In my last post I showed you the power of applying the Theory of Constraints to yourself to increase your individual effectiveness. Today, I’m going to show you where to look for the constraint in your company.
You need to figure out how your company really works
Even if you’ve been with your current employer for a number of years, you might not know how your company really works. But if you are going to be an 10x programmer and maximize your effectiveness within your company, you need to learn.
There’s no right or wrong approach to learning how your company works. Choose a few things from the following list and see where they take you:
- ask co-workers from other functional areas how the company works
- take some co-workers for a beer and find out what they do and what their challenges are
- stay late to chat with your boss
- listen closely in meetings. What’s motivating people to work on the things they are working?
- study internal reports and maybe your databases directly (only if you have permission)
Know where to look for the constraint
While it’s true that every business is unique, most small business are susceptible to a common set of problems. Are any of the following problems an issue at your company?
- cash flow, collecting receivables
- failure to specialize, lack of focus
- competition squeezing profits
- conflict among owners or owners and managers
- owner burnout
- owner can’t delegate
- poor decision making (no data driven decisions)
- too slow to respond to changing market conditions
- inefficiency, lack of systemization
- can’t attract and retain skilled employees
Things you might want to learn about your company
Here are some questions you might want to keep in the back of your mind while you are trying to learn about your company:
- how do you make money? do you sell products or services? or both? one product? many related products? many unrelated products? what percentage of your revenue comes from products vs services?
- are some products or services more important than others to the bottom line?
- who are your customers? how many customers do you have? what percentage of your revenue comes from your top 20 customers? how much of your business is repeat business?
- who are your competitors? what do you offer your customers that they don’t and vice versa?
- why do your customers buy from you instead of your competitors?
- how do you find new customers? what do you do for marketing? what do you do for sales?
- how do you retain existing customers? is it easy to get repeat business?
- is your business growing or shrinking?
- does your business appear to be profitable?
- do you think your business will be around in 10 years?
- does top management communicate a coherent plan for the future to their employees? or is everyone just trying to get through the day?
Dig for problems [carefully]
The following questions are sensitive but they can also be revealing. Please use good judgement. You might want to take note of the answers to these questions if they come up in conversation but avoid asking these questions directly if you think they might land you in trouble:
- what do employees complain about?
- what do managers complain about?
- do people get along? who are the toxic people? how are they dealt with?
- are different departments at war? programmers vs marketers? operations vs accounting? others?
- is your business chaotic or organized? is it moving towards order or chaos relative to its current position?
- on the whole, does your company behave ethically? does management tolerate unethical behavior?
- is employee turnover high or low? do people like to work at your company? are people treated fairly?
Find your constraint
Be on the lookout for possible constraints as you explore your company. Remember, the constraint is unlikely to be obvious. But it will probably be the root case of a number of symptoms of dysfunction you observe.
The best way to find your constraint is to construct a ‘current reality tree.’ You won’t find a better way to learn how to build a current realty tree than Dettmer’s Goldratt’s Theory of Constraints (I highly recommended this book).
The next best way to find your constraint is to look at all the ‘problems’ you’ve discovered while exploring your company and search for a root cause of at least 70% of them. A true constraint will be responsible for a great number of the problems you observe in your system (Dettmer says at least 70% of them). If you haven’t gotten to 70% yet, you might need to dig deeper to find the true root cause.
You can do this informally using the “5 whys” problem solving technique. Do this for each of the ‘problems’ you discovered. Eventually your 5 whys analysis should start to converge on a root problem (which may be your constraint) or a couple of very good candidates.
Kinds of constraints
Constraints can be internal or external and physical or policy. If you can classify your constraint in this way, it will help you see it more clearly. Let’s look at some examples.
Internal – physical
Your company can’t produce enough of your newest product to meet market demand because you only have one CNC machine and it is already running 24/7 but you have more than enough capacity to produce, assemble, and ship, all the remaining components of the product. The CNC machine is your constraint.
Internal – policy
Your company can’t produce enough of your newest product to meet market demand. You have enough equipment to meet demand but it is arranged in a non-optimal configuration by the production foreman who refuses to consider another configuration because ‘this is the way it’s done’. The policy of your production foreman is your constraint.
External – physical
Your company has loads of excess capacity for producing televisions. The problem is that the market for televisions is saturated and falling because people are watching TV and movies on computers and phones. Your constraint is a saturated and shrinking market for your product.
External – policy
Your company has loads of excess capacity for producing self-driving cars. The problem is that many jurisdictions do not allow the operation of self driving cars on public roads. Your constraint is regulatory.
Summary of the kinds of constraints
Internal – physical are the easiest to identify and solve because your company has complete control over them.
Internal – policy constraints are usually a little more difficult to solve but they can have a bigger impact on your business.
As you continue your improvement efforts, the constraint will eventually move outside your organization. Eventually, you’ll be able to produce more output then your market can absorb and you’ll have to deal with external – physical constraints.
External – policy constraints are the toughest nut to crack. As Microsoft became monopolistic, it faced increased scrutiny, regulation, and antitrust charges. Alphabet (Google) is starting to face the same regulatory challenges as it gets too big for the comfort of regulators.
The best way to find the constraint in your company is to figure out how it really works and then use a current reality tree to find your constraint. The second best way to find your constraint is the use the 5 whys problem solving technique. At this point, do whichever makes sense for you.
I know this may seem a little daunting but there’s no time limit on finding your constraint. And you don’t have to be perfect either. This exercise is just for you right now so take your time. Pretend that your company is a computer program and you’re just poking around trying to figure out how it works and where the performance problems reside, if that helps put it in familiar terms.
The point is to get you thinking about your company as a system and look for the constraint. I want you to get familiar with parts of your company not related to programming and start to see the bigger picture. If you accept this challenge, I can pretty much guarantee you’ll soon understand your company better than the majority of your co-workers.
In my next post I’m going to tell you everything you need to know about change. Stay tuned.