The Goal – Chapter 32 – Change Management

The chapters after 31 are really a resolution to the book.  Rogo was promoted in 31.  The plant is in good shape.  These final chapters focus on laying out the ‘Rules around Constraints’ and show how Rogo takes his epiphany on learning and applies it to his next job managing multiple plants.

Highlight

“If it weren’t for the conviction that we gained in the struggle—for the ownership that we developed in the process—I don’t think we’d actually have had the guts to put our solutions into practice.”

Urgency – creating it and managing it, is part of effective change management.

Page by Page

P265 – “The family paid too big a price for this promotion,” I finally say.

There are many families – mine included – who have paid too much for a promotion.  Christensen’s How Will You Measure Your Life is a great way to think about work/life balance.

P266 – They all made common sense, and at the same time, they flew directly in the face of everything I’d ever learned.

P267 – “If it weren’t for the conviction that we gained in the struggle—for the ownership that we developed in the process—I don’t think we’d actually have had the guts to put our solutions into practice.”

The process of change management is tough.  It is a rare group that can take feedback and implement the needed changes right away.

“Probably Mark Twain was right saying that ‘common sense is not common at all’ or something similar.”

“The best that I have come up with so far is to recognize that we refer to something as common sense only if it is in line with our own intuition.”

If it was common sense to both parties – you would already be doing it.

P268 – “Actually there are only two possibilities, either you are not understood, or you are understood.”

Communication and explanation can be hard.  Repetition is part of effective communication.

P269 – “It looks like one should think twice before charging the tall windmills of common practice.”

“This is the technique that I should ask Jonah to teach me: how to persuade other people, how to peel away the layers of common practice, how to overcome the resistance to change.”

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The Goal – Chapter 31 – Defending Performance and a Promotion

Hilton Smyth’s interrogation opens the chapter.  Rogo avoids taking the bait on multiple taunts and attempts to explain what he has done to turn around the plant.

Highlight

“Activating a resource and utilizing a resource are not synonymous.”

This is similar to the highlight of Chapter 25 – “What you’re saying is that making an employee work and profiting from that work are two different things.”

Work for the sake of work is misguided.  It feeds vanity metrics.

Page by Page

P258 – “The goal of UniWare is to make money. Agreed?”

Alignment statements like this are required all too often in corporate meetings.  Smyth even jumps on Rogo’s baited first statement about the goal being cost cutting.

P259 – “Activating a resource and utilizing a resource are not synonymous.”

Frustration is energy without focus.  Asking for activity when the goal of that activity is unclear is wasteful.  Watching colleagues pursue useless tasks is a great frustration.

P260 – “I knew you wouldn’t leave without seeing me.”

If Bill Peach knew this, why didn’t he ask for the time?

P261 – “He basically refused to listen. He continues to claim that as long as cost of products increase, profits eventually have to go down.”

Rogo was patient.  Smyth’s lack of listening and stubbornness is common.

P262 – “Congratulations, Alex; you will be the one to replace me.”

P263 – “I think that every sensible person should want to learn how to manage his or her life.”

Jonah counsels Rogo on applying the Theory of Constraints to his personal life.

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The Goal – Chapter 30 – Bucky Burnside’s Helicopter

Rogo hosts a surprise corporate walk through of his robots, which leads to another vanity metrics discussion.  A big account, Bucky Burnside, flies in on a helicopter to thank his team.  Alex and Julie reflect on life and lament past poor communication.

Highlight

“Throughput is going up as marketing spreads the word about us to other customers.”

The world cheers on a winner.  Your team, your vendors and others around you will work with a winner to help continue the winning.

Page by Page

P247 – “Throughput is going up as marketing spreads the word about us to other customers. Inventories are a fraction of what they were and still falling. With more business and more parts over which to spread the costs, operating expense is down. We’re making money.”

P248 – “That was killed,” I say.

UniCo had planned to promote the robots, but then stopped.  Now it is back!  This is a personal corporate pet peeve. ‘Decision Impermanence’ is never healthy!

P249 – “I feel my stomach twisting.”

With the NCX-10 running, but following the smaller batch sizes, Rogo knows that the utilization will not be as high.  Corporate’s vanity metrics will be out of whack!

P250 – “Is that a helicopter?” I ask.

Bucky Burnside returns in a helicopter to say a gracious “Thank you” to the team.

P251 – “What’s the status on Burnside’s Model 12’ s?” I ask her.

Rogo is concerned that Burnside is upset – he has never experienced the other side of the equation.

P252 – “Rogo, I came down here because I want to shake the hand of every employee in your whole plant,” growls Burnside.

This is how you thank a vendor!

P253 – “We’re going to do a new campaign pushing everything you make down here, because this is the only plant we’ve got in this damn division that can ship a quality product on time.”

The marketing team, led by Johnny Jons, is thrilled to have a plant that can delight customers.

P254 – “Even with screwed-up measurements, we’re making money.”

Even vanity metrics can look good with robust financials.

P255 – “When all those crises were occurring, I just kept thinking you must know how important they were,” I tell her.

Rogo assumed his wife knew what was going on, even when he did not communicate.  He had avoided that trap with this employees but failed personally.

P256 – “But then there were babies,” says Julie.

At age 19 when I asked my university adviser, Dr. Fred Diehl what his guidance was for the following years, I had expected him to recommend courses or the pursuit of specific internships.  His reply instead was, “Don’t have kids.  Don’t have them until you are comfortable in what you are doing, because the obligations they create remove flexibility from your life.”

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The Goal – Chapter 29 – Nightmares & Sales

Alex awakens from a nightmare just as Bill Peach’s Mercedes is about to run him over.  Nightmare episodes are a common trope, and it is easy to imagine first time author Goldratt smiling at his choice of story-telling tool.  Julie sleeps next to Alex.  Alex reviews the plant’s continued improvements brought on by cut batch sizes and walks through a plan to recapture business lost in the first chapter with Bucky Burnside.

Highlights

There are a number of great quotes and concepts in this chapter.

“The units will ship when we say they will,” I tell him.

Rogo has integrated sales and operations – he knows his schedule, his constraints and his capabilities.

“The only work-in-process out there now is for current demand.”

Why do otherwise?

“Financially speaking, it doesn’t make a damn bit of difference.”

Vanity metrics change the way numbers are presented, but core financial and accounting metrics are the same.

Page by Page

P237 – “When the excess inventories were exhausted—which happened quickly as a result of the increase in throughput—efficiencies came back up again.”

Cutting batch size improves the flow of an operation.  Boulders become gravel, gravel becomes sand.

P238 – “But now that the batches are smaller, the parts are ready to be moved to the next work station sooner than they were before.”

“The only work-in-process out there now is for current demand.”

Why pursue any work other than that required to meet current demand?  Speculative capacity is a fool’s game – this is why The Lean Startup focuses so much on product-market-fit and preventing premature scale-up.

P239 – “Politically speaking, yes,” I tell her. “Financially speaking, it doesn’t make a damn bit of difference.”

P240 – “The measurement assumes that all of the workers in the plant are always going to be fully occupied, and therefore, in order to do more set-ups, you have to hire more people. That isn’t true.”

Helping an organization increase throughput by more efficiently organizing personnel is a great way to create growth.  People have capacity to learn.  Teams that can learn and redeploy with new skillsets create flexible production sites.

P241 – “Remember our dear friend Bucky Burnside?” says Jons.

P242 – “He tells me he did some digging and found out that the order had originally gone to our number-one competitor, who makes a product similar to the Model 12.”

P243 – “What if we cut the batch sizes by half again?”

If a game plan has worked – keep running the play.

P244 – “And how soon could they ship the first week’s quantity to us?”

This is a step towards iteration.  Rogo is negotiating with the buyer (always a good sign) and is trying to find a way to unlock the business.  By getting Bucky to take deliveries as they are done, he keeps Bucky’s plant full and shows commitment to being a good supplier.

P245 – “The units will ship when we say they will,” I tell him.

Committing to tasks that aren’t possible is a great way to fail.  There are times to take risk – such as with the 15% that was committed to Peach earlier in Chapter 27.  Rogo isn’t taking risk here – he knows his team’s method and he knows he can hit the target.  This is excellent integration of sales and operations.

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The Goal – Chapter 28 – Cutting the Batch Size

Rogo works with his team to extend their lead.  When things are going well it can be tempting to take relative leadership and coast.  Rogo is beating his peers at other plants.  However, to get the most for all of the business – he makes a bold step and tries to extend his lead again.

Highlights

“Okay, if we cut batch sizes in half, then that means it ought to take half the time it does now.”

Batch size is a common underlying driver in The Lean Startup.  Large batch sizes are a reason that innovation in materials science is so difficult.  Plants that take weeks to startup don’t easily shut down to do trials.  Experiment design is very expensive.

Page by Page

P229 – “If I were you, I wouldn’t worry too much about being shut down.”

P230 – “If we cut our batch sizes in half, then I guess that at any one time we’d have half the work-in-process on the floor.”

Rogo is on to something.  If we think of flow as a fluid – then smaller particles will travel through the plant faster.

P231 – “But queue and wait often consume large amounts of time—in fact, the majority of the elapsed total that the part spends inside the plant.”

Reducing batch size for known products will cut down on inventory and WIP.

P232 – “And with less time spent sitting in a pile, the speed of the flow of parts increases.”

If personnel and plant expenses are known, then we don’t have to add any resources to cut batch size.

P233 – “Okay, if we cut batch sizes in half, then that means it ought to take half the time it does now.”

Cutting batch size is almost always a good thing.

P234 – “We’ve worked off our backlog of overdue orders, as you know.”

Reducing inventory of past due work to zero is a great way to create revenue and cash flow.  If a business it has orders it cannot meet, figuring out how to deliver those orders is a great place to start.

P235 – “With our overdues gone, and our current backlog declining, I’ve got to get more work into my plant.

Here the plant becomes part of a larger system – the whole supply chain.  Now that the plant is not a constraint (since it has worked through inventory), it has earned the right to go hunt for more business.  A plant that constrains the supply chain is unlikely to win new work.

With the lessons learned, the operations and marketing teams can collaborate to pursue profitable new business for the site.

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The Goal – Chapter 27 – More Vanity Metrics

Rogo delivers good results and commits to a 15% improvement. He stops to see Julie on his way home where they discuss life goals. Julie waffles about their relationship.

Highlights

“It’s too bad the standard report we’ve prepared can’t begin to tell the full story of what’s really going on.”

Vanity metrics may be Rogo’s primary enemy.

Page by Page

P220 – “All of the other manufacturing operations in the division reported only marginal gains in performance or sustained losses. Despite the improvement at Bearington and the fact that as a result the division recorded its first operating profit of this year, we have a long way to go before we are back on solid financial footing.”

“Rogo,” says Peach, “because you seem to be the only one among us who has improved to any degree, we’ll let you start the round of reports.”

P221 – “It’s too bad the standard report we’ve prepared can’t begin to tell the full story of what’s really going on.”

P222 – “How big?”

Rogo commits to 15% improvement to Peach. Again, what was his other choice?

P223 – “But what am I going to do after that?”

It is good that Rogo is thinking through iteration. Think through another round!  However, his jumping at the risk here is reasonable – there might not be another round if he doesn’t win today.

P224 – “No sense killing myself trying to get back to the plant. It occurs to me, in fact, that by the time I get back to the plant it’ll be time to go home.”

P225 – “It was my father’s rule: the business was what fed us, so it came first.”

Eating together is a core act of family – in Boy Scouts, the importance of a troop dining together is stressed.

P226 – “Do you even know why you want the things you do?”

“I think we should do the opposite. We ought to start asking a few more questions.”

[Rogo has done a lot in this relationship – but simply acquiescing to his wife won’t solve the issues they face.  He pushes back when he has to.]

“And what’s all this about a goal? When you’re married, you’re just married. There is no goal.”

[This is a pretty fatalistic view of the world.]

P227 – “All I’m saying is we ought to throw away for the moment all the pre-conceptions we have about our marriage, and just take a look at how we are right now,” I tell her. “Then we ought to figure out what we want to have happen and go in that direction.”

Rogo is searching to add personal goals to his life.

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The Goal – Chapter 26 – Results Beat Vanity Metrics

Rogo debates the Scout hike dependencies with his kids over dinner. At the plant, decisions are made to pursue results rather than follow vanity metrics.

Highlights

“And I’m not about to stand by and let that happen just to maintain a standard that obviously has more impact on middle management politics than it does on the bottom line. I say we go ahead with this. And if efficiencies drop, let them.”

Leaders make decisions.

There is no point in failing, but doing so while following the rules.

Page by Page

P213 – “I’ll give you ten minutes, and then we’ll see which one of you comes up with the best idea to keep everyone together in the line.”

Rogo follows a Dale Carnegie method and “throws down a challenge.”

P214 – “Everybody is marching in step.” Sharon puts forward her drum idea to keep a uniform cadence.

P215 – “The Herbies (the bottlenecks) are going to tell us when to let more inventory into the system—except we’re going to use the aid of computers instead of drums and ropes.”

Rogo applies his children’s guidance to the plant.

P216 – “But maybe we can predict when to release material by some kind of system based on the data we’ve kept on both the bottlenecks.”

Ralph uses data to improve the plant’s flow.

P217 – “You can also attack the inventory problems in front of assembly.” Jonah

“I can crank something out in no time,” said Ralph, “but I’m not going to promise it’ll work.”

Ralph will make the effort – he isn’t sure if the first effort will solve the issue. He may have to iterate – as is called for in The Lean Startup.

P218 – “What happens if efficiencies all over the plant go down?” he asks.

If they still achieve the goal – then who cares? If it fails, the plant can reverse course. This is a poor plan and weak objection.

P219 – “And I’m not about to stand by and let that happen just to maintain a standard that obviously has more impact on middle management politics than it does on the bottom line. I say we go ahead with this. And if efficiencies drop, let them.”

Leaders make decisions.

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