Exactly one bottleneck determines your team’s current productivity. Find it and fix it—even a little—and you’ll see immediate improvement.
Something is holding you and your people back. The bottleneck is different for every team, but if you can find and improve it—even a little—you’ll see an immediate boost in productivity. Finding and fixing key bottlenecks is the the easiest way to increase you productivity and meet goals.
Imagine your team’s productivity as cars traveling a stretch of highway. Cars move along the road as fast as conditions allow. If a car accident closes one lane for half a mile, every car passing through must slow down. The throughput of the entire road can be determined by how fast cars can pass the bottleneck. Smaller problems on other stretches of road don’t matter. Improving traffic anywhere else on the highway will not help increase the throughput on the road, because all cars on the highway must pass through the bottleneck. If you fix the bottleneck, you improve the overall efficiency of the road.
Your team is similar. Instead of a road with traffic, you follow a business process (your road) to deliver goods or services (your traffic). Each team member participates in the process, contributing toward your team’s goals. The slowest or least efficient part of your process limits your team’s ability to reach goals. This is especially true when your team is great, because processes (and other factors) dilute your team’s strengths.
Change Processes, Not People
Case Study:
A farm equipment dealership sells 150 units per month, far below their goal of 300. Many salespeople meet their quota for people applying for financing, but fewer than 40% of those applying for financing actually buy equipment. The finance processor is the team’s hardest worker, but they are overwhelmed processing paperwork for people who do not buy. Only the equipment delivery team is exceeding goals, delivering final sales ahead of schedule.
Management has tried increasing advertising, incentivising salespeople, sales training, team accountability, firing and replacing low performers, and a variety of efforts to push the sales team to perform better. As a result, finance applications have increased, further overwhelming the finance processor, but final sales have only increased marginally, far from the goal of 300. Management is considering requiring salespeople pre-qualify potential buyers to reduce the number of applications from people who don’t buy.
In this example, management approached the sales goal as a people problem: Our sales are low, so our sales team isn’t doing a good enough job. Most of their efforts to improve sales focused on the salespeople (training, incentives, firing). Their proposal to pre-qualify buyers assumes another people problem: the salespeople are taking finance applications instead of closing sales.
The key to the dealership’s sales problem is the financing bottleneck. All sales pass through finance processing, so the sales goal is limited by the processor’s ability to process financial paperwork. The more overwhelmed the processor is, the bigger the backlog gets and the longer it takes an applicant to go from start to finish in the financing process. What might be accomplished in a day could take a week. The processor is good, but the process is too slow, which loses sales from interested, qualified buyers.
Removing the Bottleneck.
The dealership moved one person from the sales team to the finance processing team. With the extra manpower, they cleared the backlog reduced the time to approve financing from a week to 24 hours. Sales increased dramatically, because customers were approved before they had time to get approved an another dealership.
The Theory of Constraints is a business philosophy that seeks to make business processes more productive by finding and fixing bottlenecks.
Recent Comments