Review of Eliyahu Goldratt’s “Critical Chain”

Project management, a field in which comprehensive study is lacking, can be a difficult undertaking.  The same goes for teaching a class on the subject.  In Goldratt’s Critical Chain, it is the topic of an executive MBA course that the main character, Rick Silver, is persuaded to teach.    He is a professor who desires to be granted tenure, regardless of the fact that he has little to show for published works.  Teaching an executive level MBA course will give him the substance he needs to publish and therefore become deserving of tenure status.  However, due to business school budget cuts at the behest of the university president, he may not be able to achieve tenure.  The university president plans to cut the business school budget because the market has been flooded with MBAs that offer no practical application, a fact that has become widely known and has negatively affected enrollment into the program.  Due to this cutback, Silver must prove himself and the theories he has developed in his project management class to the university president and business leaders.

Having advanced notice of his role in teaching a project management course, Silver prepared for months ahead of time.  However, a bulk of the important knowledge that he and his class gained were due to an open class dialogue and the theory of constraints as developed by his colleague Johnny Fisher.  Silver’s class is centered on the questions concerning why so many projects are finished late or over budget.  His class helps him to conclude that lower level management blame internally because they have detailed knowledge of the project and upper level management blame externally because they have a big picture mentality.  However, the real underlying problem with which fault rests is the prevalence of uncertainty in projects.  People estimate completion dates for projects and project phases based on uncertainty by factoring in safety times.  The higher the uncertainty, the higher the safety estimates tend to be.  Time estimates have safety inserted based upon the following:  a pessimistic experience, the number of levels of management involved, and an effort to protect local safety estimations from global cuts.  This inflation of the amount of time a project should take to complete is damaging enough, even if projects were finished on time.  However, many projects still do not meet schedule goals.  Johnny Fisher’s speech gives Silver some insight into a new way of thinking about how to manage projects more successfully.

In his speech, Fisher outlines the theory of constraints as a new management philosophy using new research methods with robust applications.  He says that in order to manage well one must control cost and protect throughput.  This translates into managing two different worlds, that of the cost world and that of the throughput world.  In order to reconcile these two seemingly contradictory worlds, Fisher explains the underlying conflicting assumptions through the evaporating cloud process.  As it turns out, the false assumption is that the only way to achieve good cost performance is through good local performance everywhere.  However, protecting throughput is controlling cost because unneeded inventory raises operational costs.  One must view different facets of a project like a chain in which different departments are linked and interrelated.  Through this analogy it can be seen that many local improvements do not help the strength of the chain as a whole if the weakest link is not addressed.  Silver had been concerned with the issue of focus in his class.  It had been established that progress reports do not help to keep focus due to their inability to raise flags quickly enough.  They recognized that in order to maintain focus in projects, the critical path had to be taken into consideration.  This issue of focus is inextricably linked to the last of five steps that make the theory of constraints:  identify, exploit, subordinate, elevate, and repeat the process of ongoing improvement, also known as focus.  Johnny then explained through a current reality tree how focus can be gained by exposing underlying assumptions, such as measurements, instead of compromising and optimizing.

Silver finds that projects tend to run over schedule and budget because the focus becomes fixed on specific areas, instead of the project as a whole.  The three mechanisms that were found to have wasted safety time are the student syndrome, multitasking, and dependencies between steps.  This is extremely detrimental to projects because in applying Fisher’s knowledge, Silver finds that time in projects is equal to inventory in manufacturing.  This means that the critical path is the bottleneck or constraint for projects.  In order to improve project performance safety must be removed from each step and buffers must be placed at the end of the project, in areas to protect the critical path from non-critical path areas, as well as be put in place for resources in order to ensure readiness.  He suggests making three changes in approaching projects:  persuade resources to cut lead time estimates, eliminate milestones or completion dates for individual steps, and frequently report estimated completion times.  The critical chain is path and resource dependent.  It removes resource contention within projects but does not address it between projects.  In order to improve an entire organization one must identify the overall bottleneck, such as a department.

In discussing different types of projects Silver distinguishes between those done by vendors and subcontractors and those handled by resources within the organization.  One must consider that projects that are not completed on time cause more damage than spending more money on a more reliable vendor.  Vendors are apparently willing to negotiate price for less lead time.  Vendors who realize that they can shorten lead time while demanding higher prices will make a killing in the price sensitive market.

Needless to say, after developing such an applicable theory relating to project management, Silver was able to publish several articles on the subject.  He was also able to prove to the university president and the community business leaders that his theories could offer a marketable skill to those who enroll within the executive MBA program.