The Goal by Eliyahu Goldratt and Jeff Cox
"The Goal: A Process of Ongoing Improvement" is an absolute classic book for anyone who is concerned with improving the performance of a manufacturing business or with process 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.
I read The Goal first in about 1989 when I was finance director of a manufacturing business. Bought on the Saturday and finished on the Sunday I couldn't put it down. I took it into work 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.
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:
- How he can save his struggling plant from closure because performance was so bad.
- His crumbling marriage because he was pouring sop 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 they 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.
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.
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. 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 Criticism of Accounting
If you want to fight back against your finance department because the 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 Throughput Accounting.
According to Eliyahu Goldratt and The Goal, the only performance measures that matter are:
- The throughput - effectively defined as sales less material costs
- Operating expenses - the other costs
- 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 a five stars business book review
It is 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
You can buy The Goal from Amazon.com and Amazon.co.uk (affiliate links)
What Do You Think About The Goal?
Leave a comment and let me know what you think about The Goal. Just watch out for the sneaky captcha that appears after you have submitted your comment.
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.