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In my first two posts in this series, I explained the purpose and basic structure of the Goal Tree, and how to construct a Goal Tree. I then demonstrated how to construct one by describing a real case study. Continuing with this case study, in this final post in this series, I will demonstrate how to use your Goal Tree to assess the status of your organization, and then show you how to create an effective strategic business plan.
Just to refresh your memory, the company in question here is one that manufactured a variety of different products for diverse industry segments. Some requests were build-to-order, while others were orders for mass production parts. This company had plenty of orders, but unfortunately, they were having trouble not only filling them but also filling them on time. As a result, this company’s profitability was fluctuating between making money one month and losing money the next. Because of this, the board of directors decided to make a leadership change and hired a new CEO to effectively “right the ship.” The new CEO led his staff through the creation of their own Goal Tree as described in the figure below.
The best way I have found to use the Goal Tree is using it to assess the current performance of your organization. I do this by comparing each Necessary Condition (NC) and Critical Success Factor (CSF) against a simple color-code scheme. Let’s continue with our case study.
The CEO passed out copies of the completed Goal Tree and explained that he wanted everyone to study it and then focus their attention on the lower level NCs first. He instructed everyone to think about the company's actual performance compared to how it should be performing, using the lower-level NCs for comparison. He clarified this by telling them to think about what was needed to satisfy the lower level NCs first, determining if the NC was in place and secondly, whether or not it was functioning as it should be.
He then explained that they were going to use a simple color-code scheme to evaluate where the company stands on each NC and CSF. He further explained that if his staff believed that what was in place was good and functioning well, then they should color it green. Likewise, if what they have in place was working but needed to be improved, they should color it yellow. Finally, if the NC or the CSF were not in place or not working in the current configuration, then they should use the color red. He then explained that once they had reviewed the Goal, CSFs and NCs, they would start with the red entities first and develop plans to turn them into either yellows or greens. Likewise, they would then look at the yellows and develop plans to turn them into greens. Obviously, those colored green were both in place and functioning very well. With these instructions in place, the CEO and his staff set out to assess their company’s performance.
The new CEO and his staff looked at each NC and CSF and color-coded them according to the instructions. For example, this company’s on-time delivery was fluctuating between fifty and seventy percent, which are both very poor levels; so they colored it red. Likewise, when they evaluated the NC “Synchronize Production to Constraint and Demand,” there was nothing in place, so it, too, was colored red. This red NC translated to a red for the NC “Minimum WIP and FG” and ultimately the CSF, “Minimum Inventory.” The CEO and his staff worked hard but finally arrived at a completed assessment of the company status as depicted in the color-coded Goal Tree below.
They turned their attention to developing their improvement plan by first, focusing on the lower-level red NCs. They had concluded that the lower-level entities should be improved first. From this, the upper-level entities should improve naturally. For example, one of the lower level NCs under the CSF “Maximum Throughput” is “Highest On-Time Delivery Rates.” By improving this NC, there should naturally be an improvement in the upper-level NC, “Satisfied Customers.” When this NC improves, there should be a noticeable improvement in the next upper-level NC, “Maximum Revenue.” When that NC improves, the first CSF, “Maximum Throughput,” should also improve. When a CSF improves, the Goal will be positively affected.
Once again, using their color-coded Goal Tree, the team worked diligently to complete their organizational assessment and improvements to arrive at their final strategic business plan.
The CEO and his new staff decided that one of the most important changes would be to implement TLS. (Note: For those of you not familiar with TLS, an improvement methodology combines the Theory of Constraints, Lean and Six Sigma.) In doing so, three lower level NCs— Highest Quality, On-Time Delivery and High Level of Customer Service—would experience a positive impact, so they colored them green. Additionally, implementation of a TOC-based scheduling system known as Drum Buffer Rope (DBR) and elimination of the performance metric (efficiency) in non-bottleneck resources were both recommended. Both of these improvements significantly improved all three of the CSFs and ultimately created an atmosphere where the Goal, “Maximum Profitability,” could be achieved. There was still room for improvement, as there were still two NCs that continued to be yellow. But in the final analysis, this team succeeded in improving and stabilizing their profitability by using the simple, but powerful, Goal Tree.
Before completing this post, you will notice that in some of the NCs, CSFs and the Goal, the team also developed performance measures that could be used to track how well their improvement plan was working. For example, for “On-Time Delivery,” the team elected to measure a percentage. Additionally, the team established targets for each of the performance metrics and then met weekly to review their status.
This case study had a happy conclusion because the Goal Tree was used to assess the organization and create a strategic business plan. This company was able to turn around unreliable profitability and become not only consistently profitable but to drive profitability higher than it had ever been.
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