Review of Eliyahu Goldratt’s “The Goal”

Management, being an endeavor many times hindered by the prevalence of outdated rules and procedures, can be a difficult field in which to attain success.  In Goldratt’s book, The Goal, the manufacturing business is at the center of a narrative that is concerned with effective management.  The protagonist, Al Rogo, finds himself in a seemingly hopeless situation in which his married life is riddled with problems, thanks to his determination to repair his manufacturing plant that has not been productive since he had taken it over.  But with the help of a physicist, Jonah, who has been developing a theory on manufacturing organizations, Rogo is able to apply several concepts in order to achieve his organization’s goal.

The first step in fixing the problems plaguing Rogo’s plant is to find out what being productive consists of.  Rogo decides that it is the achievement of a goal; therefore, he must also decide what the goal of his organization is and achieve it in order to be productive.  Jonah enlightens Rogo by telling him that all organizations share the same goal.  It becomes obvious that the goal of every organization is to make money.  With this new-found clarity of thought, Rogo begins to appreciate more than the usual goals of efficiency communicated through ineffective business speech.  The ideas of net profit, return on investment and cash flow all apply to the goal of making money, yet they don’t apply perfectly to operations within the actual manufacturing plant.  Jonah once again enlightens Rogo.

Jonah tells Rogo of the plant level measurements of production, which are used to determine the productivity of the plant.  They include throughput, inventory, and operational expense.  Throughput refers to the rate at which the system generates money through sales.  Inventory refers to the money that the system has invested in purchasing things it intends to sell.  Operational expense refers to the money spent in order to turn inventory into throughput.  These measurements allow for control and enable inducement of the parts to do what is good for the accomplishment of the organization’s goals.  Essentially, Rogo wants to raise throughput while decreasing inventory and operational expense, which will increase cash flow.  These measurements must be employed with the understanding of dependent events and statistical fluctuations.  This makes more sense to Rogo after he chaperones a camping trip with his son’s scout troop.  An observation of the dynamics of the hiking order of the scouts and the distance created in between each of them makes clear the idea that dependency limits the opportunities for higher fluctuations.  This discovery allows Rogo to apply a new idea to the way he manages his plant.

Jonah tells Rogo that there are two types of resources in his plant that he must manage correctly in order to be productive.  These resources are called bottle-necks and non-bottle-necks.  A bottle-neck resource has a capacity that is less than or equal to the demand for it.  A non-bottle-neck resource has a capacity greater than the demand for it.  The idea is not to balance capacity with demand but to balance the flow of the product through the plant with demand from the market.  Therefore, in order to manage the production process, bottle-neck resources should be placed at the front of production.  Rogo was able to understand this through the example of the scout hike in which he placed the slowest hiker at the front to regulate the speed of the other hikers which allowed the troop to stay organized.  Managing the flow of the production process depends upon giving priority to the bottle-necks, for the system is only as strong as its weakest link or links in the event that there is more than one bottle-neck, as the theory of constraints demonstrates.  This of course means that other areas of production will not be able to operate at full capacity, or else they will become clogged at the bottle-neck resources, a problem that had led Rogo’s plant to fail to ship orders on time.  The idea of not using resources seems absurd, but as Jonah points out, activating a resource is not the same as utilizing it.  Operating a non-bottle-neck at full capacity creates inventory, but operating them at the pace of bottle-necks allows for smooth flow of production.  Organization and sometimes reducing efficiency raises productivity of the entire operation.

Throughout the book, several over-arching management concepts are used that eventually allow Rogo to enjoy the success of his finally productive manufacturing plant.  First, Rogo says that often times common sense is hidden by common practice.  Just because something has been done a certain way for a long time does not necessarily mean that it is the best way of doing things.  Keeping a discerning eye on operational processes can allow for opportunities of improvement.  Second, as Ralph pointed out, the importance of teamwork is essential in achieving success.  He said that he finally felt needed and that his work had meaning.  Managing a group of individuals is not as effective as motivating a team.  Third, Rogo found that reacting rather than planning was absolutely detrimental to achieving the company’s goal.  After careful planning over how the process of production should be carried out, Rogo’s team no longer had to deal with the stresses of expediting late orders.  Rogo’s marriage barely survived the extra time that he had to spend reacting to problems brought about by a lack of thoughtful planning.  Fourthly, Rogo determined that the management thinking process consists of the following questions: what to change, what to change to, and how to cause the change?  This process of questioning will be answered by an effective manager who has a grasp on essential management techniques and on the environment within which he/she manages.  But the most important lesson learned by Rogo was the development of the DMAIC system.  This process allowed Rogo to identify the definition of his company’s goal, the necessary measurements, the proper analysis of his plant operations, the essential solutions to improve his plant operations, and the methods needed to control the stability of his plant.  A systematic process such as this allowed Rogo to continually improve his company.