Improving Business Performance

Week 8 Learning Resources

The Theory of Constraints

Through these resources, you will explore the subject of the Theory of Constraints. TOC was developed by Eliyahu Goldratt and first presented in his book,  The Goal (originally published in 1984). The objective of TOC is to prevent “constraints,” referred to as bottlenecks, from limiting the throughput (i.e., production rate) of an organization. This is accomplished through managing constraints as opposed to attempting to eliminate them.

· Cox,  J. F. III. (2015, August).  Unlocking the service sectorLinks to an external site. .  Industrial Engineer,  47(8), 30–35.

· Cox,  J. F. III., Robinson, T. M., & Maxwell, W. (2016, February).  Unconstraining a doctor’s officeLinks to an external site..  Industrial Engineer,  48(2), 28–33.

· CorrectionLinks to an external site. . (2016, March).  Industrial Engineer,  48(3), 11. Note: This article simply contains a brief correction to the Unconstraining a Doctor’s Office article.

· Dalton, M. A. (2009).  What’s constraining your innovation?Links to an external site.   Research Technology Management,  52(5), 52–64

· Fox, K. (2012).  Seeing the forest for the trees: Theory of constraints reduces cost of governmentLinks to an external site. .  The Public Manager,  41(3), 10–13.

· Hsu, P.-F., & Sun, M.-H. (2005).  Using the theory of constraints to improve the identification and solution of managerial problemsLinks to an external site. .  International Journal of Management, 22(3), 415–425.

· Monteiro, V. (2018).  TOC in the emergency roomLinks to an external site. .  Industrial and Systems Engineering at Work,  50(7), 38–42.

· Weiss,  E. N. (2004, February 20).  A brief note on the theory of constraints . Darden School Foundation, University of Virginia. https://hbsp.harvard.edu/

Throughput Accounting

Using these resources, you will explore the concept of throughput accounting, which is a method of increasing productivity and generating more income and profit. When people in traditional accounting and finance roles lead the budgeting process, there can be more opportunities for wrong decisions to be made, especially when there is an overemphasis on costs. By applying throughput accounting principles, you can gain a more comprehensive and enlightened perspective on decisions that need to be made within an organization by increasing the focus on throughput.

· Albright, T., Lam, M. (2006).  Managerial accounting and continuous improvement initiatives: A retrospective and frameworkLinks to an external site. .  Journal of Managerial Issues,  18(2), 157–174.

· Corbett, T. (2006).  Three-questions accountingLinks to an external site. .  Strategic Finance,  87(10), 48–55.

· Kadhim, H. K., Najm, K. J., & Kadhim, H. N. (2020).  Using throughput accounting for cost management and performance assessment: Constraint theory approachLinks to an external site. .  TEM Journal,  9(2), 763–769. https://doi.org/10.18421/TEM92-45

· Kirli, M. (2016).  Throughput accounting in strategic cost management: An applicationLinks to an external site. .  Annals of Dunarea de Jos University. Fascicle I: Economics and Applied Informatics,  22(2), 78–87.

Combining the Three Systems: Leaning, Six Sigma, & Theory of Constraints

Through these resources, you will explore the benefits of combining the best of the three main continuous performance disciplines: Lean, Six Sigma, and the Theory of Constraints. This combination is referred to as the velocity approach. Each of these systems has strengths and weaknesses but, when used together, they can efficiently improve business performance.

· Aghili, S. (2011).  Throughput metrics meet Six SigmaLinks to an external site. .  Management Accounting Quarterly,  12(3), 12–17.

· Hudson, J. D. Jr. (2017, October).  CL6 allows three shots at better improvement: Instead of bickering over methodologies, find synergies between theory of constraints, lean and six sigmaLinks to an external site. .  Industrial and Systems Engineering at Work,  49(10), 43–47.

· Ioana, B. R. (2018).  TOC, lean, six sigma are complementary?Links to an external site.   Ovidius University Annals, Economic  Sciences Series,  18(2), 389–394.

· Piraseth, R.M., Kannappan, S. (2013).  The synergy of continuous process improvementLinks to an external site. .  Industrial Engineer,  45(6), 41–45.

Important Documents

· Goldratt, E. & Cox, J. (2014).  The goal: A process of ongoing improvement (4th ed., pp. 1–123). North River Press. Note: This resource will be used for this week’s Discussion.

· Document:  Module 3 Assignment Template (Word document)

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Discussion: The Goal – Part 1

Lakenya Campbell

Walden University

Improving Business Performance

Instructor’s Name

July

The Goal – Part 1

In The Goal, Goldratt challenges traditional manufacturing and management assumptions by emphasizing systems thinking, throughput, and goal alignment. Several passages from Chapters 1–16 illustrate essential ideas relevant to effective business management.

First, Goldratt (1984) states, “The goal of a manufacturing organization is not to balance capacity, but to make money” (p. 43). This passage is compelling as it redefines organizational focus from merely achieving balanced capacity or high utilization to prioritizing profitability and throughput. Managers often concentrate on ensuring every department is fully utilized, but without aligning activities with profitability, these efforts may lead to overproduction, increased inventory, and waste (Goldratt & Cox, 2014). Effective business management requires aligning every operational activity, departmental goal, and investment with the organization’s overarching goal of financial viability. As discussed in this week’s readings on the Theory of Constraints, emphasizing throughput over cost efficiency enables managers to make decisions that genuinely enhance the organization’s financial outcomes (Weiss, 2004).

Second, Goldratt (1984) observes, “A plant in which everyone is working all the time is very inefficient” (p. 74). This passage is particularly relevant as it challenges the misconception that constant busyness equates to productivity. In reality, uninterrupted work without strategic flow management can create bottlenecks and inefficiencies that hinder throughput. The Bearington plant’s challenges illustrate how constant activity leads to excessive work-in-process, blocking critical resources and delaying customer orders (Goldratt & Cox, 2014). For effective business management, it is essential to focus on synchronizing operations around constraints rather than maximizing local efficiencies, which aligns with throughput accounting practices that prioritize system-wide improvements (Corbett, 2006).

Third, Goldratt (1984) asserts, “Measurements of efficiency must be subordinate to the goal” (p. 85). This highlights the importance of aligning all performance metrics with the organization’s true objectives. Managers frequently focus on isolated metrics such as machine utilization or individual productivity without considering their contribution to throughput and profitability (Hudson, 2017). This passage emphasizes that metrics and KPIs should serve the goal rather than become goals themselves, supporting a holistic systems thinking approach essential for effective decision-making and prioritization in complex environments.

Reflection

“If I had only known this back when I was a project manager, I would have focused more on aligning our team's efforts with the company's overall goal, rather than getting caught up in individual productivity metrics. I would have also encouraged more breaks to improve overall efficiency.”

References

Corbett, T. (2006). Three-questions accounting. Strategic Finance, 87(10), 48–55.

Goldratt, E. M. (1984). The goal: A process of ongoing improvement. North River Press.

Goldratt, E. M., & Cox, J. (2014). The goal: A process of ongoing improvement (4th ed.). North River Press.

Hudson, J. D. Jr. (2017, October). CL6 allows three shots at better improvement: Instead of bickering over methodologies, find synergies between theory of constraints, lean and six sigma. Industrial and Systems Engineering at Work, 49(10), 43–47.

Weiss, E. N. (2004, February 20). A brief note on the theory of constraints. Darden School Foundation, University of Virginia. https://hbsp.harvard.edu/

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Improving Business Performance

Week 9 Learning Resources

System Thinking and Social Change

Using these resources, you will explore how applying systems thinking principles can be used to promote positive social change. As you review these resources, consider how you might apply systems thinking to create change. How might these concepts benefit the greater good?

· Hernández, A., Ruano, A. L., Marchal, B., San Sebastián, M., & Flores, W. (2017).  Engaging with complexity to improve the health of indigenous people: A call for the use of systems thinking to tackle health inequityLinks to an external site. .  International Journal for Equity in  Health,  16(1), 26–31. https://doi.org/10.1186/s12939-017-0521-2

· Stroh, D. P. (2014).  Systems thinking for social change: Making an explicit choiceLinks to an external site. .  Reflections,  14(3), 35–42.

· Stroh, D. P., & Zurcher, K. (2012).  A systems approach to increasing the impact of grantmakingLinks to an external site. .  Reflections,  11(3), 31–43.

Ethical Consideration

Through these resources,  you will investigate how the application of systems thinking principles and tools can assist managers in understanding and mitigating ethical dilemmas. As you review these resources, consider some ethical concerns that you may have encountered in your personal and professional life. Can you think of any ways in which systems thinking principles could have done anything to address or alleviate those concerns?

· Bardoel, E. A., & Haslett, T. (2006).  Exploring ethical dilemmas using the “drifting goals” archetypeLinks to an external site. .  Journal of Management Education,  30(1), 134–148. http://dx.doi.org/10.1177/1052562905280836

· Noga, T., Pant, L. W., & Shaw, L. (2011).  Recalibrating ethical dilemmas using the “fixes that fail” archetypeLinks to an external site. .  Journal of Business Ethics Education,  8(1), 115–118.

· Steele, R., & Derven, M. (2015).  Diversity & inclusion and innovation: A virtuous cycleLinks to an external site. .  Industrial and Commercial Training, 47(1), 1–7.

· Werhane, P. H. (2002).  Moral imagination and systems thinkingLinks to an external site. .  Journal of Business Ethics,  38(1/2), 33–42. https://doi.org/10.1023/A:1015737431300

Important Documents and Resources for the Week

Goldratt, E. & Cox, J. (2014).  The goal: A process of ongoing improvement (4th ed., pp. 124–236). North River Press. Note: This resource will be used for this week’s Discussion.

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