The Goal – Chapter 15 – Herbie and Teamwork

Posted on September 16, 2018 by flybrand1976

[To read The Goal fast, and learn the Theory of Constraints even faster] [Video summary of Chapter 15]

Rogo chaperones the scouts and reflects on the lessons he can apply from hiker speeds to his plant. Read 13 and 15 together. Teamwork isn’t an explicit thread in The Goal – but this chapter shows how Goldratt approaches the topic.

The Goal of the team is to unburden the constraint. If a team doesn’t know the constraint, then finding it is the first task.

Highlight

“If we take some of the load off you, you’ll be able to do a better job at the front of the line.”

This is a team activity. Share the burden of the constraint to speed up the team.

Page by Page

P113 – “Inside a plant, when the departments get behind and work-in-process inventory starts building up, people are shifted around, they’re put on overtime, managers start to crack the whip, product moves out the door, and inventories slowly go down again.”

“I just thought I’d stay back here with you. This way I won’t hold anybody up.”

Herbie is a compassionate constraint. Most constraints are. Most constraints know that they are the constraint! Rather than let the constraint suffer, it should be embraced and encouraged.

P114 – “If this were my plant, it would be as if there were a never-ending supply of work—no idle time.”

Each pace is optimal. Each walker goes along without thinking of the others. There is no sense of a troop or a team. In a plant – there is no sense of a common business.

Rogo and Goldratt take the concept of team and alignment as a given. But here we see what happens when that is ignored – the troop spreads out on their hike. Each plant operation does its best, but doesn’t accomplish a common goal.

P115 – “In fact, whoever is moving the slowest in the troop is the one who will govern throughput.”

P116 – “Up front, you’ve got some kid who wants to set a speed record. and here you are stuck behind Fat Herbie, the slowest kid in the woods.”

That kid, or teammate, up front doesn’t understand the goal – for everyone to finish.

P117 – “Herbie, this thing weighs a ton,” I say. “What have you got in here?”

P118 – “If we take some of the load off you, you’ll be able to do a better job at the front of the line.”

This is a team activity. Share the burden of the constraint to speed up the team.

P119 – He says, “You know, Dad, I was really proud of you today.”

The praise from a son after a scout activity will melt the heart of any father.

The Wonder Pets is a kids tv show where the theme song is a love story to teamwork.

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The Goal – Chapter 14 – A Very Boring Dice Game

Posted on September 15, 2018 by flybrand1976

Still on his scout troop, Rogo creates a very boring dice game. This was one of Goldratt’s teaching methods. It is dull. Instead of reading the chapter, play the game on your own.

Highlight

And the system gets further and further behind schedule.

In finance, this is somewhat akin to a bond yield. There is an optimal yield (the fastest finish time) if all payments are made on time at the assumed rate of return. But if the debt encounters variation, then there are all kinds of other yields – each less than optimal. The calculated yield is the best – the system must look out for discounts (time extensions).

Page by Page

P103 – I mean, obviously, we’d all go out of business if inventory was always increasing, and throughput was always decreasing.

P104 – Every time I roll the dice, I get a random number that is predictable only within a certain range, specifically numbers one to six on each die.

P105 – “How many matches do you think we can move through the line each time we go through the cycle?”

P106 – Anybody who does better than that, who averages more than 3.5 matches, doesn’t have to wash any dishes tonight.

P107 – If both Andy and Ben had rolled five’s, you’d have five matches to pass.

P108 – Graphic!

P109 – Indeed, some of the inventory which had been stuck in the first three bowls had finally moved to Dave.

P110 – If this had been an actual plant, half of our orders—or more—would have been late.

P112 – And the system gets further and further behind schedule.

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The Goal – Chapter 13 – Herbie’s Famous Scout Hike

Posted on September 15, 2018 by flybrand1976

Dig deeper with the full Chapter-by-Chapter Review of The Goal. or watch the Video Summary for Chapter 13. [Watch the 60 second YouTube #shorts summary.]

This is the most famous chapter of the book, where we meet an earnest overweight scout, named Herbie. (As a scout parent and frequent chaperone – the troop narrative is accurate.)

Highlight

What’s happening isn’t an averaging out of the fluctuations in our various speeds, but an accumulation of the fluctuations.

Herbie is the constraint – but his pace can be subject to others if it isn’t the focus of the troop. With focus, his pace is the fastest pace the troop can attain.

Page by Page

P094 – “Our troopmaster couldn’t make it,” says one of the boys.

BSA = Babysitter’s of America.

P095 – But I look back again after a few hundred yards, and the column is stretched out much farther.

P096 – “Herbie,” says the fat kid.

Goldratt would not win any awards for political correctness.

P097 – “HEY! LET’S GO UP THERE! LET’S CLOSE RANKS!” I yell. “DOUBLE TIME! DOUBLE TIME!”

Exhortation creates speed for small bursts – but isn’t sustainable. Good systems be effort.

P098 – “You’re doing great, Dad,” he says.

A son’s admiration for his father’s effort does not come lightly. This may be the best praise Rogo gets the whole book.

P099 – Ron is setting the pace.

P100 – What’s happening isn’t an averaging out of the fluctuations in our various speeds, but an accumulation of the fluctuations.

P101 – And that would have to be our throughput—not the rate at which Ron walks the trail, but the rate at which I do.

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The Goal – Chapter 12 – Singles Bar

Posted on September 14, 2018 by flybrand1976

Want more? “How to read the goal fast“, or “Video Summary of Goldratt’s The Goal – Chapter 12.”

Like Chapter 7, this is a bridge to transition our narrator, Rogo, to another setting.

P090 – “Good-bye, you bastard!”  Someone else from Unicorp found this message when their spouse left them.  That is sad.

P091 – “Ever since you got into management, your career has come first and everyone else takes whatever is left.”  Julie Rogo to her husband, our narrator, Alex.

“Even when you’re home, you’re at the office. Sometimes I’ve seen the kids tell you something two or three times before you hear them.”

Rogo has conflicting goals:

  • Be a good spouse.
  • Save his plant.
  • His time is the constraint.

P092 – “I had no idea singles bars could be so depressing.” Julie Rogo goes for the gut, explaining where she was out to with her friend.

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The Goal – Chapter 11 – Dependent Events & Statistical Fluctuations

Posted on September 13, 2018 by flybrand1976

Dig deeper with the full Chapter-by-Chapter Review of The Goal.  Watch a one minute summary of Chapter 11, or watch a longer version. 

Chapter 11 starts with a rushed packing at home and a speedy trip to visit with Jonah at a NY Hotel.  In my first reading of The Goal, this was my eye opening chapter, because it highlights two concepts I hadn’t previously fully understood:

  • Dependent events.
  • Statistical fluctuation.

Highlight

“The big deal occurs when dependent events are in combination with another phenomenon called ‘statistical fluctuations,’ ” he says.

For every process, mapping out dependent events is vital to understanding what possible scenarios will play out.  There is an optimal yield – if everything goes perfect.  There is a bad yield – if everything goes wrong.  Most processes benefit from knowing what the optimal yield might be if things are perfect.  Understanding the sequence of events helps people at each step understand their role in supporting the organization’s goal.

Page by Page

P080 – “I’ve got a lot of problems to solve.”  Lots of problems typically require a team, Rogo is functioning as an individual, not as a leader.

P081 – “Well, thanks, but I’m afraid I need more than a goal and some measurements to save my plant.”

P082 – “Just pay me the value of what you learn from me.”  Jonah here shows the value of incentive alignment.

“Three months is more than enough time to show improvement . . . if you are diligent, that is. And if you aren’t, then nothing I say could save you anyway.”  Crossing over business books – Jonah is highlighting Getting to Yes‘s use of a BATNA – Best Alternative To a Negotiated Agreement.

P083 – “We absolutely have to keep them productive.”  What is the point of keeping the robots productive if it is costing you the plant?  The robot decision pre-dates Alex, that cost is sunk.  Don’t set yourself on fire to keep the other person warm.

“If your efficiencies are so good, then why is your plant in trouble?”

This common sense question that highlights conflicting realities often helps a lot in clarifying what is going on.  “If X is true, then just do Y!”  This rhetorical method often helps highlight the need for change.

P084 – “Most of the time, your struggle for high efficiencies is taking you in the opposite direction of your goal.”  The goal of high efficiency conflicts with the goal of profit maximization.

P085 – “But I am suggesting that you question how you are managing the capacity of your plant.”

P086 – “Why do you think it is that nobody after all this time and effort has ever succeeded in running a balanced plant?”

Some things are impossible.  It is better to accept reality than it is to target something that cannot happen.

P087 – “The big deal occurs when dependent events are in combination with another phenomenon called ‘statistical fluctuations,’ ” he says. “Do you know what those are?”

Dependent events = sequence matters.

P088 – “These types of information vary from one instance to the next. They are subject to statistical fluctuations.”

Major concepts:

  • Dependent events
  • Statistical fluctuations

P089 – “You have to gain the understanding for yourself in order to make the rules work,” he says.

Sixty Second Summary of Chapter 11

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The Goal – Chapter 10 – Throughput Accounting 101

Posted on September 12, 2018 by flybrand1976

[Fastest Summary of The Goal][Video Summary of Chapter 10]

Rogo is back in his plant working with his team on the concepts he has talked through with Jonah.  They are simplifying their financial reporting and learning how to focus their resources.

Highlights

“You’re still accounting for it. It’s just that his way is simpler, and you don’t have to play as many games.”

Every time Goldratt writes ‘games’ – readers of The Lean Startup should see ‘vanity metrics’.

“…But if the knowledge pertains to a product which UniCo itself will build, it’s like a machine—an investment to make money which will depreciate in value as time goes on. And, again, the investment that can be sold is inventory; the depreciation is operational expense.”

Goldratt’s detour on pages 75-76 into accounting for intangible goods with a focus on knowledge is unusually thorough. Anything that is invested into, that can be converted into revenue in the future is thereafter inventory.  Education and training often creates inventory – provided you retain the personnel.  For technology and manufacturing entities, the knowledge of trained application engineers is required to unlock sales.  It is part of what Geoffrey Moore would call ‘The Whole Product’ and which is required by the customer to purchase.

“The problem is that everybody—including me until now—has thought these robots have been a big productivity improvement.”

Rogo can’t do anything about the bad decisions that got him here today.  This cost is sunk.  However, he can start making good decisions today.  That will make the difference.  In the complex surroundings of modern production – there are a bewildering array of past bad decisions that could chew up all of your time.  Don’t touch them.  Instead, when new decisions arise – make them as robust and future proof as possible.

Page by Page

P073 – “We’ve got nothing to do with sales; that’s marketing.”

“One measurement for the incoming money, one for the money still stuck inside, inside, and one for the money going out.”

P074 – “All employee time—whether it’s direct or indirect, idle time or operating time, or whatever—is operational expense, according to Jonah.”

“You’re still accounting for it. It’s just that his way is simpler, and you don’t have to play as many games.”

Every time Goldratt writes ‘games’ – readers of The Lean Startup should see ‘vanity metrics’

“How can you account for everything in the whole damn system with three lousy measurements?” Bob Donovan.  [I can feel myself in a meeting saying, “Well, Bob – how many metrics do you need?  Why is 3 a ridiculous number?  Really – it all comes down to profitability…”]

P075 – “Any money we’ve lost is operational expense; any investment that we can sell is inventory.”

Money for knowledge has us stumped for a while. Then we decide it depends, quite simply, upon what the knowledge is used for. If it’s knowledge, say, which gives us a new manufacturing process, something that helps turn inventory into throughput, then the knowledge is operational expense. If we intend to sell the knowledge, as in the case of a patent…

P076 – “…or a technology license, then it’s inventory. But if the knowledge pertains to a product which UniCo itself will build, it’s like a machine—an investment to make money which will depreciate in value as time goes on. And, again, the investment that can be sold is inventory; the depreciation is operational expense.”

Anything that is invested into, that can be converted into revenue in the future is thereafter inventory.  Education and training often creates inventory – provided you retain the personnel.  For technology and manufacturing entities, the knowledge of trained application engineers is required to unlock sales.  It is part of what Geoffrey Moore would call ‘The Whole Product’ and which is required by the customer to purchase.

“He’s operational expense,” says Lou. Granny’s chauffeur.

P077 – “The problem is that everybody—including me until now—has thought these robots have been a big productivity improvement.”

Rogo can’t do anything about the bad decisions that got him here today.  This cost is sunk.  However, he can start making good decisions today.  That will make the difference.  In the complex surroundings of modern production – there are a bewildering array of past bad decisions that could chew up all of your time.  Don’t touch them.  Instead, when new decisions arise – make them as robust and future proof as possible.

P078 – He wanted to talk to you before he left London today, but I’m afraid you’ve missed him.”

Rogo was too wrapped up in discussion (which was needed) and missed Jonah’s call.  Jonah was his constraint, and he missed it.  Although, maybe educating his team was the constraint.  When things are bad it is often because the constraint has spread.  In Rogo’s case, the constraint is knowledge and systems to make good decisions.  Even if Rogo had a framework, he would have to spread it beyond himself to help get his plant on track.

P079 – “He wouldn’t say whether it was important or not.” Fran on Jonah’s call.

How would Jonah know if the call was important or not?  It must not be important to Rogo if he didn’t make time for it!

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The Goal – Chapter 09 – Robots

Posted on September 11, 2018 by flybrand1976

[The most effective review of Goldratt’s The Goal] [Video Review of Chapter 9]

Chapter 9 returns us to the factory as Rogo tries to uncover what is going on in his plant.

Highlights

“Tell him absolutely not,” I say.

  • Late is better than wrong.
  • Late can be forgiven – wrong is never forgotten.
  • Do not make a situation worse.
  • Do not ship without testing.

“I need to know if the robots had any impact on our sales.”

  • Quick fixes work on quick problems – commit to the long fix.
  • Rogo should have known this ahead of time, but he didn’t.  Now he needs to go back and do the right work.
  • “There are two ways to do things – the right way, and again.” US Navy Seals

Page by Page

P063 – “Tell him absolutely not,” I say.

Ship without testing?  A manufacturer is only as good as what it knows that it ships.  If a customer requires a certificate of analysis (“COA”) or other type validation – then that is just as much a part of the product as any other physical aspect.

P064 – I hang up and sit there on the steps muttering, “So . . . he likes the color.”

P065 – “But, Mom, he was run over by a bus.”  We are told more about the death of Rogo’s father – is this Goldratt humor?

P066 – “I was the one who thought he didn’t understand the realities of manufacturing.” Alex is realizing that he was looking down on Rogo.  If someone tells you something that causes cognitive dissonance, try your best to believe them.  If you are right – it costs you nothing, but if you held a fundamental belief that was wrong, then this is a priceless opportunity to learn something new.

P067 – “Increase throughput while simultaneously reducing both inventory and operating expense.” Back at the goal!

P068 – “I need to know if the robots had any impact on our sales.”  This should have been done *before* the robots were ordered. Better late than never.  If you find yourself in a situation that is riddled with mistakes – it can be very tempting to look for a quick fix.  Bad situations take time to develop – often the long fix is required.

P069 – “Well, I can tell you without looking that inventories went up on those parts,” Stacey says.

The robots increased local throughput.  They shortened a step that was not a constraint.  To keep the robots busy and satisfy a vanity metric, they were fed more feedstock.  Then more inventory was created.  What a waste!

P070 – I had to release more materials to the floor in all the areas feeding the robots.

The robots became a goal within themselves – their demand for feedstock and good vanity metrics consumed resources throughout the business.

P071 – “Everybody tells me we’ll use them eventually,” she says.

Investing in the future with changes today is often a good thing for a business, but there i a point that bad things today never become good things tomorrow.

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The Goal – Chapter 08 – "Throughput, Inventory, Operational expense"

Posted on September 10, 2018 by flybrand1976

[The smartest summary of Goldratt’s The Goal][Video guide to Chapter 8]

Our narrator disappoints his wife, ransacks his home and tracks down a mentor.

Highlight

“And the measurements I use inside the plant . . . well, I’m not absolutely sure, but I don’t think they’re really telling the whole story…”

Page by Page

P055 – “Look, don’t give me any grief, Julie; this is important.”  Not a good thing to the person who should be most important in your life. Privileging one thing as ‘important’ implies that everything else is not.

P056 – “Your old address book . . .”  Our narrator is quizzing his mother on the location of things in his childhood bedroom.

P057 – “Mom, I need to use your phone.”  With urgency, Alex prioritizes finding a solution to his problem.  Finding Jonah will help him achieve his corporate goal – but perhaps at the cost of his personal goals.

P058 – “The goal of a manufacturing organization is to make money,” I say to him. “And everything else we do is a means to achieve the goal.”  BINGO.

P059 – “”And the measurements I use inside the plant . . . well, I’m not absolutely sure, but I don’t think they’re really telling the whole story,” I say.”  The writer is surrounded by word salad, gobbledy-gook and vanity metrics when he tries to analyze his plant.  Bureaucracy has surrounded itself with silly words.

P060 – “Their names are throughput, inventory and operational expense.”  These are the terms that matter.

“Throughput,” he says, “is the rate at which the system generates money through sales.”  The closest accounting concept is ‘cash conversion cycle’ – this metric does wonders in helping a company understand the rate at which a customer request is turned into profit.

P061 – “Everything you manage in your plant is covered by those measurements,” he says.

“We are not concerned with local optimums.”

Creating a profit center on one part of the business, while losses at another – makes no sense to shareholders.  A business is a portfolio of profits produced from a portfolio of activity – grow the profitable portfolio.

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The Goal – Chapter 07 – A Short, Worthless Chapter

Posted on September 9, 2018 by flybrand1976

[The MBA’s best guide to Goldratt’s The Goal][Video Guide to Chapter 7]

There are a few short, practically throw away chapters in The Goal that help us transition the narrator or pull in emotional cues.  This is such a chapter.

P053 – “Why should I be different?”  The narrator talks about committing to his current job.  Without commitment, it is hard to do the daily work needed to make real change.

P054 – “More of the same is not going to do any good.”  If everything else has failed, changing tactics provides a shot at success.

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The Goal – Chapter 06 – Improving Metrics Create Visibility

Posted on September 8, 2018 by flybrand1976

[Click for a chapter-by-chapter summary of the whole book.] [Video summary of Chapter 6.]

Chapter 6 takes us back to the plant, where our narrator meets with his controller to re-evaluate financial numbers.  Then he returns late to home where he misses his daughter and finds a disappointed wife.  The chapter closes back at the plant.

Rogo knows his plant isn’t healthy – but his numbers don’t tell him that.  If the numbers don’t help, then the numbers are part of the constraint and deserve focus.  Poor financials and reporting – just like the Vanity Metrics of Ries in The Lean Startup – are a constraint in creating real improvement.  Call out the constraint and address it.

Operations Highlight

This chapter has three that are very compelling:

  1. “How can I possibly control what goes on?”

  2. “Producing products is just a means to achieve the goal.”

  3. “The first thing I’m trying to do is get a clear picture of what we have to do to stay in business,” I say.

It requires a great deal of energy to fully control a situation – leaders should create situations where teams can be trusted to execute. If a company can maintain profits without production, it should do so.  Before acting know what you want to accomplish.

Writing Highlight

“She waited by the front window for you all evening until I made her go to bed.”

Plenty of readers of Goldratt deride the family component as a side story – but every time I’ve re-read the book, these are the parts that grow in resonance.

Page by Page

P042 – “You use your people, or lose ’em—you got it?””  Rogo is pushing his people to ‘look busy’ – but activity away from the constraint is not productive.  Often times, such ‘look busy’ activity creates a feedback loop that is tough to get out of – especially if it involves customers.

P043 – “How can I possibly control what goes on?”  Rogo hits on a fundamental truth – it is very hard to force someone to do something.  Instead, we must educate and coach.  Force is rarely effective in creating an outcome.

P044 – “Is there a simplified way to know if we’re making money?”  Keep the business simple. I once had a customer tell me that I was fortunate that my business was simple – they didn’t understand that simplicity had been hard won with difficult decisions and discipline.  Simplicity is earned, but is highly valuable.

P045 – “Producing products is just a means to achieve the goal.”  If a business can generate the same profits without manufacturing – shouldn’t it do so?  This question is at the heart of many outsourcing / in-sourcing initiatives globally.

P046 – “Bad cash flow is what kills most of the businesses that go under.”  Businesses fail when high growth products change the flow of cash and they aren’t prepared for the change.

P047 – ““The first thing I’m trying to do is get a clear picture of what we have to do to stay in business,” I say.”  If you don’t know what to do, spend some time figuring out what the right thing to do is.  In military terms, this is the OODA loop – Observe, Orient, Decide, Act.

Frustration is energy without focus.  Prevent future frustration by focusing your energy now by deciding your strategy.

P048 – “On the paper, I write down the three measurements which Lou and I agreed are central to knowing if the company is making money: net profit, ROI and cash flow.”  Simple, basic financial measures paint a compelling picture when applied consistently over time.

P049 – “To make money by increasing net profit, while simultaneously increasing return on investment, and simultaneously increasing cash flow.”  The Goal!

P050 – “She waited by the front window for you all evening until I made her go to bed.”  But here, Rogo has uncovered the goal for his plant at the cost of time with his family.

P051 – “It’s just that those concerns are not part of his world.”  As with the observation of P043 – Rogo can’t control what his people do, but his people can win if he educates them on what matters to the business.  An educated and motivated team is a powerful tool in growing a business.

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