‘Critical Chain by Dr. Eliyahu M. Goldratt’ is a fast paced business novel which provides powerful yet simple techniques to solve the toughest and most common problems faced in Project Management. This book provides a new perspective for the reader and enables him to understand how the current conventional methods and progress measuring methods used till now are redundant in today’s world of cut throat competition. Even a delay of a few months in completion of a project can lead to major loss in market share for the company and a series of such delays can make the company bankrupt and cause them to shut down, this causes the upper management to put pressure on the lower levels, which forces them to compromise some of the product specifications. In this book the author has mentioned several techniques using which a company can cut down it’s lead time considerably without incurring any additional cost or any compromise with the original product specifications. These techniques have been intelligently demonstrated using a story setting where real life practical problems. These problems are solved in great detail in the book.
The story revolves around a central character Richard Silver, who is struggling to gain recognition in the academic world and to achieve a tenure in the business school he works in. He has a very interesting way to teaching, by involving his students in his lectures, teaching through open discussions. He encourages his students to raise the problems faced by them at their work place, and uses the concepts of Theory of Constraints (TOC) introduced to him by his college Johnny Fisher, to solve these problems. He teaches them how to remain focused on the few critical areas and how to prevent their attention from being divided among all of the projects’ tasks and resources. He also deals with various special cases that seem non standard at the beginning along with critical problem problem of resource contention among different projects and in the process of solving this problem, he invents a new concept called ‘Critical Chain’, hence the title of the book.
The book starts by describing the problem faced by a company named Genemodem, which sells modems. The company is facing a risk of losing its market share to its competitors if they don’t release a new model every six months or so, but the product development team takes a minimum of two years to develop a new model. To upper management tries to solve this issue in every way they could think, they even hire a consulting firm to do an in-depth analysis. All their efforts fail to produce any considerable results. As a last resort the executive vice-president of the firm Isaac Levy decides to launch a think tank. The think tank consisted of three members Mark Kowalski from engineering, the group leader, Ruth Emerson from
marketing and Fred Romero from finance. These three are given the task to find a way to cut the development time of their products. They are given the freedom to visit other places, to attend conferences or even register for Executive MBA program without any budget restrictions. The think tank then joins the business where Rick teaches the Project Management course. In the beginning of the course Rick explains them how almost every project never finishes in the specified time limit and even if it does finish on time, it is done at the expense of product specification. The exception to this trend as Rick mentions is the U-2 project which finished well ahead of schedule without exceeding budget limits and resources. He also expresses to the class that they all can gain from the experiences of each other as all of them deal with some or the other form of projects which would deepen their understanding of all the concepts involved in the course.
Meanwhile, the president of the university B.J. vonBraun is starting to recognize drop in enrollments in all the business schools across the country. This drop in enrolment is a real concern for her as the business school in her university is the most most important school which brings in a lot of money for the university. She realizes that this drop in enrollment is a result of the fact that students graduating from the business schools are no longer guaranteed a high paying job and everyone is starting to find out. The companies complain that they do not benefit from the knowledge their employees gain in these courses and they have to waste their valuable time in training them. The problems they work on are artificial and they are deterministic. The problems dealt in the real life scenarios are very different, reality contains many thing that are vague, malleable, even debatable. The inability of business schools to provide any real value to the company is causing them to discourage their employees from registering for these Executive MBA programs, students do not acquire problem-solving skills. Companies no longer believe that a person finishing an Executive MBA program has become a much better manager due to it. They don't see the tangible benefit to the company. This causes B.J to take drastic steps such as forcing the dean of the business school to freeze all the tenure positions till a solution to this problem is in sight.
In his following class Rick explains about the uncertainties that exist in every project. These uncertainties are the main cause for most problems and because people working on projects are aware of these uncertainties, they end up adding a lot of safety in their planning in order to finish the tasks on time, most of which is unnecessary and increases the lead time of the project. At the end of the class he gives them an assignment to find out how much safety
people include in different steps of the project. The class finds out in later classes that a lot f safety is added in each step of the project and estimates are given to the project leader, the the project leader adds a certain additional safety before reporting these time estimates to the upper management. The upper management is almost always never pleased with these time estimates and orders at least a 20% reduction in the lead time. All the departments are well aware of this and therefore add an additional safety to protect themselves from this cut. This results in a very large overall safety padded to the project. In-spite of all this safety, the projects still competed on time due to various factors such as ‘Students Syndrome’, ‘Parkinson’s Law’ and cherry picking tasks according to ease of completion. Rick also brings up the issue of late start vs early start in the non critical paths of a projects. An early start would result in consuming resources before they are really necessary, also the project leader may lose focus by taking up too many things at a time. But if a late start is chosen, the path doesn’t have any time slack and any delay in the path will cause a delay in the project. The solution to this issue as suggested by Rick after a discussion in the class is to change the way we measure progress of a project, measurements should induce the parts to do what is good for the system as a whole and should direct managers to the point that needs their attention.
Half way through the book, we are introduced to another important character, Johnny Fisher. Johnny is a chaired professor at the business school where Rick teaches. Johnny gives a presentation at a faculty colloquium about his experience during his one-year sabbatical with UniCo. In his presentation Johnny talks about how UniCo uses TOC to reduce lead time and improves throughput while keeping the cost in check. He talks about the cost world and throughput world and how they are not dependent on each other contrary to popular and well established belief. He explains this using the chain analogy where each each link represents a department in the company and cost is represented by weight of each link. To reduce the total cost of the company i.e. total weight, weight of each link has to be reduced. The summation of weights of each individual link will give you the weight of the chain. It implies that any local improvements automatically translate to overall improvement of the organization. This is how things work in the cost-world and we have managed according to the cost world since the beginning of industrial revolution. In the throughput world it is not just the links that are important; the linkages are just as important. In the chain analogy the overall throughput is represented by the strength of the chain and not the weight. The strength of a chain is determined by the weakest link. And with this he concludes that in order to improve throughput of an organization we need to identify and strengthen the weakest link which the bottleneck. He introduces the five principles of TOC which will enable the
organization to increase its throughput. First step is to identify the constraint of the organization i.e. the bottleneck. Second, to decide how to exploit the constraints. Third subordinate everything else to match the performance o the constraint. Fourth, elevate the constraints. Then we need to go back to first step and repeat. Johnny states that improving local efficiencies does not improve overall throughput of the organization, therefore one must stop living in the cost world and start to implement the throughput world. The fact that so many managers and almost all our systems are based on this assumption that the only way to achieve good cost performance is through good local performance everywhere, is regarded by TOC as the current core problem of our organizations. In the second part of the session, he discusses his experience working with UniCo, where the vice-president Don Pederson acquires a steel manufacturing firm and questions the existing employees about the relevance of using a standard way of measuring progress, Tonsper-hour. He demonstrates how by using tenser-hour as a tool for measuring performance each department tries to improve it’s local efficiency and how this mentality causes so much damage to the organization. He turned this steel company into a gold mine, in just one month, he made them profitable.
Later Rick is given the news by Dean Page that he will not be granted tenure. This leaves Rick very disappointed and irritated and it carries to the meeting later when Jim, Johnny, Charlene and Rick discuss about how the students have been giving them problems in the class because of the course taught by Johnny. They request him to explain them the concepts of TOC so that they better prepared to answer the students’ questions. As Johnny starts to explain them the five steps involved in TOC, he is interrupted by Rick who claims that his methods are not practical and would not prove useful in real life problems where there are several constraints and challenges him to explain it without using any mathematical models. Johnny starts to explain it using the soldier analogy, where each process is represented by a soldier. As the rows of soldiers are moving forward, they consume the job in front of them as they move. The slowest row is considered as the constraint and moves a relatively slower pace than others. Johnny suggest that the first soldier be tied to the slowest soldier. If we tie the first soldier to the bottleneck, then the first row will be forced to walk at the rate of the bottleneck, spreading of the troop is prevented. All the other soldiers, being faster than the bottleneck, will jam pack, some behind the first row, the others behind the bottleneck. So the troop will spread over a distance that will be almost equal to the length of the rope we choose. It will also guarantee that there is a gap before the bottleneck, so if one of the upstream soldiers stops, the bottleneck can still proceed. The inventory, the safety, accumulates there.
After the discussion with Johnny, Rick starts to find the answers to his problems. He explains it to the class. The think tank ask Rick to come to their company to convince the project member to trim their safety he manages to convince the project team that they are accustomed to believing that the only way to protect the whole is through protecting the completion date of each step as as result they pad each step with a lot of safety time. They then find the constraint in their organization which is the recognized as the production department. They decide that they need to insert a feeding buffer wherever the non critical path emerges with the critical path and also pad the project with a project buffer, this ensures safety only provided where it is required. At the end Rick successfully convinces them to implement his methods and this results in considerable reduction the lead time of that project. Later in class he is faced with new problems such as multi tasking and resource contention. Rick introduces a new concept of Critical chain, which deals with resource contention by allotting a limited time the resource to work in a step on different projects. As the critical path keeps on changing, a new path has to be created where the resource is allocated to each path following a schedule. This also solves the problem faced in Genemodem where the systems processing department always had pressure from different project leaders. Now they deal with one project at a time and do not start work on the next before finishing the first.
Rick later also solves the vendor problem where he says that the vendors have to be spoken to in their language and they can work faster if they are paid more. He along with Johnny solve this issue by eliminating the assumption that it is a win-lose situation for the vendor and developer. The vendor can also benefit from early completion of the project as they can be rewarded by the developer and can raise above the completion in the market.
In the end Rick is appreciated by all the presidents of the various companies where his students work and this enables him to get a tenure in his university. He is also asked to develop a new structure for the new executive MBA program which aims to provide a set of skills to its students which will make them useful in their respective companies. We can learn that the methods that have been used from a long time may not necessarily prove useful in today’s competitive world. This book provides a new perspective to deal with the problems of project management.
...(download the rest of the essay above)