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The Goal: A Process of Ongoing Improvement Essay Sample

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The Goal: A Process of Ongoing Improvement Essay Sample

The Goal: A Process of Ongoing Improvement was published in 1984 and it has shifted over a million copies in sales since then, underscoring its status as a premier business publication. Few can argue with the fact The Goal: A Process of Ongoing Improvement is one of the most influential books of the 20th Century.

The author Eliyahu Goldratt is an Israeli business consultant but was originally a scientist and he saw that it was possible to apply scientific methods to solve problems bedeviling business organizations. And this is exactly what he attempts to show us in the The Goal.

Goldratt successfully drives this point home by weaving his business ideas in a fictional account The Goal. The Goal is thus a work of art representing reality, business reality to be precise.

Eliyahu Goldratt in his ingenuity might have foreseen the challenges inherent in sitting down and scripting a wholly business book in a world that is chock-full with stack after stack of business textbooks and therefore settled on the idea of presenting in a novel. It looks like his plan worked.

Moving on straight to the book we met Alex Rogo who is the main character. Alex is the division manager of a UniWare plant in Bearington. It is apparent that Alex’s division is ailing and is unable to produce efficiently. Not long thereafter Alex is informed by the plant vice president that if it the plant does not deliver goods, literally, within three months, then it will be faced with an imminent closure. This is the sort of thing that is not in the cards for the thirty-eight-year-old Alex who sets about discovering ways to save the plant he heads from being shutdown.

It is in this quest that Alex turns to a  physics professor turned business consultant, a man named Jonah for help. Notice Jonah’s job description resemblance to the author’s.

Jonah proves Godsend because as soon as Alex starts picking his brain the turnaround in his plant starts taking effect and it starts on slow but sure course back to productivity.

Jonah starts by pointing out the only home truth in the business prompting Alex to do homework. Alex starts by asking himself what is the goal of his business, or all the businesses for that matter? Is not to make money? Indeed it is. So the “goal” is to make money. This implies that he should start paying close attention to things that bring him ever closer to this goal. Anything else should be dropped like hot coal. Having found the goal Alex seeks Jonah again and he is presented with three terms that he should watch ever carefully if he wants his plant to successfully embark back on the path of profitability.

The three terms are throughput, inventory and operational costs. Giving Alex the terms was not enough and so he seeks more explanation. He is answered thus: throughput is the rate at which the system generates money through sales; inventory is all the money that system has invested in purchasing things which it intends to sells, and operational expense is all the money the system spends in order to turn inventory into throughput (Goldratt and Cox, 1992, pp. 60, 61). Or put in another way, throughput is that money which comes into the business, inventory is the money that is in the business already, and operational expenses is the money the business spends to see to it that throughput does indeed come in.

Alex is presented with yet another concept and this is one to do with dependent events and statistical fluctuations. Dependent events are processes that must first take place before other ones can begin, whereas Statistical fluctuations occur when one is unable to precisely predict events or quantities (Goldratt & Cox, 1992).

Alex is able to understand better the relationship between these dependent values and stastical fluctuations over one weekend when he takes out his boys for a hike. While hiking, Alex lets the slowest kid lead the way and withdraws much of the load that is causing his backpack to be heavy. He realizes after he has done this that the kid’s productivity was increased and consequently the team’s throughput was also increased.

By engaging in a further experiment, namely, the dice or match bowl experiment he is also able to determine that in the manufacturing business a balanced plant is not the answer. A balanced plant as Jonah puts it in the book is: “is a plant where the capacity of each and every resource is balanced exactly with demand from the market.” This balanced plant, Jonah hastens to add, is sure to lead any plant to bankruptcy.

In the same breadth Jonah introduces Alex to the idea of bottlenecks and non-bottlenecks. Bottlenecks being any resource whose capacity is equal to or less than the demand placed on it and non-bottlenecks being resources capacity is greater than the demand it is expected of. Jonah points out to Alex that the right thing to do is to balance the flow of product in the plant instead of balancing capacity with demand.

As Alex makes this discovery the reader is also made to understand that production is a process and one that cannot and should not be interfered with as processes usually rely on earlier ones to be complete.

The beauty of Goldratt’s book is that much as Jonah has offered to assist Alex with his problems and the fact the he seems to posses all the possible answers to his questions he does not spoon feed Alex. Like a Sensei he lets Alex’s himself suggest solutions to the problems he presents to him. Most of the times he leads off with a question, in a true Socratic way. Well, it worked for Socrates in ancient Greece and there is no reason it cannot work in today’s fast-paced corporate world.  Which brings us to the question, what is in it in The Goal for us and so for those in the financial analysis field. Plenty, no doubt.

But before we jump into some of the possible applications it is important point out that in 1990 Goldratt wrote another book The Theory of the Constraints as a follow up to The Goal in which he further explains the concepts he had put forward in The Goal. Goldratt has says that the purpose of  The Theory of Constraints was to address two critical questions which are: “What are the thinking processes that enable people to invent simple solutions to seemingly complicated situations?” and “How can we use the psychological aspects of individuals and organizations to implement those solutions.” ( MAAW, par.1).  This other book is certainly recommended reading for anyone who has read The Goal and indeed those who have not.

Analysts have stated that Goldratt’s theories can be applied to many different business organizations as the constraints encountered are not necessarily physical (unt.edu, par 14) This is a loaded statement and one that those working in the finance can implement. As it has been shown it all starts with the way we think. We need a more proactive approach to problem solving. In The Goal, the idea is not to deal with the existing problem but to stop it from happening at all. This means letting the existing problem die a naturally death, so to speak, and working towards halting its recurrence. This method of dealing with problems is called the Evaporating Method.

In a nutshell this is how anyone can implement the key issues in The Goal: firstly, identify the constraint using the effect-cause method hat needs to be change. Secondly find if there are ways you can use the constraints to your best advantage through the evaporating cloud method, use it. Thirdly deal with resistance by using the Socratic Method to provoke people to be inventors of solutions. If this works out for you, take a system a notch higher, if it does not start from step one.

References:

Goldratt, Eliyahu. The Goal: An Ongoing Process of Improvement (3rd Ed.). North River Press. July 2004

Management and Accounting Web.2008. What is this Thing Called the Theory of Constraints and How it should be Implemented. Retrieved June 27 2008 from:  http://maaw.info/ArticleSummaries/ArtSumGoldratt90WhatTOC.htm#Effect-cause-effect method

Winter, Christian. 2008. According to the Goal: How Eliyahu Goldratt Helps Organizations Examine Their Processes to Achieve Maximum Results. Retrieved June 27 2008 from: http://64.233.167.104/search?q=cache:_9CCRxer00QJ:www.unt.edu/honors/eaglefeather/2005_Issue/2005_PDFs/Winter.pdf+%60The+Goal%60,+by+Goldratt+and+Cox&hl=en&ct=clnk&cd=5&gl=ke

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