“The Goal: A Process of Ongoing Improvement” by Eliyahu Goldratt and Jeff Cox is an absolute classic book for anyone who is concerned with improving the performance of a manufacturing business or with business improvement in general.
First published in 1984 this book introduced the world to the Theory of Constraints and how much of the focus on improvement is misguided at best and wrong at worst.
It may seem strange to consider that a book about production planning and which has had major effects on the way manufacturing businesses work is really a book on business strategy.
That’s because The Goal is the book that introduced Theory of Constraints thinking and is therefore a logical starting point although the ideas have developed into a general improvement theory that applies just as much to strategy and marketing issues as it does to production.
Sadly, the main author, Eli Goldratt died on June 11, 2011.
The Goal Book Review
I first read The Goal in about 1989 or 1990 when I was finance director of a manufacturing business in the UK West Midlands. Bought on the Saturday and finished on the Sunday, I couldn’t put it down. I took it into work on Monday morning and gave it my operations director who read it that night.
By 7:00 am on the Tuesday morning, we were in my office discussing how The Goal and the theory of constraints could be put to work in our business.
That’s how compelling the book and the ideas in the Theory of Constraints.
The Story Of The Goal
It may sound strange to read “the story of The Goal” but I think this was the first popular management book to be written as a story and that was one element that made it so hard to put down.
Two stories are interlocked in our hero, plant manager Alex Rogo’s life:
1. How he can save his struggling plant from closure because performance was so bad.
2. His crumbling marriage – because he was pouring so much of himself into saving the business, his personal life was suffering.
Both aspects of the story resonate and The Goal hooks it claws in deeper as you read it and recognise that the symptoms the plant is suffering, echo in your own workplace with high costs, backlogs and the frustration that things just don’t get better as fast as you think they should, despite the best efforts of your team.
The Guru Of The Goal
Fortunately Alex Rogo has help in the form of a mysterious wise guru called Jonah who teaches Alex the theory of constraints.
Jonah teaches by asking questions so that Alex and his team have to search for the answers.
The truth is often more powerful that way but fortunately The Goal makes it easy.
Whilst you walk in their steps in the search, you are given the answers.
Bottlenecks And Constraints
The essential idea is that business is a system, and just as the strength of a chain is determined by its weakest link, a system is constrained by one particular operation – the bottleneck.
The logic is that every system must have a bottleneck because otherwise, output would be infinite. [If we think of the business as a system, then the constraint is whatever is stopping it from making an infinite amount of money. You can see why Theory of constraints thinking has been picked up in strategy and marketing since the constraint can lie in the market or in the approach to the market.]
The Goal is set in a manufacturing plant and this makes it easy to envisage the constraint more clearly than in a service based business.
An Example Of Applying The Goal & The Theory of Constraints
Imagine you have four machines in the production line and every product must pass through each machine in sequence.
Machine A – maximum output of 200 per hour
Machine B – maximum output of 225 per hour
Machine C – maximum output 150 per hour
Machine D – maximum output 180 per hour
In this very simple example, it is clear. The output of the production line or system is governed by Machine C which is the bottleneck or constraint.
If machine A and B operate at 200 units per hour, only 150 units will be processed by Machine C so work in progress builds in front of machine C at the rate of 50 units per hour.
The theory of constraints says that the only way performance of the system can be improved is through improvements in the bottleneck machine C.
Improving machine A and increasing output to 250 units per hour by investing in robotics is an illusion. In this case it will just build up work in progress in front of machine B and if that is speeded up to its maximum, more builds up in front of machine C. A lot of work in progress – and my old firm was guilty – is a sign of a business with problems.
Back in the example, the system is constrained by machine C and the money spent on improving machine A is effectively wasted.
Even worse, each hour lost on machine C – through breakdowns or operator issues – is an hour of output lost to the entire system. The other machines can catch up but, output at machine C can never be recovered.
Theory of Constraints
The Goal’s main message is that in the Theory of Constraints, you must focus all your attention on the constraint.
How do you do that?
You need to read The Goal by Eli Goldratt.
In a series of vivid examples, The Goal introduces you to the ideas which will improve the constraint but the first thing is to recognise which is your constraint. Get it wrong and your ongoing improvement efforts are wasted.
The Goal And Its Criticism of Accounting
If you want to fight back against your finance department because their guidance doesn’t make much sense, The Goal can give you the ammunition.
The Goal introduces a new performance basis which recognises that most expenses should be regarded as fixed in the short term including labour.
It is controversial and this is not the place to debate it but the argument is powerful and lead to the creation of a concept called Throughput Accounting.
According to Eliyahu Goldratt and The Goal, the only performance measures that matter are:
1. The throughput – effectively defined as sales less material costs
2. Operating expenses – the other costs
3. Inventory – money tied up in the system
The Goal is to make money and you do that by increasing throughput, decreasing operating expenses and inventory or some combination of all three.
Review Rating For The Goal by Eliyahu Goldratt
No hesitation in giving The Goal five stars as an eye-opening, mind-expanding, must-read book which shows how management education can be built into a powerful story.
If you are involved in performance improvement, go and buy The Goal and keep an open mind as you read it.
If you are not in manufacturing, you have some work to do to imagine how the theory of constraints fits into service businesses, distribution businesses and retail businesses.
But try – unless you have a business which makes money hand over fist, your business has a constraint and your fastest way to improve it, is to focus on that constraint.
Buying The Goal
What Do You Think About The Goal?
If you’ve read The Goal, then please leave a comment and let me know what you think about The Goal.
At the time of writing, Amazon.com shows 341 reviews:
5 star – 217 reviews
4 star – 93
3 star – 13
2 star – 8
1 star – 10
Not everybody thinks The Goal is as important a book as I do, but you can see that the overwhelming majority are very positive.
The Goal Is The Start Of The Journey
The Goal has done wonders for manufacturing businesses and has helped to tie together other improvement techniques like JIT, TQM, lean and six sigma.
The real power comes through the later developing of the Theory Of Constraints Thinking Processes to help identify:
- What to change
- To what to change
- How to change
I use elements of these in my strategic/business planning work.
Paul Simister is a business strategy coach who helps small business owners to profit from differentiating their businesses, by being distinctive in the eyes of their customers and standing out in a crowded marketplace…. in other words, by building a business to be proud of.