Theory of Constraints Handbook - James Cox Iii [563]
Priority of a task/product/service/project/customer is affected by two parameters—on one hand, its value to the organization and on the other hand, the time (effort) spent at the bottleneck processing it. The resulting priority can be decided by calculating the specific Throughput of the task/product/service/project/customer or graphically by drawing the focusing matrix for the bottleneck. The specific Throughput of a task is the ratio between the value of the task for the organization and the time this task requires to be processed at the bottleneck. Namely, the specific contribution of a task represents the value that the organization gains per constraint time (Ronen and Pass, 2008a, Chapter 5). The focusing matrix is a chart that maps the tasks/products/services/projects/customers in two dimensions according to their relative importance to the value of the organization on one hand and the ease of achievement on the other hand (Ronen and Pass, 2008a, Chapter 5).
In a large financial institute, the total amount of development tasks requested from the IT department was typically 400 percent higher than the actual development capacity. Traditionally, the decision of which tasks to deliver in a given year was influenced mainly by the organizational power of the requesting unit (“he who shouts louder, wins”). In order to decide rationally on the best portfolio of tasks to be developed during the next year, management adapted and implemented the strategic gating mechanism. A major element of strategic gating is the notion that those tasks that did not have high enough priority should not be put on a “contingency list” but will be put aside in a firm freeze status waiting for a subsequent annual strategic gating session.
This strategic gating process obviously ensured that maximum value to the organization was delivered. Moreover, this process increased the effective capacity of the IT department of this firm by 15 percent, enabled it to develop 15 percent more software products, and at the same time enabled it to reduce the damages associated with version content changes.
Subordinating Everybody Else to the Permanent Bottlenecks
The organization as a whole has to be subordinated to its main constraint—the market. This means that in order to achieve high profits one has to offer customers services that deliver as much value as possible.
In order to achieve this subordination to the market, the organization has to undergo a paradigm shift—to accept the approach that everybody in the organization has to be subordinated internally to the market through Marketing and Sales.
In service organizations, one has to instill double subordination: to the market and to IT development. Subordination to IT development means practically to request only necessary IT applications, to eliminate any “nice to have” features, and to submit the requirements in a complete kit. A complete kit is the set of items needed to complete a given task (e.g., information, drawings, materials, components, documents, tools) (Ronen and Pass, 2008a, Chapter 12).
Elevating the Permanent Bottlenecks
Permanent bottlenecks obviously can be elevated by hiring more resources. A more challenging mechanism for elevation is the offload mechanism. Offloading bottlenecks is achieved by directing part of the tasks of the bottleneck to other non-bottleneck resources. Candidates for offload are repetitive tasks or those that do not require the highest professional skills.
Salespersons can be offloaded very effectively by a good back-office. Administrative tasks, meetings coordination, customer retention, etc. can be performed by the back-office, freeing the salesperson to increase Throughput by performing more sales meetings per week. For example, in a medium-sized insurance company, Pareto analysis of a typical day of a salesperson revealed that only 13 percent of the day was used for face-to-face sales meetings with a customers. As a result,