in the entire division, we have to clarify for ourselves what we
actually have done—in a generic sense. Repeating the specific actions won’t
work. Not only are the plants very different from each other; how can one
fight local efficiencies in sales, or cut batches in product design?
Stacey is the only one who has something to offer and her idea is simple.
If Jonah forced us to start by asking, ‘what is the goal of the company’,
Stacey suggests that we start by asking, ‘what is our goal’—not as
individuals, but as managers.
We don’t like it. It’s too theoretical. Bob yawns, looks bored. Lou
responds to my unspoken request and volunteers to play the game.
With a smile he says, "This is trivial. If the goal of our company is ‘to
make more money now as well as in the future,’ then our job is to try and
move our division to achieve that goal.’’

---

"Can you do it?’’ Stacey asks. "If the goal includes the word ‘more’, can
we achieve the goal?’’
"I see what you mean,’’ Lou responds, still smiling. "No, of course we can’t
achieve a goal that is open-ended. What we’ll have to do is to try and move
the division toward that goal. And you are right, Stacey, it’s not a one-shot
effort, we have to constantly strive toward it. Let me rephrase my initial
answer.’’ And in his punctuating voice, emphasizing each word, he
concludes, "A good job will be to start our division on a process of on-going
improvement.’’
Turning to me, Stacey says, "You asked for an idea of how to tackle the
subject? I think that we should proceed from here.’’ "How?’’ Donovan
echoes the question that everybody is thinking.
"I don’t know,’’ is Stacey’s answer. When she sees Bob’s expression she
says defensively, "I didn’t claim to have a breakthrough, just an idea.’’
"Thank you Stacey,’’ I say, and turning to the rest I point to the white board
that nobody has bothered to erase yet. "We must admit that it is a different
angle from the one we had so far.’’ We are stuck. Donovan’s question is
certainly in place. So I try to gain some momentum by cleaning the board and
writing in big letters "A process of on-going improvement.’’
It doesn’t help much. We sit in silence for a while staring at the board.
"Comments?’’ I ask at last. And, as expected, it’s Bob who voices
everybody’s feeling.
"I’m sick and tired of these big words. Everywhere I go, I hear the same
thing.’’ He stands up, goes to the board, and mimicking a first grade teacher
he intones "A process ...of... on-going... improvement.’’
Sitting back down he adds, "Even if I wanted to forget it I can’t. Hilton
Smyth’s memos are all spotted with this phrase. By the way Alex, these
memos keep on coming, and more often than before. In the name of savings,

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at least saving paper, can’t you do something to stop it?’’
"In due time. But let’s keep at it. If nothing comes out of these discussions,
then the only useful thing that I will be able to do as the division manager
will be to stop some memos. Come on Bob, spit out your frustrations.’’
It doesn’t take much to encourage Bob to voice his true opinion. "Every plant
in our company, has already launched at least four or five of those pain-in-
the-neck improvement projects. If you ask me, they lead only to indigestion
problems. You go down there, to the floor, and mention a new improvement
project and you’ll see the response. People have already developed allergies
to the phrase.’’
"So, what are you suggesting should be done?’’ I pour some more fuel on his
flames.
"To do what we have done here,’’ he roars back. "We, here, have not done
any of these. We have not launched even one formal improvement project.
But look at what we have achieved. No talks, no big words, but if you ask
me, what we’ve achieved here is the real thing.’’
"You’re right,’’ I try to calm the volcano that I have awakened. "But Bob, if
we want to do the same in the entire division we must pinpoint what exactly
the difference is between what we have done and what everyone else has
tried to do.’’
"We haven’t launched so many improvement projects,’’ he says.
"That is not accurate,’’ Stacey responds. "We have taken many initiatives: in
shop floor procedures, in measurements, in quality, in local processes, not to
mention the changes that we have made in the way we release material to
production.’’ Raising her hand to stop Bob from interrupting, she concludes:
"True, we didn’t call them improvement projects, but I don’t believe the
crucial difference is that we didn’t bother to title them.’’
"So why do you think we have succeeded where so many have failed?’’ I ask
her.

---

"Simple,’’ Bob jumps in. "They talked, we did.’’
"Who is playing with words now,’’ I shut him off.
"I think that the key,’’ Stacey says in a thoughtful tone, "is in the different
way we interpreted the word ‘improvement’.’’
"What do you mean?’’ I ask her.
"She is absolutely right!’’ Lou beams. "It’s all a matter of measurements.’’
"For an accountant,’’ Bob speaks to the room, "Everything is a matter of
measurements.’’
Lou stands up and starts to pace the room. I rarely see him so excited.
We wait.
At last he turns to the board and writes:
THROUGHPUT INVENTORY OPERATING EXPENSE
Then he turns back to us and says, "Everywhere, improvement was
interpreted as almost synonymous to cost savings. People are concentrating
on reducing operating expenses as if it’s the most important measurement.’’
"Not even that,’’ Bob interrupts. "We were busy reducing costs that
didn’t have any impact on reducing operating expenses.’’
"Correct,’’ Lou continues. "But the important thing is that we, in our
plant, have switched to regard throughput as the most important
measurement. Improvement for us is not so much to reduce costs but to
increase throughput.’’
"You are right,’’ Stacey agrees. "The entire bottleneck concept is not
geared to decrease operating expense, it’s focused on increasing throughput.’’

---

"What you are telling us,’’ I say slowly, trying to digest it, "is that we
have switched the scale of importance.’’
"That’s precisely what it is,’’ Lou says. "In the past, cost was the most
important, throughput was second, and inventory was a remote third.’’
Smiling at me he adds, "To the extent that we regarded it as assets. Our new
scale is different. Throughput is most important, then inventory—due to its
impact on throughput and only then, at the tail, comes operating expenses.
And our numbers certainly confirm it,’’ Lou provides the evidence.
"Throughput and inventory had changed by several tens of percent while
operating expenses went down by less than two percent.’’
"This is a very important lesson,’’ I say. "What you claim is that we have
moved from the ‘cost world’ into the ‘throughput world’.’’
After a minute of silence I continue, "You know what, it really highlights
another problem. Changing the measurements’ scale of importance, moving
from one world into another, is without a doubt a culture change. Let’s face
it, that is exactly what we had to go through, a culture change. But how are
we going to take the division through such a change?’’
I go to pour myself another cup of coffee. Bob joins me. "You know,
Alex, something is still missing. I have the feeling that the entire approach we
took was different.’’
"In what way?’’ I ask.
"I don’t know. But one thing I can tell you, we haven’t declared any
improvement project, they grow from the need. Somehow it was always
obvious what the next step should be.’’
"I guess so.’’
We spend good time. We bring up the actions we took and verify that each
one actually has been guided by our new scale. Bob is very quiet until he
jumps to his feet.

---

"I nailed the bastard!’’ he shouts, "I have it!’’
He goes to the board, grabs a marker and put a heavy circle around the word
‘improvement.’ "Process of on-going improvement,’’ he booms. "Lou and his
fixation on measurements forced us to concentrate on the last word. Don’t
you realize that the real sneaky SOB is the first one?’’ and he draws several
circles around the word ‘process.’
"If Lou has a fixation about measurements,’’ I say somewhat irritated, "then
you certainly have a fixation about processes. Let’s hope your fixation will
turn up to be as useful as his.’’
"Sure thing, boss. I knew that the way we handled it was different. That it
wasn’t just a matter of scales.’’
He returned to his seat still beaming.
"Do you care to elaborate?’’ Stacey inquires in a soft voice.
"You haven’t got it?’’ Bob is surprised.
"Neither did we.’’ We all looked perplexed.
He looks around and when he realizes that we are serious he asks, "What is a
process? We all know. It’s a sequence of steps to be followed. Correct?’’
"Yes...’’
"So, will anybody tell me what the process is that we should follow? What is
the process mentioned in our ‘process of on-going improvement’? Do you
think that launching several improvement projects is a process? We haven’t
done that, we have followed a process. That’s what we have done.’’
"He’s right,’’ says Ralph in his quiet voice.
I stand up and shake Bob’s hand. Everybody is smiling at him.

---

Then Lou asks, "What process have we followed?’’
Bob doesn’t hurry to answer. At last he says, "I don’t know, but we definitely
followed a process.’’
To save embarrassment I hurriedly say, "Let’s find it. If we followed it, it
shouldn’t be too difficult to find. Let’s think, what is the first thing we did?’’
Before anybody has a chance to answer Ralph says, "You know, these two
things are connected.’’
"What things?’’
"In the ‘cost world’ as Alex called it, we are concerned primarily with cost.
Cost is drained everywhere, everything cost us money. We had viewed our
complex organization as if it were composed out of many links and each link
is important to control.’’
"Will you please get to the point?’’ Bob asks impatiently.
"Let him talk,’’ Stacey is no less impatient.
Ralph ignores them both and calmly continues, "It’s like measuring a chain
according to its weight. Every link is important. Of course, if the links are
very different from each other then we use the principle of the twenty-eighty
rule. Twenty percent of the variables are responsible for eighty percent of the
result. The mere fact that we all know the Pareto principle shows us to what
extent Lou is right, the extent to which we all were in the cost world.’’
Stacey puts her hand on Bob’s to prevent him from interfering.
"We recognize that the scale has to be changed,’’ Ralph continues. "We
choose throughput as the most important measurement. Where do we achieve
throughput? At each link? No. Only at the end of all operations. You see,
Bob, deciding that throughput is number one is like changing from
considering weight to considering strength.’’

---

"I don’t see a thing,’’ is Bob’s response.
Ralph doesn’t let go, "What determines the strength of a chain?’’ he asks
Bob.
"The weakest link, wise guy.’’
"So if you want to improve the strength of the chain, what must your first
step be?’’
"To find the weakest link. To identify the bottleneck!’’ Bob pats him on the
back. "That’s it! What a guy!’’ And he pats him again.
Ralph looks a little bent, but he is glowing. As a matter of fact, we all are.
After that it was easy. Relatively easy. It wasn’t too long before the process
was written clearly on the board:
STEP 1. Identify the system’s bottlenecks.
(After all it wasn’t too difficult to identify the oven and the NCX10 as the
bottlenecks of the plant.) STEP 2. Decide how to exploit the bottlenecks.
(That was fun. Realizing that those machines should not take a lunch break,
etc.)
STEP 3. Subordinate everything else to the above decision. (Making sure that
everything marches to the tune of the constraints. The red and green tags.)
STEP 4. Elevate the system’s bottlenecks.
(Bringing back the old Zmegma, switching back to old, less "effective’’
routings. . . .)
STEP 5. If, in a previous step, a bottleneck has been broken go back to step 1.

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I look at the board. It’s so simple. Plain common sense. I’m wondering,
and not for the first time, how come we didn’t see it before, when Stacey
speaks up.
"Bob is right, we certainly followed this process, and we cycled through it
more than once—even the nature of the bottlenecks we had to deal with
changed.’’
"What do you mean by the ‘nature of the bottlenecks?’’’ I ask.
"I mean a major change,’’ she says. "You know, something serious like the
bottleneck changing from being a machine to being something totally
different, like insufficient market demand. Each time that we’ve gone through
this five-step cycle the nature of the bottleneck has changed. First the
bottlenecks were the oven and the NCX10, then it was the material release
system —remember the last time when Jonah was here?—then it was the
market, and I’m afraid that very soon it’ll be back in production.’’
"You’re right,’’ I say. And then, "It’s a little odd to call the market or the
system of material release a bottleneck. Why don’t we change the word,
to...’’
"Constraint?’’ Stacey suggests.
We correct it on the board. Then we just sit there admiring our work.
"What am I going to do to continue the momentum?’’ I ask Julie.
"Never satisfied, huh?’’ and then she adds passionately, "Alex, why do you
drive yourself so hard? Aren’t the five steps that you developed enough of an
achievement for one day?’’
"Of course it’s enough. It’s more than enough. Finding the process that
everybody is looking for, the way to proceed systematically on the line of on-
going improvement, is quite an achievement. But Julie, I’m talking about
something else. How can we continue to improve the plant rapidly?’’

---

"What’s the problem? It seems that everything is sailing forward quite
smoothly.’’
I sigh, "Not exactly, Julie. I can’t push aggressively for more orders because
we’re afraid that any additional sales will create more bottlenecks and throw
us back into the nightmare of expediting. On the other hand, I can’t ask for a
major expansion in hiring or machines; the existing bottom line results don’t
justify it yet.’’
"My impatient husband,’’ she laughs. "It looks like you simply have to sit
tight and wait until the plant generates enough money to justify more
investments. In any event darling, very shortly it will be Donovan’s
headache. It’s about time you allowed others to worry.’’
"Maybe you’re right,’’ I say, not totally convinced.

---

37
"Something is wrong,’’ Ralph says after we’ve made ourselves
comfortable. "Something is still missing.’’
"What?’’ Bob says aggressively, all geared up to protect our new creation.
"If step 3 is right...’’ Ralph is speaking very slowly, "if we have to
subordinate everything to the decision that we made on the constraint,
then...’’
"Come on Ralph,’’ Bob says. "What’s all this ‘if we have to subordinate’? Is
there any doubt that we must subordinate the non-constraints to the
constraints? What are the schedules that you generate on your computers if
not the act of subordinating everything to our decision about the bottlenecks’
work?’’
"I don’t doubt that,’’ Ralph says apologetically. "But when the nature of the
constraint has changed, one would expect to see a major change in the way
we operate all non-constraints.’’
"That makes sense,’’ Stacey says encouragingly. "So what is bothering
you?’’
"I don’t recall that we did such changes.’’
"He’s right,’’ Bob says in a low voice. "I don’t recall it either.’’
"We didn’t,’’ I confirm after a while.
"Maybe we should have?’’ Bob says in a thoughtful voice.
"Let’s examine it,’’ I say. And then, "When was the first time the constraint

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changed?’’
"It happened when some green-tag parts started arriving at assembly too
late,’’ Stacey says without hesitation. "Remember our fear that new
bottlenecks were popping up?’’
"Yes,’’ I say. "And then Jonah came and showed us it wasn’t new
bottlenecks, but that the constraint had shifted to being the way we released
work to the plant.’’
"I still remember the shock,’’ Bob comments, "of restricting the release of
material, even though the people had practically nothing else to work on.’’
"And our fear that ‘efficiencies’ would drop,’’ Lou comments. "In retrospect,
I’m amazed that we had the courage to do it.’’
"We did it because it made perfect sense,’’ I say. "Reality certainly proved us
right. So Ralph, in that case at least, we did affect all the non-constraints.
Should we move on?’’
Ralph doesn’t answer.
"Something’s still troubling you?’’ I inquire.
"Yes,’’ he says, "but I can’t put my finger on it.’’
I wait for him.
Finally Stacey says, "What’s the problem, Ralph? You, Bob, and I generated
the work list for the constraints. Then you 
had
the computer generate release
dates for all material, based on that list. We definitely changed the way we
operated a non-constraint, that is, if we consider the computer as a non-
constraint.’’
Ralph laughs nervously.
"Then,’’ Stacey continues, "I made my people obey those computer lists.

---

That was a major change in the way they operate —especially when you
consider how much pressure the foremen put on them to supply them with
work.’’
"But you must admit the biggest change was on the shop floor,’’ Bob
contributes. "It was very difficult for most people to swallow that we really
meant they shouldn’t work all the time. Don’t forget that the fear of layoffs
was hanging heavily above us.’’
"I guess it’s all right,’’ Ralph gives up.
"What did we do with the method we were using?’’ Lou asks. "You know,
the green and red tags.’’
"Nothing,’’ Stacey replies. "Why should we do anything about it?’’
"Thank you, Lou,’’ Ralph says. "That is exactly what was bothering me.’’
Turning to Stacey he adds, "Do you remember the reason for using those tags
in the first place? We wanted to establish clear priorities. We wanted each
worker to know what is important and must be worked on immediately, and
what is less important.’’
"That’s right,’’ she says. "That’s exactly why we did it. Oh, I see what you
mean. Now—not like in the past when we released stuff just to provide work
—now whatever we release to the floor is basically of the same importance.
Let me think for a minute.’’
We all do.
"Oh shit,’’ she moans.
"What’s the matter?’’ Bob asks.
"I just realized the impact that those darn tags have on our operation.’’
"Well?’’ Bob presses her.

---

"I’m embarrassed,’’ she says. "I’ve been complaining about our problems
with the six or seven capacity constraint resources, I raised all the red flags,
I’ve gone as far as to demand that incoming orders be restricted. And now I
see that I’ve created the problem with my own hands.’’
"Fill us in, Stacey,’’ I request. "You’re way ahead of us.’’
"Of course. You see, when do the green and red tags have an impact? Only
when a work center has a queue, when the worker has to choose between two
different jobs that are waiting; then he always works on the red tag first.’’
"So?’’
"The largest queues,’’ Stacey goes on, "are in front of the bottlenecks, but
there the tags are irrelevant. The other place where we have relatively high
queues is in front of the capacity constraint resources. These resources supply
some parts to the bottlenecks, red-tag parts, but they work on many more
greentag parts, parts that go to assembly not through the bottlenecks. Today
they do the red-tag parts first. This naturally delays the arrival of the green