Understanding the Theory of Constraints

Have you ever led or contributed to a project team, only to end up bottlenecked and unable to meet deadlines or stay within the project budget? 

It’s frustrating, without a doubt — and you want to fix it. But how? How can you figure out what part of your project process needs to be patched up? And how can you use that information to improve your other projects moving forward? 

That’s where the theory of constraints comes into play.  

What is the theory of constraints?

The theory of constraints is a method for identifying what’s holding your project back and improving it, so it’s no longer a limiting factor. 

The theory of constraints (TOC) is a management philosophy developed by Eliyahu M. Goldratt in his 1984 publication, "The Goal: A Process of Ongoing Improvement."

Simply put, Goldratt suggested that organizations can achieve their goals by identifying and leveraging a system’s constraints. A constraint is something that limits your performance, and this theory assumes that there is always at least one constraint, if not more.

Rather than looking at individual components and processes, the idea is that utilizing the constraint is more effective. When you zone in on exactly what’s holding you back and improve upon that one piece, it improves profitability and ultimately allows an organization to reach its goals.

Keep in mind that organizations are systems of connected departments and individuals with multiple dependencies. The actions of departments may create ripple effects for other groups. Rather than addressing one-off or short-term conflicts amongst different teams, the theory of constraints requires that you step back, identify a single leverage point, and fix that to improve the entire system. 

How? Well, the theory of constraints is split into five key steps: 

  1. Identify the constraint
  2. Exploit the constraint
  3. Subordinate everything else to the constraint
  4. Elevate the constraint
  5. Avoid inertia and repeat the process

Don’t worry — we’ll dig into each of those in more detail a little later. 

But for now, let’s clear up this somewhat dense and academic theory with a super simple theory of constraints example: Imagine your team wants to send postcards to all of your clients, vendors, and contacts to celebrate your business’ anniversary. 

You’ve designed and printed the postcards and created your mailing list. You wanted to get them all out the door by Friday, but now Friday is here, and you haven’t mailed a single one. When you take a step back, you identify where the bottleneck is: You only have one postage meter, and you need to run the postcards through it one at a time. 

Using the theory of constraints, you know you need to change something about that specific piece of the process to improve the entire system. 

What is the goal of the theory of constraints?

As you familiarize yourself with the theory of constraints, there’s no denying that there’s a lot of jargon and academic terms that can make you feel overwhelmed.

But to keep this high-level, here’s what you need to know about the primary theory of constraints goal: to eliminate barriers that limit your team or company’s throughput. 

Wait ... what’s throughput? It’s the rate at which your team is producing. In the most traditional sense, it represents the rate at which your business is generating money — and that’s why you’ll often hear the term throughput accounting mentioned in the same breath.

For the sake of simplicity, let’s stick with our postcard example. Your throughput would be the number of postcards you’re getting mailed — which, right now, is zero. 

You’d use the theory of constraints to identify what’s holding you back from better throughput, so you can knock down that barrier and get more postcards stamped and sent off to your contacts. 

What are constraints in project management?

You’ll likely hear the theory of constraints talked about most frequently in the context of manufacturing. However, it can be applied to project management as well. 

All projects have risks and limitations that can hinder your ability to deliver a top-notch project. Maybe you don’t have the right tools or enough team members. Those are all specific constraints. 

In project management, there’s what’s known as a triangle of constraints. You might hear this referred to as a number of different names, including “iron triangle,” “project triangle,” and “triple constraint triangle.” 

All of them represent the same thing: the triple constraints of project management. These constraints include: 

  • Time constraints: Time constraints refer to the project schedule, including delivery dates for key milestones and the final deliverable.
  • Scope constraints: These may arise if scope creep rears its ugly head and the predefined scope is adjusted midway throughout the project.
  • Cost constraints: These refer to fixed and variable costs within the project budget, including fees for resources, materials, labor, and other necessary materials. 

In the case of our delayed postcards, you and your team are facing a time constraint — you don’t have enough time to get the cards mailed by your original deadline.  

What are the 5 focusing steps in the theory of constraints?

As we mentioned earlier, there are five focusing steps in the theory of constraints. These are steps that you’ll walk through sequentially to identify your bottleneck and fix it. 

Sticking with our simple postcard scenario, let’s walk through each of these focusing steps — with plenty of theory of constraints examples included. 

1. Identify the constraint

To achieve your goal, you must alleviate the current bottleneck. But you can’t lessen the bottleneck until you know exactly what it is. 

In some cases, pinpointing your bottleneck might be easy. In other cases, it might be less obvious. One of the easiest places to start is looking for the step of your process that takes the longest amount of time — as that could be a place where things are getting stuck.

It’s also important to keep in mind that, technically speaking, a constraint is something that’s mostly out of your control. For example, your postage meter is designed only to stamp a single postcard at a time. There isn’t anything obvious you can do to change that. 

EXAMPLE: Putting postage on the postcards. 

2. Exploit the constraint

Now that you know what your constraint is, it’s time to exploit it. It sounds a little harsh, but this step is about making sure that you’re using the constraint to its full capacity right now. 

Pull your constraint apart and see if there are any obvious ways that you could make it better. 

EXAMPLE: Are you sure that your postage meter can only print one stamp at a time? Or are you missing a feature that could boost capacity? 

3. Subordinate everything else to the constraint 

The previous step was about understanding the ins and outs of the constraint itself, and this step is about understanding everything around that constraint. 

You want to make sure that everything that feeds that constraint is also running at full capacity too. Your constraint should have exactly the amount of resources it needs from non-constraints to be used as optimally as possible. 

In this step, you might hear about something called the Drum-Buffer-Rope (DBR) system. It’s another aspect of this theory that can get highly technical, and we won’t get too into it now. The gist is that your constraint is a drum, and it sets the rhythm for your whole system.

EXAMPLE: Are the postcards stacked up next to the postage meter so they can be fed through the machine as quickly as possible? 

4. Elevate the constraint

Now it’s time to address the constraint itself. How can you increase the capacity of the bottleneck you identified?

In many cases, this is going to involve elevating it with additional resources. Those could include more people, money, or equipment, to name just a few. 

EXAMPLE: You determine you need to purchase two more postage meters to speed up this project and all future mailing projects. 

5. Avoid inertia and repeat the process

You did it — you addressed the constraint, and now your team is whizzing through those postcards. Your hard work is done, right?

Not even close. The theory of constraints is all about constant process improvement. That means that once you fix one constraint, you’re bound to uncover a new one. You should start the process all over again to identify the next constraint and avoid inertia (meaning you want to avoid becoming complacent). 

The theory of constraints isn’t something that you get through or finish. Instead, it’s a continuous approach to ensure your team is constantly iterating and improving.

EXAMPLE: With your increased postage meter capacity, you realize you don’t have enough team members to feed the machines.

How the theory of constraints ties into lean manufacturing

Both the theory of constraints and lean manufacturing share the same goal: increasing profits through continuous improvement. They serve the same purpose, but how they get there is different. 

As we’ve discussed, the theory of constraints focuses on working with limiting factors and utilizing them as opportunities to drive production and, in turn, boost revenue. 

In contrast, lean manufacturing principles are all about minimizing waste within a system without sacrificing productivity. The removal of that waste improves production time and leads to cost savings. So, you might print four postcards on a sheet, so there isn’t any excess paper you need to trim. 

Rest assured that you don’t have to choose and stick to only one of these methods. The theory of constraints and lean manufacturing go hand-in-hand and can work effectively together. 

You can apply lean techniques to constraints and non-constraints to improve other areas of the system or project. In fact, combining these methods in a hybrid approach can help boost your overall project management techniques and strengthen your process even more. 

Why Wrike can help you get on top of constraints

One of the trickiest pieces of the theory of constraints is figuring out your bottleneck. Sometimes it’s blatantly obvious, and other times finding it feels like a treasure hunt.

That’s where a collaborative work management platform like Wrike comes in handy. Wrike gives you and your team a thorough understanding of your processes and workflows.

With that information at your fingertips, it’s way easier to spot where things are getting stuck. Once you’ve identified your bottleneck, Wrike also empowers you to ensure all other aspects of your process or system are running at peak efficiency and capacity.

To put it simply, Wrike gives you the visibility you need to pull all the right levers and improve not only your current projects but future ones too. 

Ready to use the theory of constraints to boost your team’s productivity? Start by signing up for a free trial of Wrike.

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