Project management is everywhere—the term is experiencing a moment. People have come to realize that the discipline of project management offers proven methodologies and tools to get their jobs done more productively and efficiently.
In fact, project management is such a broad topic that it integrates other management ideas and applying them. One such idea is the theory of constraints. While the theory of constraints is typically used in manufacturing, it can be helpful in controlling most any project.
What Is the Theory of Constraints?
Basically, the theory of constraints says that a small number of constraints prevents any management system from achieving more of its goals. There is always at least one constraint, and the theory of constraints uses what is called a focusing process to identify that constraint, and then restructures to address it.
Think of it like the old axiom, “A chain is no stronger than its weakest link.” The theory of constraints works to find that link and lessen its vulnerability. That applies to processes, organizations, individual team members, whatever or whoever is a risk to the successful completion of the project.
The theory of constraints’ key assumption is that an organization can be managed by measuring these three things:
- Throughput: The rate at which the system generates “goal units” (or money) through sales
- Operational Expense: Money spent when generating “goal units”
- Investment: All the money that is invested in the system (inventory, machinery, etc.)
Before any goal is achieved, however, there are conditions that must be met. Usually, these are safety, quality, legal obligations and so forth. For-profit organizations have a goal of making money, but the theory of constraints can be used with nonprofits, whose goals of making money are secondary.
What Is the Focusing Process?
If at least one constraint is limiting the success of a project, then the obvious solution is to identify that constraint. However, even if you remove all the constraints, the project won’t necessarily succeed. There are always other risks and mitigating factors at play. But if one can remove constraints, then the path to success is that much clearer.
The focusing process is the instrument by which constraints can be found and, therefore, dealt with. What it really does is provide a roadmap to handle the constraint once it has been discovered. It is a five-step process.
- Identify the Constraint: Before you can strengthen the weak link in the chain, you must find it.
- Decide How to Exploit It: Make quick improvements with existing resources.
- Subordinate Everything to the Above Decision: Make sure all other activities in the process are aligned with the resolution of the constraint.
- Alleviate the Constraint: If the constraint remains, think about what else can be done to address it, such as adding resources.
- Repeat as Needed: This process is a cycle, in that it begins but doesn’t end—one must always be vigilant about addressing the constraint, wherever it might show up.
These five steps are used to make sure that there are always improvements and those efforts are focused on the project constraints.
What Is a Constraint?
To identify and rectify a constraint, it is crucial to understand what a constraint is. A constraint is anything that stops you from achieving your goal, and a constraint can show itself in various ways. However, the theory of constraints maintains that there are not an endless number of constraints, but at least one and at most only a few.
Internal & External Constraints
Constraints can be internal, such as when the market demands more than you can deliver, or external, such as when you produce more than the market will bear. With the latter, the organization must focus on ways to create more demand for its product or service.
Some examples of internal constraints are equipment, such as the way the equipment is currently being used limits your ability to produce more. People are another internal constraint, which can reveal itself by lack of skills, personnel and behavioral issues. Finally, policy, whether written or unwritten, can prevent you from making more product or expanding services.
Remember, that a constraint is a limiting factor. Therefore, a problem that occurs in a project or organization is not by definition a constraint, even if it occurs with equipment, people or policies. A constraint is something that is preventing you from getting more throughput, even if nothing else is wrong.
Thinking Process in the Theory of Constraints
The theory of constraints is a way to solve problems inherent in your project that are preventing you from achieving more of your goals. Part of the theory of constraints is the methodology called the thinking process, which is made for complex projects with many interdependencies.
The thinking process is a cause-and-effect tool, which helps you to identify the root cause of undesirable effects and remove them without creating new ones. To do this, ask yourself these three questions:
- What needs changing?
- How should it change?
- What action will change it?
There are many tools that can facilitate this process. You can diagram the current state that needs changing with a current reality tree, which traces the problem to its root. An evaporating cloud tree evaluates potential improvements, and a future reality tree helps document what the future state will look like. Finally, a strategy and tactics tree will assist with the implementation plan to achieve that future state by creating a logical structure to organize what you’ve learned and derive solutions.
What is Throughput Accounting?
When accounting in the theory of constraints, you’ll be differing from traditional accounting methods. The theory of constraints looks at accounting as the counting of bad behaviors. Financial concerns are secondary to selling goods or services (throughput).
Remember, throughput accounting is made up of throughput, or rate you make money through sales, operating expense, the money spent to product “goal units,” and investment, the money tied up in what you need to make and sell your product or service.
Throughput accounting has these four measurements:
- Net Profit: throughput minus operating expenses
- Return on Investment: net profit divided by investment
- Productivity: throughput divided by operating expenses
- Investment Turns: throughput divided by investment
Management decisions are guided by how well they can achieve improvements that increase throughput, reduce investment and reduce operating expenses. However, increasing throughput is the most important of the three, as the theory of constraints is less interested in cutting costs than on building sales.
How the Theory of Constraints Works with Lean Manufacturing
Both the theory of constraints and lean manufacturing are methods to improve the effectiveness of your project. They do, however, have different means to their ends.
While the theory of constraints is about identifying and removing constraints that limit project throughput with the primary goal of increasing manufacturing capacity, lean manufacturing is more concerned with removing waste from the process and reducing costs.
Focus on What’s Important
But both share a focus on the customer and can work together. For example, not every constraint is worth addressing, due to limited resources for one, so the theory of constraints can help you prioritize while lean manufacturing offers tools and techniques to achieve improvements.
Lean tools can also help identify the constraint through tools such as value stream mapping, which engages teams in problem solving, and Gemba, which encourages understanding real-world issues. Lean tools can also help exploit, subordinate and evaluate the constraint with a variety of different techniques.
The benefits of hybrid techniques are just another way that project management cannibalizes methodologies and applies them to controlling work for better results. Having more tools in your toolbox means you have more options to address process and the problems that arise during it.
How ProjectManager.com Helps Execute the Theory of Constraints
Projects are made up of many sub-projects and the theory of constraints is just one more you’ll have to manage when leading a project. In a sense, it’s a project with the objective of increasing efficiencies, but it’s structured just as any project would be: plan and execute. ProjectManager.com is award-winning software that organizes tasks, teams and projects to give you greater efficiency when managing a project.
Create Workflows on Kanban
Once you’ve identified the constraint that needs to change and have decided how you’re going to change it, you need a plan of action by which to change it. Set up that task on our kanban board. Create a card that describes the action. You can set the priority, even tag it to a department if applicable to make it easier to find. Add a due date and attach any pertinent files or images.
Track with Dashboards
Managers can keep an eye on progress without getting in the way of their team’s productivity. Real-time dashboards offer a high-level view of the project. As teams update their statuses that data is feed into the software, which automatically calculates the time left on tasks, the costs associated with the work and you can even see if your team is overallocated.
Keep Stakeholders in the Loop with Reporting
Keep stakeholders abreast of what’s going on with one-click reporting that can be filtered to show just what they want to see. It’s easy to share reports as PDF attachments or print them out when presenting to your stakeholders. ProjectManager.com is the only tool you’ll need for everything related to project management.
What can handle all these different methods and still provide managers with an easy-to-use interface? ProjectManager.com—a cloud-based project management software with the tools for any project, no matter how you choose to manage it. From a real-time dashboard to online Gantt charts with a collaborative platform, everything you need to work efficiently is in one place. See how it can help you by taking this free 30-day trial now.