‘The Goal’ is an exceptional work of an Israeli physicist, Eliyahu Moshe Goldratt (March 31, 1947 – June 11, 2011) who turned a management guru later. The novel hit the stores in 1984. Eli was the first to propose the ‘Theory of Constraints’ through this and aimed to help organizations formulate a technique for their continuous development. Buzzle brings the chapter-wise summary and an in-depth analysis of the novel by the management genius, Eli.
The novel ‘The Goal: A Process of Ongoing Development’ is considered a detailed example of ‘Socratic teaching’ using managerial context. The entire plot is about how certain pointers provided by his favorite professor lead the central character to find solutions to his problems.
Alex, an adequately educated and conceptually sound manager at UniCo, moves back to Bearington, his hometown, to settle comfortably with his family. What he had imagined to be perfectly blissful takes up a bad shape when he realizes that the division he works for faces several issues with its operation and is close to its end. His troubles extend to his family as his wife, Julie, is unable to adjust to the monotonous life in the new town. He decides to work on the company’s prospects and do whatever he can to save the division. His increased worry and dedication towards work worsens the scenario with his wife. One of his old Physics professor, Jonah, dawns upon his life as the savior and makes him realize what is needed to be done. Jonah uses the Socratic teaching method to give him cues on which he needs to work. Using these cues as the keys, he ventures out with his team at the plant to find the defects in the operational system. Together, they work out to find solutions to each of the constraints that impeded the growth. Alex is promoted after the visible growth in the plant’s statistical accounts, and he also works out the differences between him and his wife. Towards the end, he realizes that ‘bottlenecks’ or constraints would change with time, and their solutions would also change with it. What he had, were the key questions on finding solutions to those and all the other issues that could come up. He had the key to the process of ongoing improvement.
The first chapter goes about introducing the main character Mr. Alex Rogo, an industrial engineer and an MBA graduate who is positioned as the manager of injection molding part of a plant of the UniCo Manufacturing Corporation. He reaches his plant to find out his parking slot was taken by the division Vice President Mr. Bill Peach. Their conversation reaches the topic of a seven-week overdue order. The very agitated Bill complains about the plant’s current situation and informs Alex that he has 3 months to turn the tables in the plant’s favor, otherwise the plant will be shut down. He ends with a word of instruction that the overdue order gets shipped on the same day at all costs.
The author takes us into Alex’s life at home and his relationship with the family in this chapter. Alex, burdened by the tense conversation and the order to complete, gets home to grab a quick lunch. It is brought to the reader’s notice that the family has shifted to his hometown six months ago and was facing trouble adjusting to this industrially declining city as compared to the one they had left. Alex gets into an argument with his wife Julie, who wanted to go out for lunch. He promises her to be back early that night and then heads towards the plant. He reaches there only to find a worse case scenario where the machine had stalled just before he had left. He gets all the employees to work for extra hours that day and somehow, the order finally gets shipped that night. Later that night, while at dinner with a colleague, he reflects upon the mismatch between the company’s accounts and actual profits.
The following morning, Alex has to attend a meeting presided by Peach. Each of the plant managers are made to attend the meeting. While in the elevator, a co-worker, Nathan Selwin explains why Peach has been behaving in a strange manner. Alex feels sorry as he realizes that the entire division faced its near end if it failed to show progress, and Peach gets sacked too. He reaches the meeting, but finds it hard to focus on the proceedings. The meet proceeds to pinpoint the lags of the plants behind their target and assign new targets for the next three months. Alex discovers a cigar in his pocket while looking for a pen and that takes him back to recall certain events.
During a work trip, Alex runs into this old Physics professor Mr. Jonah. A light conversation advances, and they start discussing how had work been for both of them. Alex tells him the name of his company, which is not very familiar to Jonah, but seems to hit upon a lot of faults in its working process through the little information on the company’s employment of techniques as specified by Alex. Their conversation reaches an abrupt end, but Jonah leaves a ‘food for thought’ question posed in front of Alex―”what was his company’s ultimate goal?”
Alex regains his present state from his drift of thoughts and realizes that the meeting was a waste of time for him. He decides to walk out on it during the break and return to his office. Instead, he goes out for food and beer. He keeps pondering over Johan’s suggestions, and then it strikes him that the goal of his company is to make money.
Back at the office in the evening, he sits down to discuss his idea of the goal of the plant with the plant’s controller, Lou. He is open to the fact that the main idea of the plant is to make money, and further, they discuss the specific terms of accounting upon which they could reach the goal. They conclude that there is an immediate need of increase in the cash flow into the plant, return on investments, and most importantly, the net profit. The conversation goes on till late, and Alex gets into trouble again with his wife when he calls home. He stops by the nighttime manager for a talk and retires home for the night.
Alex’s daughter greets him at the late hour to show her excellent grades at school. After tucking her into bed, he gets thinking all over again, but this time, with a more positive perspective. He knew he had to work a lot in a few days time if he wanted to stay and improve the plant’s position. But for that, he needed to know more. Then he realizes that he needed guidance from Jonah once again.
The next morning at work, he gets to face Peach again who nags him for walking out of the meeting the other day. He is scheduled for meetings over the phone for the entire day. Alex then decides to go back to his mother’s place and trace Jonah’s whereabouts. He gets his number and calls him up with his queries. Jonah outlines three important tools of measurement of the company’s account. First, ‘throughput’ that gave the rate of sales, ‘inventory’ was the money invested in their products, and ‘operational expenses’ were the costs associated with converting inventory into throughput. Their conversation is cut short once again as Johan proceeds for some work and Alex is left wondering how to relate them in terms of the plant’s operation.
Alex takes up the theory suggested by Jonah to Lou at work the next day. The inventory manager, Stacy and the production supervisor, Bob are called in to join the discussion. They plunge into the basic nature of each element of the plant and categorize them according to the three figures suggested by Jonah. They reach a conclusion that the robots that had been employed increased inventory cost.
The figures given by Jonah was in question when Alex tells his team where he had received them from. Stacy is not definite upon what exactly was the change required, a meeting is fixed over the phone with Jonah, and that night Alex heads to New York to seek his answers.
In a hotel of New York, Jonah and Alex meet again. This time, Alex tells him the exact nature of problems at the plant, and the time constraint under which they had to be revamped. Jonah affirms the changes to be plausible in the given time period. He denies Alex’s concept of a balanced plant and tells him to reconsider it with two new perspectives at hand – ‘dependent events’ and ‘statistical fluctuations’. Jonah’s other engagements interrupt them once again and leaves Alex with new figures to deal with.
On his return to his house at Bearington, Alex gets into an argument with his wife for all the phone calls that were not answered. The strenuous situation developing between him and his wife due to the extra pressure of work is highlighted in this chapter. Alex promises to set aside sometime for her during the weekends. He leaves for work soon after.
Alex wakes up the following Saturday morning to find his son dressed and ready for an overnight boys scout hike that he had promised to lead. The individual scout movement and its effect on the entire line during the hike struck Alex with the real nature of the concepts of ‘dependent events’ and the ‘statistical fluctuations’.
To observe the effect more carefully, Alex plays a dice game or the Match-Bow game with the boys. He realizes the importance of dependent growth and the effect of bottlenecks in any system’s growth. As pointed out by Jonah, he realized that a balanced plant was not the ideal solution. This was because ‘dependent events’ and ‘statistical fluctuations’ tend to pull down the throughput for each day, and the operational expenses as well the cost of inventory increased.
Back on the line, Alex decides to let the slowest kid among the troop, Herbie, lead the line. He also helps him with the weight he was carrying. As expected the fluctuations of the troop balanced out and the camp was set up at the expected time and site.
Sunday evening when they reached home from the camp, Alex found his wife had left with a note. She was tired of his newfound, overwhelming devotion towards work already, when he left for the camp on a weekend that was reserved for her. He retrieves his daughter from his mother’s place and tries to reach her over the phone. He makes several calls to his acquaintances, but is unable to find where she is.
The following day at work, Alex explained his revelation to a hesitant team of co-workers who are skeptical of his theory. He proves his case by applying the same to complete Hilton’s target.
The team now believes him and is all set to act to his command. Alex, on the other hand, remains unsure of what exactly should be his next step. Conclusively, Jonah is consulted once again. This time, he enlightens them with the theory of constraints, that is, differentiating between the bottlenecks and the non-bottlenecks. He defines these terms to Alex and asks him to focus on the balance of flow within the production plant instead of trying to balance out the plant’s capacity with the demand. Alex sets out with his team to find these elements in his plant and recognizes one of their machines NCX-10 and their furnace as the bottlenecks. The next step would obviously include reorganization of the process to ease the fluctuation created by these bottlenecks. But Alex knew the fact for sure that the management of the division won’t allow any of that.
Jonah, on being posed with Alex’s queries, once again proposes to visit the plant. During his visit, he explains the existence of bottlenecks in a plant. He also explains how a plant could only increase his capacity by increasing it at the bottleneck operations. He discusses the downtime of both the bottleneck and the entire plant with Lou. Relating the downtime at the bottlenecks with the loss of throughput, he points out the actual cost the plant suffers when the bottlenecks are down for an hour.
The team gets back together in the plant the preceding day to discuss the actions to be taken upon the bottlenecks they had earlier recognized. Alex works out a priority chart of the overdue orders from the most overdue to the latest, and instructs that the bottleneck operations work upon accordingly. While his idea is being put into motion, Alex finds out that Julie had been staying with her parents. When he goes up to her, she tells him that she needed some more time to herself.
Alex decides to make up for the weekend he owed to Julie and calls her up and asks her out for the next Saturday. She is overjoyed and vouches in for the plan. Back at work, Alex and the crew work on a new tagging system to mark the priority level of material required in the plant. Materials that hold up production at bottleneck were decided to be marked ‘red’, indicating high priority and materials required at the non-bottleneck operations were to be marked with the green tag. The system is implied and seemed to work. Alex’s manages to keep up with the date he had promised his wife.
Monday morning, Alex finds out that the system that they had organized was actually working, and the plant had managed to fulfill twelve overdue orders. Alex is happy, but not content. He invites suggestions from his crew for further improvements. Bob, the production manager, gathers some old machinery to make up for the incompetency of the NCX-10.
New issues crop up at the bottlenecks that seem to be holding up production. Alex works around them and employs dedicated foremen to help keep up the time lag during the bottlenecks were in process. One of these employed foreman comes with the idea of mixing of the priority of the orders in order to match the production of its parts. This new method hiked the production by 10%. While all this is happening, things seemed to be working out between Alex and Julie as well.
The team was pleased with the plant’s performance and decided to celebrate their success. Stacey drops Alex home where Julie was already waiting for him. She thinks that Alex is cheating on him and leaves. Back in plant, the new setup had increased the productivity and had cut back on the cost of inventory. It did seem good on paper, but in the production line, new bottlenecks were budding. Jonah was surprised by this turn of events and plans to visit the plant the very next day.
Jonah visits the plant to find out that there were no new bottlenecks at all. What had actually happened was the increase in productivity at the bottleneck processed to its maximum capacity had led to the accumulation of parts at the assembly line still awaiting parts from the non-bottleneck processes. The solution was to rework the tagging system to create a balance between the two parts. The focus now remained on matching the production of bottleneck parts to fuel the requirements of the non-bottleneck processes.
Alex’s kids offer to help their dad with his issues if he would allow, and while in discussion with them, he actually feels relieved. Whereas, the team at the plant together with Jonah forges a new formula to anticipate how many products needed to be finished and when some of them were to be released to create the balance between bottleneck and non-bottleneck parts. Alex drops Jonah back to the airport that night.
Another business meeting takes place, which Alex attends with Peach and other officials from UniCo. The meeting underlines that Alex’s division was the only one that had shown some progress over the past two months. Alex feels that he deserved a little appreciation from Peach and goes to his office to have a direct confrontation. Peach poses him with a new challenge to increase the plant’s profits to an extra fifteen percent under which condition, he shall allow his plant to continue functioning. In spite of knowing the impedances to this score, Alex agrees on it. He later goes to spend some time with his kids and wife, where he gets into another fight with his wife. They resolve their differences later and make up.
Alex was still pondering over the demand from the market and the current inventory plan of the plant when he got back home to find the phone ringing. Jonah was calling from the other side to inform Alex that he won’t be available for the forthcoming weeks. Alex tells him about the new target and the problems that provided hindrance. To this, Jonah suggests reduction of batch sizes to half their present size. This meant cutting new deals with the vendors, but reducing operational costs and the inventory by half. Alex meets Johnny Johns, the division sales manager, and tells him to outline a new marketing strategy for his plant’s increase in capacity.
The new goal was to exhibit an increase in the sales to target the 15 percent growth as Alex had promised. What worries him is the fact that although there was an improvement in plant’s growth, the accounts showed differently. Lou asks him not to worry and tells him that he would risk going against the account department’s format of accounting and help show growth in the accounts. John has good news as he brings a customer demanding 1,000 products in two weeks time. The team gathers up and discover that smaller batch sizes would help them to carry out any commitment and would need greater time. They bag the new contract by committing to 250 products every week in a month. These low-priced small batches act as the key factor in their success.
It is the meeting at the beginning of a new month. Lou walks in with the new sales figure, and a whopping seventeen percent growth has been observed according to his new model of accounting. The productivity manager, Hilton gets a whiff of the inside activity of the plant. The company audits the plant and the downside is, the old model exhibits only 12.8% overall increase. While all this is in motion, Mr. Burnside shows up to alter the contract from the previously agreed 1000 products to 10,000. He personally congratulates the team at the plant for their great work and efficient delivery. At the end of all this, Alex is seen to meet Julie and they finally decide to reclaim their relationship.
The day of the verdict from the company arrives. A meeting attended by division controller, division productivity manager, division sales manager, and many of Peach’s subordinates is not going very well for what Alex had expected. Smith tells the committee that the growth being shown was temporary, and the plant is going to show major losses very soon. John, however, chooses to show his support by relating the growth he had seen. Lou, on the other hand, has been working hard to point out the flaws of the old accounting model. He takes up corrected figures directly to the division controller and tells him the actual growth for that month is about 20%. When Alex goes up to Peach to defend his plant’s growth, Peach has already made his decision to let the plant continue. Alex and Peach both are getting promoted. Alex has new questions for the new responsibilities he has, but Jonah needs specific questions from him.
The short chapter shines down to Alex’s dinner with his wife. They discuss Jonah’s key role in the events that had transpired in the past months. Alex agrees that it was Jonah who had helped him all the way through and how he needed the new workers under him to understand his concepts as well. They ponder over why they couldn’t do it without Jonah’s suggestions, which now seemed like common sense.
Alex shows up at the plant once again, but this time as the division Vice-President. He is seen meeting his team members Lou, Bob, Stacey, and Ralph, and promoting them to positions they truly deserve. A new team is set by him, and he is all set to embark upon the next major stage of planning.
Together with his newly positioned team members, Alex now takes his previously designed model to a whole new level. What was first being applied to a plant was now being modified to suit the entire division. This implied a lot of work and each member’s keen involvement. They decide to meet in the afternoon on a daily basis and discuss the problems.
The brainstorming session continues, and the team now takes a scientific perspective towards the entire scenario. They talk over Mendeleev’s method of designing a periodic table to study the internal nature of elements and, thus, classifying something seemingly vast with great ease. They relate this to their division and a decision is made. They shall now concentrate upon designing a common framework upon which all the issues of the division can be examined.
The team reviews what process they had followed in the past months to fix the situation at their plant. This leads to the formulation of a five-step process of evaluating the system’s performance. Step one – identify bottlenecks. Step two – decide ways to exploit the bottlenecks. Step three – subordinate every other decision to ‘step two decisions’. Step four – evaluate the system’s bottlenecks. Step 5 – if a bottleneck is found broken in the system evaluation, return to step one.
They find loopholes in their own design and continue making amendments. They realize that the last step in the five-step process needed to ensure that the inertia is not to be allowed to create any system constraints. Stacey brings about changes to the tagging system, and Alex along with John plan future expansion in the market. The continuously improving structure adds on twenty percent to the previous capacity, and the result is seen in the company’s share in the market.
John has a new client in Europe to fill the increase in capacity. The catch of the deal is that it would have to be priced lower than what they are offering to local market. Alex and he know that this would create new opportunities for the company in the European market as it had quite a lot potential customers. Alex analyzes the situation with a physicist’s perspective. He points out that they could use their spare capacity to meet the contract requirements and all that would count would be material costs. This would show a net profit in the company accounts.
The new orders received by the plants show signs of new constraints cropping up. The inventory is unable to keep up with the increased capacity of the division. Alex’s risks the newly established relationship with his customers by getting the sales to decline any commitment of order for the next four weeks. Julie, who has been reading Socrates, explains the ‘If … Then …’ theory of deduction. She tells him how this helps to consider all the courses a situation could take and prepares one for each of the situation’s aftereffects. Meanwhile, Alex is called upon by Peach to help Hilton with his plant’s improvement and is asked to visit the plant and teach his practices.
Alex and Lou ponder over all that had occurred and the question Jonah had asked. They decide upon three basic questions every manager must consider while in charge of a system and its improvement – ‘what to change?’, ‘what to change to?’, ‘how to cause the change?’. Finding out the answers to these questions would bring out the best manager out of everyone. Alex now knew that he had to travel alone on the path shown by Jonah and could no longer keep running back to him for help. He knew that being a manager, he himself had to learn how to get to the core of the most complex situations and solve them without creating new problems.
▶ ‘The Goal’ has its central character portray the manager inside each one of us. The language has been kept simple and not flowery, although the author has not compromised with the technical terms of the subject.
▶ As the story proceeds, a person can connect with the character to realize ‘constraints’ of his own management system. In order to deal with these issues, it is necessary to find answers to those questions and figures that Jonah had placed in front of Alex.
▶ The book ventures out to draw analogy among managerial decisions both at home and work. This implies that the ‘theory of constraints’ is universal in nature and can be observed everywhere around us. Finding ‘bottlenecks’ and fixing them while avoiding new ones is the key to bring about development in each and every system. This approach is portrayed in the novel as ‘common sense’.
▶ The reader realizes that though we have it all in us, we need correct guidance to start off with our work, just like Alex received from Jonah. However, in order to explore one’s own potential and abilities, a person must be taught in the ‘Socratic method’. This method involves leaving the disciple pondering over some suggested points so that they can understand its true nature in and around themselves by relating those points to their surroundings. The concept of accounts and production management is simplified by means of detailed situations.
▶ It also teaches the budding managers and entrepreneurs that the conventional model of management may always be used as a reference, but must not be totally relied upon. For being a successful manager, it is very important to develop one’s own understanding of decision making. This, and the fact that, for every system to achieve success, the entire team involved needs to show sustained dedication towards its progress. The team’s manager must be able to generate enthusiasm in its team for every change he suggests. He should be open to the criticism and opinion from all his team members, and value the same. The author also sends out a clear message that as the system grows and develops, the constraints involved in it may increase or may change. Therefore, what one has to keep constant in his own mind is his goal and accordingly find methods to solve the problems hindering its fulfillment. As Dr. Eli says, “Productivity is meaningless unless you know what your goal is.”