Theory of Constraints in the Public Sector

After the Introduction of Theory of Constraints, some participants could not understand the application of this concept to the city government and the public sector in general, even with the examples presented by the Consultant of actual applications of Theory of Constraints.  Since Theory of Constraints has been talking about making money as the goal, how is it then applied to an organization such as the government when its main goal is public service -- delivery of services to the people.

It is actually simple. One just has to replace the concept of money with services. Just like this.

If for the manufacturing/business, the Goal is to make money now and in the future; for the government/ public sector, the Goal is to provide excellent services to its people now and in the future.

Theory of Constraints uses three measurements : Throughput, Inventory and Operating Expenses.

Throughput for business/manufacturing is the rate at which the system generates money through sales; Inventory is all the money that the system has invested in purchasing things which it intends to sell; and Operational Expense is all the money the system spends in order to turn inventory into throughput.

Now, Throughput of the government is the satisfaction of clients/customers to the delivery of services. Inventory is all the money that the government has invested in purchasing things to provide the excellent delivery of services. And, Operational Expense is all the money the government spends in order to turn inventory into throughput.

Attendees to the First Theory of Constraints Workshop

The two-day workshop entitled "Theory of Constraints/Constraint Management as an Innovative Way of Managing Public Services" on August 20-21, 2007 was attended by select government employees from different departments namely Iligan City Waterworks System Office (ICWS), Economic Enterprise Development and Management Office (EEDMO), City Planning and Development Office (CPDO), City Budget Office (CBO), City Treasurer's Office (CTO), City Engineer's Office (CEO), and Gregorio T. Lluch Memorial Hospital (GTLMH).

Many of the participants, 17 to be exact, are from ICWS because InWEnt chose ICWS as the pilot department with which to implement the concept of TOC since my project proposal in Germany was on water improvement. And Michael Funcke-Bartz, the Senior Project Manager, also saw the need to help improve the water system of Iligan.  To view  the complete list of participants during the workshop, click here.

The first day of the workshop started with a prayer given by Mr. Octavius Molo of the City Agriculture's Office, followed by the singing of the National Anthem lead by Ms. Rosa Edrozo of the City Human Resource Management Office.  And I gave an overview of the program.  

The Start of Cooperation between Iligan and InWEnt, Germany for Theory of Constraints

The cooperation between Iligan and InWEnt, Germany started, somehow, during my 1-year training in Germany after I presented my project proposal to Michael Funcke-Bartz, Senior Project Manager of the Sustainable Cities Development Program.

I was granted to participate in a one-year training in Germany when my boss, Archt. Gil Balondo, sent my nomination in reply to the UN-Habitat invitation. The program was on Sustainable Cities Development : Local Agenda 21 in Practice conducted on March 2006-February 2007. It focused on sustainable solidwaste management, water management and wastewater disposal. As participants, we were required to develop a project proposal which we would present to our bosses (Archt. Balondo and the mayor, in my case) for possible implementation. My proposal was on the improvement of water supply and water distribution in Iligan City.

The Beginnings of Theory of Constraints in Iligan

Theory of Constraints (TOC) or Constraint Management was introduced in Iligan City on August 20-22, 2007 at Crystal Inn, San Miguel, Iligan City. Mr. Adolfo Held, a German TOC Consultant visited Iligan from August 15-22, 2007. He gave an introduction of TOC to selected employees from different departments as well as an executive session to the department heads, city officials, representatives from academe and national agencies.

Accommodation of consultant at Cheradel Suites and his airfare from Germany to Cagayan de Oro (vice-versa) was by InWEnt, Germany. And the city’s counterpart is the provision of facilities, venue, meals and land transportation of the consultant (Cagayan de Oro-Iligan, vice-versa and within Iligan).

TOC is a management philosophy developed by Eliyahu M. Goldratt. He introduced this concept through his book "The Goal" in which the story revolves around solving the problem of a manufacturing plant about to be closed, keeping in mind the goal of the company, "to make money". And in the process breaking company policies and changing the way things are used to be done.

 

In Theory of Constraints, an organization is treated as a single system wherein every part must perform well in order to achieve the goal of the organization. However, in every system, there is always at least one constraint (also called bottleneck) that limits the organization in achieving it's goal.

There are two types of constraint :

1. The internal - the constraint exists within the system (resources and policy)
2. The external - the constraint is from outside the system, in which the organization usually have no control of.

The Theory of Constraints process follows these Five Focusing Steps :

1. Identify the constraint(s)

2. Decide how to Exploit the constraint (make sure the constraint's time is not wasted doing things that it should not do)

3. Subordinate everthing else to the above decision (align the whole system/organization to support the decision made above)

4. Elevate the constraint(s)

5. When the constraint is removed, return to step 1. Don't let inertia become the constraint.

The five focusing steps are in a loop because TOC process aims to ensure the continuous improvement in the system and that the steps ensures that ongoing improvement efforts are focused on the organization's constraints.

It is important though, that before applying the TOC process, the organization or the company has already identified its GOAL. Because the TOC process would then be geared towards achieving this goal.

The TOC process can be applied not just in industries or manufacturing plants but as well as in business and services including public/government. Generally, TOC can be applied in all aspects of life.

As one goes through the process, Step 1 of the Focusing Steps uses the method called "Cause and Effect". In order to identify the constraint, one has to develop the Current Reality Tree (cause and effect tree) identifying reasons that are causing the problem at hand. Until such time when one can no longer give a reason or the reason is beyond the organization's sphere of influence , the constraint has then been identified.

With the Theory of Constraints concept, organizations can be measured and controlled by variations on three measures:

1. Throughput - the rate at which the system generates money through sales.
2. Inventory - all the money that the system has invested in purchasing things which it intends to sell
3. Operating Expense - all the money the system spends in order to turn inventory into throughput