24 Apr The Essence of The Goal
Over the course of my career I have purchased and received at least one hundred “business” books. I read most of them and most were boring; too prescriptive and in some cases condescending. A few, like those written by W. Edwards Deming, were worth the pain and out of respect for the author, I read (maybe more than once), listened and ultimately tried to adopt their teachings in my life. However, too many were like textbooks I had to read in college; principles were shared and quizzes were provided at the end of each chapter. Perhaps I am odd but do executives really like reading books that are written in this manner? I don’t think so and perhaps it is one of the reasons executive management rarely change their management styles or methods. After all, those styles and methods enabled their success.
How many of the business books you’ve read over your career have been novels? I have only read one that I recall, titled The Goal by Eli Goldratt1. I read the book in the early 90’s when I was trying to determine how to share the principles of continuous improvement with my peers and fellow employees. At the time, I was a member of a team of leaders who were responsible for the development of a Total Quality Management (TQM)2 program within our company. Finding ways to educate others on the principles of TQM in an easily understandable and applicable manner was paramount to our success.
Everyone learns in different ways, and while some prefer the prescriptive model, I did not. I found that few others did as well, regardless of their level within the company. I lead several formal training sessions in those days, and of course as a trainer the feedback you receive is immediate and obvious. Invariably, those sessions that involved reading principles and then passing a quiz or parroting back the key ideas were embraced with dead stares, glassy eyes, or in most cases, ambivalence. As a trainer, if you know anything about body language you know what that means. Whenever my associates read The Goal I found most of them to be engaged and ready to discuss the principles of the book and the review sessions were generally upbeat and rarely ended on time. Often individuals would engage me after the session to further the discussion and in many cases this would lead to helping them apply the book’s principles as well other TQM principles in their operating environment.
Not only is The Goal a novel, it is an easy read and one that has two plots: one involving a leader’s business life and also his personal life. The authors do an excellent job showing how the principles of ongoing improvement not only apply to our business lives but also our personal lives. There are other business books that achieve that level of integration. Most are psychological/behavioral writings that appeal to one’s inner self and attempt to explain how altruistic principles can be applied in the business environment. Personally, books like this appeal to me. Unfortunately, most executives find them to be too ambiguous, lacking specific measureable tactics which can be implemented in the business environment. Many of these books have excellent concepts which are useful in situations where a culture change is needed in order for a company to achieve the next level of success.
While The Goal is intended to be read by managers, it is easily understood and appeals to those who are in non-managerial positions as well because those individuals are often working within a managerial environment which is not as productive and supportive as it needs to be. Accordingly, the book and its principles can empower employees at the individual contributor level.
Although the novel’s setting is a factory environment, the principles can be applied to any business environment regardless of whether the business is manufacturing or service oriented. Ultimately, the goal is to make money, and it doesn’t matter what business you are in as long as you understand that is the goal and that the way to reach the goal is to provide products and services your customers want in the manner they want it. A simple to understand but often difficult to achieve approach, but why is this? Clearly there can be many reasons but in most instances the paradigms that exist within the business and its culture, often supported by policies and procedures dictated by professionals like accountants, lawyers, regulators, and others; however, in most cases it is just “the way things are done here” that prevent companies from achieving their targeted goal. Failure to recognize the need for change often leads to complacency, where insiders become too comfortable with the environment and past success, only to ultimately experience failure.
The principles apply to non-profit organizations as well. I have been involved with a non-profit performing arts company for over 20 years. Two decades ago the company was struggling to succeed, often running a deficit and as such unable to achieve its vision. However, over the past 20 years the company has made some great strategic decisions and kept focused on its vision. With the help of some benefactors and a solid management team, they have grown, prospered, and ultimately improve the quality of their product. Today, they often experience a surplus, enabling them to reinvest in new strategic initiatives that in turn will help ensure the organization’s continued success. Imagine if our federal and state governments were run like this.
Recently I reconnected with some executives I used to work with and learned they started an analytics firm focused on achieving the goal by modeling key performance indicators that drive cash flow and Economic Value Added (EVA)3. They pull data from the company’s Enterprise Resource Planning (ERP)4 system and analyze the data at the customer, product and geographic level. Doing so enables them to uncover facts about the company’s performance which often leads the executive team to refocus on the customers, products and services that drive the most enterprise value. In some cases, the executive team will change the company’s strategic direction. Providing companies a new lens to view performance like this adds considerable value to the traditional financial statements which tend to be unidimensional and of limited value.
Today, there is an amazing amount of data available for companies to analyze performance. Leveraging the systems, data and modeling tools available enables a 21st century approach to applying the principles of The Goal so companies can be proactive with key business decisions. An executive information system can be made available so they can review key performance indicators on a near-real-time basis. Decisions can be made quickly and results reviewed sooner than ever allowing adjustments to be made in a timely and fact-based manner. They don’t have to wait for the sky to begin falling to react like Alex Rogo did in The Goal.
1 Elijahu Goldratt; The Goal; North River Press, Inc; Second Revised Edition 1992
2 http://managementstudyguide.com/total-quality-management.htm
3 http://www.investopedia.com/university/eva/
4 http://en.wikipedia.org/wiki/Enterprise_resource_planning