Strategic and Operational Constraints

Every business has an operational goal to make money; and a strategic goal to grow its value as a business. In most businesses the constraint in accomplishing both of these goals is the same team of managers. The ability to delegate effectively must be designed into your business if you want to break through this constraint.

The two constraints

Some time ago I was having a conversation with Eli Schragenheim, and we got on to the topic of there being  two types of constraints in a company one that is constraining the day to day operations from increasing profits, and another that is constraining the company from growing and developing.

Operational Goal

The idea of The Goal as being to make money now and into the future, as the goal of any for-profit venture, is pretty well established. You may have a bigger purpose as a company, but if you dont meet this goal, you will not exist for very long to accomplish your higher purposes. This is an operational goal.

For the operational aspect of your business, your product is the product or service that your business offers the market. Throughput is the rate at which you are able to sell this product to the market.

Strategic Goal

For the strategic aspect of your business, your product is the business itself. Strategic throughput is the rate at which you are able to improve and grow this business into a better and better business with other words growing the VALUE of the business.

We know that constraints relate to value streams. A value stream is the series of connected processes that generates throughput. Effectively, in every business, we therefore have at least two value streams. The operational value stream, and the strategic value stream.

A shared constraint

Here is the rub. In most businesses the same management team that is fighting the fires and trying to manage the day to day operations, is the team that is responsible for formulating and executing the strategy. And in most businesses, they are also the people that work the longest hours, and have the longest queues of outstanding tasks and decisions that everyone else is waiting for. With other words, they are the constraints in both the operational and the strategic value streams.

When we take this knowledge to the second of the five focusing steps of constraint management i.e. to exploit the constraint then I think in most businesses we quickly begin to realize that we waste a lot of management time and attention on things that should be done by other people.

Don’t waste this constraint on tasks that could be delegated!

This highlights the critical importance of delegation in fact, the critical importance of delegation done well. Delegation done badly is just a crisis postponed which actually increases management load. Delegation done well removes load from the management bottleneck to where it should be in the business.

Delegation is not just what a manager does. Delegation is designed into the very way youve designed and built your business. If your business is not designed for effective delegation, youll never be able to shift the bottleneck from management and you will fall into the trap of thinking that the way to solve the problem is through employing more, and better (and thus more expensive) managers.

This is not the answer.

In the next article we will look more closely at how you design and build a business for delegation.

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To your success

Ashton

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