Theory of Constraints Handbook - James Cox Iii [355]
Whether dealing with monkeys, rats, or human beings, it is hardly controversial to state that most organisms seek information concerning what activities are rewarded, and then seek to do (or at least pretend to do) those things, often to the virtual exclusion of activities not rewarded . . . Nevertheless, numerous examples exist of reward systems that are fouled up in that behaviors which are rewarded are those which the rewarder is trying to discourage, while the behavior he desires is not being rewarded at all. (1975, 769)
For example, management unintentionally causes inflated project task estimates by relying on on-time task completion as a performance measure. This expectation, in turn, incites project team members both to select unrealistically high task completion time requirements and to extend estimates of completion times. Similarly, shortsighted marketing objectives sometimes drive premature commitments by sales staff to delivery of products and capabilities based on schedules that could not possibly be met by developers and engineers.
Kerr’s observation focuses attention on a pervasive problem in strategy implementation: poorly aligned performance evaluation and reward systems. Regardless of the extent to which a strategic initiative is on-target and well-thought-out, to the degree to which the system continues to reward behaviors that are contrary to the desired outcomes of the strategic plan, the plan will be sabotaged and rendered ineffective. McAdam and Bailie (2002), for example, found that not only were performance measures linked to strategy more effective, but also the alignment between the measures and strategy must be continually reviewed and treated as a dynamic and complex issue. TOC not only suggests some measurements that are more directly tied to desirable outcomes in various applications, for example, DBR and Critical Chain Project Management (CCPM), but also the TP, used creatively, can suggest customized measures for specific localized and corporate situations. See Chapter 14 of this Handbook.
TOC Contributions
Throughout this Handbook, more detail is provided concerning specific TOC applications and how they contribute to the effectiveness of a firm’s strategy. DBR establishes order out of chaos in production, serving to bring reliability, order accuracy, and predictability to the company’s production outputs. CCPM not only shows managers how to achieve the same order and dependability in project delivery that DBR has brought to the production floor, but also CCPM and S&T trees are invaluable tools for the implementation of the overall strategy, itself a project or series of projects. The unrefuseable offer (URO), sometimes referred to as the “Mafia Offer,” is designed to uncover unique, creative marketplace offers that companies are unlikely to consider under normal strategic planning methods. The buy-in process addresses the need to present the URO to the customer or prospect in a manner that is believable and compelling. Sales force engineering demonstrates how an application of DBR to sales force deployment gives a boost to Throughput of a magnitude not usually associated with sales force training and management. TP and S&T trees have already been discussed in context. The synergy in strategic management generated by the knowledge and proper utilization of these tools is unprecedented in the strategic management literature.5 Chapters 12 and 16 (this volume) present case studies of holistic implementations of TOC strategies.
Future Research Opportunities
The development of TOC since the initial publication of The Goal (Goldratt and Cox, 1984) represents significant progress toward a comprehensive theory of business strategy creation and implementation. Many others have also added to the TOC body of knowledge since that time, many of whom authored chapters for this Handbook. In particular, for more perspectives on TOC and strategy, one might view Chapters 18 and 19 by Kendall and Dettmer, respectively.