Theory of Constraints Handbook - James Cox Iii [285]
Figure 15-1 shows an example of this pressure and challenge to improve resulting from a large growing gap between stakeholder expectations (the “red” curve) and actual performance (the “green” curve).
For private sector organizations, this challenge manifests in the continuous pressure to close the gap between actual and expected short- and long-term returns for shareholders. For public sector organizations, the challenge manifests itself in the ongoing pressure to close the large and frequently growing gap between the deteriorating levels of service delivery and infrastructure and a growing demand for such services in the areas of health, safety, education, energy, and telecommunications—especially in the developing countries around the world. For individuals, the challenge manifests itself in the difficulty to maintain a balance within the various aspects of our lives—some struggle with gaps in their self-confidence, others with gaps within their health, some with gaps in their relationships, and others with gaps in financial security.
Organizations and individuals also share three types of responses to such pressure to change due to current and likely future performance gaps and unacceptably high variations that can cause system instability:
FIGURE 15-1 The red curve challenge. (© E. M. Goldratt used by permission, all rights reserved. Source: Modified from Goldratt, 1999).
1. Don’t change (to prevent decay or at least to prevent wasting resources).
2. Make many small- or low-leverage and low-risk changes (to maintain stability).
3. Make few large- or high-leverage and possibly high-risk changes (to achieve growth).
Figure 15-2 shows the uncertainties and the related conflict that determines which of the three responses will be the most likely for a specific stakeholder. When organizations (and individuals) are faced with the reality that their performance is no longer improving at the required or desired rate or have unacceptable high variation, they face the risk of performance decay if they don’t change (the uncertainty of not changing). At the same time, if they decide to change but “play it safe” by targeting many small incremental improvements, they will probably risk not meeting their growth objective, while if they decide to target the few large step-change improvements, they risk instability and even decay, which could threaten the survival of their organization (the uncertainty of changing).
These uncertainties put all stakeholders who feel or are held responsible for the performance of the system into the conflict on the right-hand side of Fig. 15-2. In order to achieve ongoing success, stakeholders feel they must meet the required or desired growth objectives. In order to meet these growth objectives (to reduce gap or variation), they feel pressure to change. At the same time, to achieve ongoing success, stakeholders also feel they must ensure that the requirements for stability (and survival) are never compromised, which contributes to the pressure not to change or at least not to initiate any step-changes that could jeopardize stability and even survival.
FIGURE 15-2 The uncertainty and dilemma related to the improvement challenge.
The Types of Management Mistakes When under Pressure to Change
The design of a continuous improvement and auditing system (to create a learning organization) should start with classification of the types of mistakes made that can block continuous improvement. There are two types of mistakes2 (Ackoff, 2006): Errors of commission, doing something that should not be done or not doing the right thing properly; and errors of omission, not doing something that should have been done. Ackoff warned that we learn little from doing things right or even from doing the right thing at the right time. Most learning comes from doing the wrong thing or doing something wrong. However, in order to