Critical Chain

“‘I chose you because of your unique style of teaching,’ he surprises me. ‘Teaching through open discussion?’ I’m astonished. ‘Yes,’ he says categorically. ‘For this program I’m more and more convinced that that is the only prudent way. The students have the relevant day-to-day experience. Open debate, steering a group of people to develop the know-how themselves, is how we should teach them.’”

The concept of open discussion is applicable both in and out of the classroom, and Richard’s importance in the novel is uncovered in this passage. Combining the experiences and knowledge bases of multiple professionals and academics is a great way to broaden the scope of a discussion, and it gives each individual participant the chance to voice concerns and contribute to the concerns of others. Richard’s technique will be applied to the project management class, but the premise of open communication is relevant in all forms of business and academia.

“I swiftly scan in my mind four definitions I read in textbooks. Somehow they all seem too pompous to me. How can one relate to a definition like ‘A set of activities aimed to achieve a specific objective and have a clear start, middle and end.’ If I want to bring this course down to earth and relate it to their situations, I’d better not quote any of these oversimplified or complicated definitions. Rather than defining, I choose to describe. I say, ‘In your work, have you come across a complex initiative that in order to manage it, people have to draw the picture of what they are supposed to do?’”

This passage both presents a formal definition of a project and an informal way to identify projects in everyday work and life. In any situation where the end goal needs to be formulated in advance, one must develop a process by which to reach that goal, and that process is the project. Richard knows that the formal definition sounds both too vague and too niche for a regular professional to apply directly to their own life, so he asks, instead, about the work he expects they may have completed.

“Before I have a chance to comment, Charlie confidently states, ‘Everybody knows that projects don’t finish on time or on budget, and if they do it means they had to compromise on content. Especially in systems programming or product design.’ ‘That is not necessarily the case,’ I say. ‘Occasionally, there are design engineering projects that finish much ahead of time, significantly under budget and deliver more than was promised.’ Those with any experience working in or with design engineers, which means about half the class, find it hard to believe such a claim.”

Critically, Charlie makes his assertion before listening to Richard’s thoughts, showing how professionals tend to assume, though based on experience, that projects are all doomed to some form of failure, either through budget, time, or content. However, the premise of the class is to subvert these expectations, and Richard confirms that, while failure may be the norm, the goal is to find methods that avoid failure and even exceed expectations.

“‘One cannot compare agriculture to business,’ he says conversationally. ‘You don’t need a university degree to succeed in agriculture. In that field there is no external pressure that forces people to go through higher education.’ ‘And in business there is,’ B. J. encourages him. ‘Without a doubt. Today, if you want to climb the corporate ladder you must have an MBA.’”

B. J. and Page’s discussion opens the scope of project management beyond distinct tasks and fields. Page misses B. J.’s point that, though agriculture may seem significantly different from business, they are both vulnerable to patterns in demand and convention. Though an MBA is needed for advancement now, so, too, was an agricultural degree a requirement for advancement prior to the crash B. J. describes. As such, the value of the MBA might change over time, even if Page cannot imagine such a change.

“I cannot stop myself from commenting, ‘There is something common to all of them. Do you see it?’ Ted is the first one to jump. ‘It’s all somebody else’s fault. The weather, the vendors, the Malaysian government.’ ‘What did you expect?’ Fred is slightly impatient. ‘That’s corporate mentality; always blame the external world. But look at what I wrote under unofficial reasons. Here you will find finger pointing at functions inside the company.’”

Romero’s acknowledgement of the trend in the corporate world to blame external factors highlights the biggest struggle of projects in terms of psychology, as those within the project are inclined to blame external causes instead of re-evaluating their own processes. Richard highlights the common element of the complaints to draw out this insight, as many projects suffer the same trend. The premise behind asking for “unofficial” reasons is to show how finger-pointing, in general, is unhelpful in comparison to re-evaluating management techniques.

“‘In some of our cases, the work is already completed. And you know what? The original estimates were not far off. Out of the four I checked, in one case the work was reported complete ahead of time. In two it was on time, and in one it was way off. In any case, I didn’t see this “two hundred percent plus” safety.’ ‘Maybe time estimates are a self-fulfilling prophesy?’ Ruth speculates.”

Emerson is characterized as uniquely insightful, and her comment to Romero shows how her distinct perspective reveals something new about a seemingly obvious situation. To Romero, the timelines are being met, meaning the timelines are accurate, but Emerson sees how an extended timeline could encourage slower work, or delays in starting a task, which would lead to a correct timeline with room for greater efficiency.

“‘If we start all the paths at their earliest start, don’t you think that the project leader will have too much on her hands? From my experience,’ she adds, ‘if I start too many things, I’m bound to lose focus, and losing focus is one thing a project leader cannot afford.’ I never thought about it this way. To gain time I ask the class, ‘What do you think?’ ‘Makes sense,’ is Charlie’s response. ‘Makes perfect sense. In retrospect, I think Ruth put her finger on the biggest mistake I usually make.’”

The issue of focus that Emerson refines, here, becomes a central issue in project management, as the entire class agrees emphatically that focus is crucial to success as a project leader. However, it soon becomes obvious that task paths are going to overlap regardless of their starting points, leaving an opening for a new and innovative solution to the issue of focus. Charlie’s acknowledgement “in retrospect” uncovers how such issues are difficult to see in the moment, exacerbating the stress of losing focus.

“‘A shortsighted project manager,’ Charlie’s still talking to him, ‘can ignore the paths that are slowed down by problems, and the measurement will still indicate that the project is progressing. The project leader looks good. For a while. A long while. Only when the work is complete on all the other open paths, and only the problematic path remains, only then will the fallacy start to be revealed. Mark, don’t see this as a personal criticism. I do exactly the same thing. Only in the last fifteen minutes have I become so smart.’”

Charlie’s observation highlights Richard’s later assertion that progress measurement is detrimental in its current form. Part of that detriment is the idea of the critical path, which demands attention at the expense of other paths that ultimately coincide with the critical path. When Kowalski or Charlie ignore one noncritical path long enough, it becomes the new critical path and delays the project, resulting in exactly the issue that the idea of a critical path is meant to avoid.

“‘Criteria number one: Measurements should induce the parts to do what is good for the system as a whole.’ Well, the way we measure the progress of a project, the measurement does almost the opposite. ‘Criteria number two: Measurements should direct managers to the point that needs their attention.’ In projects the measurement steers the project leader away. It’s ridiculous, it’s damaging, and in my opinion, it often leads to the failure of major projects. But it’s not important enough to be accepted as a respectable academic article.”

Initially, Wilson seems to question Richard’s evaluation of progress measurement, but Richard’s issue lies outside the actual method of measuring progress, so much as it questions how progress measurements are understood by managers. The idea of measuring task path progress is to call attention to lagging paths, but managers tend to avoid lagging paths, just as separating progress measurements is meant to emphasize how everything needs to be completed, but it tends to show false progress as some paths progress ahead of others. Richard’s complaint at the end highlights how these issues are not mathematical, but logical and psychological.

“But what does it mean, to manage well? Many things. For our discussion, we don’t have to list them all. It’s enough to agree that two things are absolutely necessary conditions. In order to manage well, managers must control cost, and at the same time, managers must protect throughput—they must ensure that the right products will reach the right clients in a way that they will pay for them.”

Johnny’s definition of good management bears direct applicability to projects, as, like in production, projects need to stay within budget and provide a successful outcome. Implicitly, throughput includes time and scheduling, thus covering the three main issues discussed in Richard’s class: going over budget, missing deadlines, and compromising quality.

“We have found the process to focus. This is the focusing process of the throughput world. But at the same time, do you agree with me that these steps are also the ‘process of on-going improvement’? Fascinating, isn’t it? In the throughput world, focusing and process of on-going improvement are not two different things, they are one and the same.”

The issue of focus is illustrated early in the novel as the biggest problem facing project managers, as they do not have the ability to devote their full attention to a single path of the project. Johnny’s presentation shows that focusing fully on the biggest constraint grants the greatest improvement in overall efficiency, so it is likely that this same idea will cross into Richard’s class. The remaining area for consideration, then, is how the process of ongoing improvement will translate into a project management scenario.

“To make a long story short, they became convinced that all the other problems were either relatively insignificant or were significant because of the existing chaotic environment. There was a real, true consensus that the core problem, the constraint of the company, was the fact that their prime operational measurement was tons-per-hour. Don pointed out to them that this was actually very good news. Yes, very good news, because all their competitors suffered from exactly the same core problem. Correcting it would give this company a tremendous advantage.”

As with any unique or new idea, Don’s application of TOC to the steel mill grants a significant competitive advantage, and, additionally, it offers a multipurpose solution to the steel mill’s existing issues. Part of the premise of TOC is that the biggest constraint is often broad enough to have multiple symptoms throughout the system, as with the steel mill, in which the chaotic environment, driven by the desire to increase tons per hour, causes issues in every stage of production. By removing or ameliorating the constraint, Don manages to push the mill into profitability in only a month of operation.

“Ruth’s words trigger a train of thought in my head. ‘We try to protect the performance of each step.’ That sounds to me like a cost world mentality. ‘The only thing that counts is the performance of the project as a whole.’ That sounds much more like the throughput world mentality. Is it possible that we are facing here the conflict that Johnny Fisher was talking about? Is it possible that bad performance is the result of a wrong assumption? What assumptions have we made?”

The premises of cost and throughput as areas of focus applies to both production and project management, as projects, like production systems, have a budget and deadlines, both of which need to be met without sacrificing quality. The issues facing projects are that throughput and cost are often disregarded, and TOC may provide the answer to Richard’s big questions. Moreover, these thoughts could be the bridge Richard needs to a novel idea for a publishable paper.

“So even in production they measure the buffer, the protection, in terms of time. What Johnny is talking about now is not too important for me. In projects, not like in production, the work is done only once. I will not be able to copy the mechanism from production, but I can transfer the concepts and find the appropriate mechanism. I have the key, I just have to follow the five steps.”

Richard’s realization that he can transform TOC from production to project management is the basis of his development of the Critical Chain methodology. The seemingly niche analogies Johnny uses focus on production, alone, but Richard is already making connections between the application of the five steps of TOC to project management, working with resources and scheduling, even though it occurs only once.

“‘Don’t waste what?’ I ask. We go through the expected questions and answers. The answers move from ‘critical path’ to ‘time’ and then, when we once again clarify that the time is based on estimates and pressures, we finally arrive at: ‘Don’t waste the time allotted for the critical path.’ Any waste here will delay the project. Semantics? Maybe. But semantics are sometimes crucial.”

This passage underpins the importance of semantics in explaining and executing Richard’s developing methodology. While wasting the “critical path” or “time” could be understood correctly, they are more precisely defined as wasting time within the critical path. This process is what forces noncritical paths to subordinate to the critical path, as they cannot afford to waste time in the critical path itself. This thinking leads to both the project buffer and the individual resource buffers that the class uses to protect the critical path.

“Before, when we used milestones, and you knew that you had two weeks to complete a step, the two weeks were yours. I, as project leader, couldn’t do much to push you to finish earlier. Moreover, if I came after one week and started to press, even inquired, you would have reacted as if I were out of line. ‘There is still a week to go, what do you want?’ Now it’s different. We trimmed the times. Now people know that there is a fair chance that they will not finish the step on time. They fully understand why I’m concerned, why I came early to find out where they stand.”

Working dynamics between management and employees are crucial to project success, and Mark highlights a critical change from removing milestones. With milestones, he cannot put additional pressure for an early finish, but, with more abstract time estimates that allow for little to no deviation, Mark can maintain a pleasant atmosphere, allowing greater focus and morale, while still checking to make sure everything is proceeding according to schedule. This shift indicates smoother communication between leadership and workers.

“We heard from Mark how they implemented our ideas in their environment. Conceptually they have made many changes. Practically it boils down to three. If you recall, the main changes were: One. Persuading the various resources to cut their lead time estimates; Two. Eliminating milestones or, in other words, eliminating completion due dates for individual steps, and Three. Frequent reporting of expected completion times.”

It is important to note that only the final step, here, is quantitative. The first step is persuasion, which focuses on finding a correct time estimate, but the second step, removing the specific dates assigned to each task, makes this a more qualitative process. The final step ensures the success of the previous two steps by introducing a control in the form of frequent reports, which allow calculations of buffer times and possible completion dates without either putting extraneous pressure on specific steps or allowing slack in the task path overall.

“‘There isn’t much profit in this business,’ I say. Roger wants to protest, but our coating man doesn’t give him a chance. He immediately starts with another lengthy story that is supposed to demonstrate how careful they are with their quotes. One might get the impression that their missing in life is to save money for their customers. Maybe he is the salesman after all. When the flood stops, I say, ‘You need more net profit. Roger’s company needs shorter delivery times. I suggest you put it in your proposal.’”

Richard’s method of handling vendors seems simple, as he is offering more money for faster work, but it is a bit more complicated. In the past, Ruth and Roger both note that they have offered more money for shorter lead times, but Richard adds the additional step of forging a connection with the vendor, taking a moment to understand his needs and goals. Then, he suggests incorporating the request for more money in the proposal, organizing the negotiation as a matter of planning in advance, rather than throwing money at a delay.

“‘One way to “encourage” a contractor to reduce lead time is to attach big bonuses to early completion and big penalties to delays.’ He raises his hand to prevent me from commenting. He wants to better explain this point. ‘Let’s not forget,’ Johnny continues, ‘that most of the developer’s investment is tied up toward the end of the project, so a three-month early finish can easily double the developer’s return on investment. Why shouldn’t he offer the contractor a big bonus for that?’”

The combination of bonuses for early completion and penalties for delays mirrors most real-world negotiations, such as Richard’s negotiation with B. J., in which his extension and possible tenure are the bonus for increasing MBA registrations, while dismissal is the penalty for failing to deliver in a given timespan. Likewise, Mark, Ruth, and Fred are struggling to arrange a specific timeline with Levy, as their incentive is 10,000 shares with an assumed penalty of dismissal if they consistently fail over time. The basic idea of Johnny’s suggestion is that negotiators can make the situation a win-win if they try to see both sides of an arrangement.

“The objective is to finish the project on time. One necessary condition is what Ted said. We cannot afford to rearrange everything. Which means don’t formally change the critical path. The other necessary condition is Ruth’s point, we cannot afford to leave the true critical path exposed, which means we must formally change the critical path.”

Using Ted and Ruth’s arguments, Richard employs the evaporating cloud method, in which two seemingly necessary, but mutually exclusive, choices interfere with the project. From this contradiction, Richard develops the Critical Chain method, which essentially creates a second kind of critical path, linking dependent steps to retain the original critical path without ignoring a constraint. This passage highlights how the evaporating cloud is applied in a distinct situation by breaking down two perspectives and the assumptions on which they are based.

“‘I don’t know how many articles dealing with resource sequence optimization I have read,’ I tell them. ‘More than I care to remember. They contain many algorithms and heuristic rules to sequence resources. Between them, these articles consider everything you brought up here, and many more considerations that you haven’t brought up. But I don’t waste my time reading them anymore. Why? Because in each case the impact on the lead time of the project is less than even half the project buffer.’ Jim raises an eyebrow. Of course these articles don’t specify a project-buffer. I use our rule of thumb to approximate it.”

Though Richard does disparage articles on optimization, here, his point is more that optimization cannot solve systemic issues. If the organization of the project is flawed, optimizing the order of steps will not keep the project flowing well, and, if the project is well-organized, the benefits of optimization will be minor in comparison to the overall lead time. This method of approaching the project with a broad view of possible issues mirrors Levy’s initial assignment to the think tank, as their goal is to exceed the results of outside consulting, which likely focused on optimization.

“Something like…For example, can we offer that the companies pay for the education only after the student has used his knowledge to bring the company benefits of at least one hundred thousand dollars? It’s not such a big risk. You see, the mistakes companies make today are so fundamental the four of us are confident we can deliver such benefits, at least until our knowledge becomes standard practice in these companies. But by then the value of our teaching will be established.”

Jim presents a translation of Richard’s vendor negotiation technique into academia, telling B. J. that the possible cost of these penalties does not outweigh the likely benefit of increased enrollment. The key to this tactic is Jim’s assertion that the Executive MBA program already provides at least $100,000 in value by covering basic issues common to most companies, therein ensuring a payout for the university. Much like the vendors, who shorten lead times for greater pay, the penalty is not likely, acting more as an assurance of lessened risk.

“‘Basically,’ Fred clarifies further, ‘we fell into the trap of thinking that eight times eight equals exactly sixty-four; we were trying to be more precise than the noise. Everybody was fighting about contentions which, left alone, could have been easily absorbed by the buffers.’ ‘As a result,’ Mark summarizes, ‘we were constantly changing schedules for nothing, and by that creating real problems.’”

Much of Richard’s methods emphasize how specific dates and times are not as useful as helpful estimates. With vendors, a specific start date is a hindrance, while, in projects, tight scheduling leads to panic and confusion. By including buffers and estimated times, the project manager can protect the critical path from interruption, while using specific scheduling of dates and times can lead to multiple areas creating alarm about potential conflicts that should be covered in the buffer.